Trademarks and business names serve similar legal functions within market economic activities. Both are designed to differentiate the goods and services offered by specific producers from those of others, enabling the public to easily identify the providers of particular goods or services. This distinction aids consumer decision-making and ensures quality assurance. 

Under China practice, if an individual registers another person trademark as a business name and utilizes it in a manner that does not prominently feature the trademark in their business activities, the public is unlikely to perceive the goods or services as originating from the trademark holder. In this scenario, trademark infringement would not be established. 

However, the use of another registered trademark as a business name can create a resemblance to an existing trademark, product, service, or business name, potentially leading the public to mistakenly believe there is a specific relationship—such as licensing, collaboration, or joint operation—between the two parties. This situation may result in the improper appropriation and exploitation of the goodwill, which is typically recognized by courts as unfair competition, thus subjecting the individual to legal responsibility under the Anti-Unfair Competition Law.

Case Overview

The plaintiff, Lanzhou Foci Company, is a joint-stock company founded in 1956 after the original Shanghai Foci Pharmaceutical Co., Ltd. moved to Lanzhou. This company is recognized for producing several well-regarded traditional Chinese meicine products and was awarded the title of Chinese Time-honored Brand by the Ministry of Commerce in December 2006. The Foci trademark was registered on April 21, 1996, and has been continuously used by Lanzhou Foci Company since then.

Conversely, the defendant, Xi An Foci Company, is a limited liability company that was registered in September 2006. It mainly specializes in the production of sterilization and disinfection products, as well as external medicines. Although the company does label its factory name on its products, it primarily uses its own Tianjian trademark. In 2011, Lanzhou Foci Company contacted Xi An Foci Company to address the business name issue, but no agreement was reached.

The plaintiff claims that the defendant has violated its legitimate rights and has filed a lawsuit, asking the court to order the following: for the defendant to stop infringing on the plaintiff's Foci Chinese Time-honored Brand and the exclusive rights of the Foci trademark; for the defendant to change its business name and issue a public notice to reduce any negative effects; and for the plaintiff to be compensated for reasonable losses, including legal fees.

In its defense, the defendant argues that its actions do not amount to infringement and that it should not be liable for compensation. Xi An Foci Company states that its name was inspired by the founder's experience during a trip, where he encountered the phrase Our Buddha is compassionate, and insists that there was no intention to connect with the plaintiff name or to infringe upon it maliciously. Furthermore, the company highlights that it has consistently used its full company name and its own trademark on its products, without prominently displaying the term Foci.

Case Focus

The main concern is whether Xi An Foci Company's registration of the Foci trade name, despite the Foci trademark being owned by Lanzhou Foci Company, amounts to trademark infringement or unfair competition.

First, Xi An Foci Company prominently displays its full business name on its product packaging, and the consistent font effectively conveys the manufacturer's identity. The company has also included its registered trademark, Tianjian, on the outer packaging while downplaying the term Foci. As a result, it is unlikely that consumers would link Xi An Foci Company to the Foci trademark or confuse Tianjian with it. Thus, it seems that Xi An Foci Company has not violated the exclusive rights associated with the Foci trademark owned by the plaintiff.

Secondly, the business operations of Xi An Foci Company are closely related to those of Lanzhou Foci Company, and both companies are expected to honor the legitimate rights of their industry counterparts while exercising caution. Lanzhou Foci Company has been engaged in pharmaceutical research, manufacturing, and sales since moving to Lanzhou in 1956, establishing a diverse product line and a strong market presence. The business name and registered trademark Foci are well-known and distinctive in the industry. Given the similarities in their operations, geographical closeness, and historical background, Xi An Foci Company’s choice of a name that closely resembles Lanzhou Foci Company’s could mislead consumers into thinking there is a local connection between the two.

Moreover, the term Foci is not commonly used in everyday Chinese, which adds to its uniqueness and distinctiveness. Therefore, Xi An Foci Company justification for using Foci in its name seems inadequate. In conclusion, it can be determined that Xi An Foci Company’s unauthorized use of the prominent business name and registered trademark Foci, which belongs to Lanzhou Foci Company, constitutes unfair competition. Consequently, Xi An Foci Company should be held responsible for its actions.

Court Ruling

In the end, the court ruled that Xi An Foci Company must stop using the name Foci in its business name, product packaging, and descriptions. The company is also obligated to announce the change of its business name in the China Market Supervision News and to compensate Lanzhou Foci Company for damages, including reasonable legal expenses. After the decision, neither party opted to appeal.

Takeaway

An entity registers another trademark as a business name and prominently incorporates it into their business activities, this action constitutes trademark use as defined in Article 48 of the Trademark Law. Practices such as emphasizing, enlarging, or displaying the same wording as another registered trademark in a highly visible manner on product packaging can mislead consumers, causing the public to mistakenly identify the prominent portion of the business name as the trademark of another party, thereby misattributing the source of the goods. This behavior transcends general unfair competition and qualifies as trademark use under trademark law. Consequently, when courts address such cases, they typically conclude that the individual is liable for trademark infringement.