The legal disputes between Huatuo Sinopharm and Guangdong Huatuo Pharm spanned over a decade, garnering significant attention within the Chinese traditional pharmaceutical industry. In 2024, the Beijing High People’s Court overturned the ruling of the first instance, determining that the defendants, Guangdong Huatuo Pharm and associated entities, engaged in trademark infringement and unfair competition by unlawfully capitalizing on the Huatuo trade name.

Key Takeaways

1. It is not a must to establish a trademark as well-known in order to obtain cross-class protection. In the present case, the contested trademark pertained to pharmaceuticals classified under Class 5, while cold compresses were categorized as medical devices under Class 10 according to the Nice Classification. Nevertheless, the court found these products to be sufficiently similar to pharmaceuticals in Class 5 for the purposes of trademark infringement analysis.

2. If a invested company is permitted to utilize a shareholder’s trade name under a cooperation agreement that has since lapsed, and the shareholder subsequently requests that the company cease using the trade name, the continued use of that trade name by the invested company constitutes unfair competition.

Case No: (2023)Jing Min Zhong 621

Huatuo Pharm Trademark Dispute – Second Instance JudgementPlaintiff

• Huatuo Sinopharm Co., Ltd. (Huatuo Sinopharm)

Defendants

• Beijing Yuetai Fangze Trading Co., Ltd. (Beijing Yuetai)
• Huatuo Sinopharm (Guangdong) Great Health Industry Co., Ltd. (Guangdong Huatuo Health)
• Huatuo Sinopharm (Guangdong) Pharmacy Co., Ltd. (Guangdong Huatuo Pharm)
• Cangzhou Qianwei Medical Products Co., Ltd. (Canghzou Qianwei)

Disputed Trademarks

Huatuo Sinopharm is the trademark right holder who owns several Huatuo trademarks in Class 5 designating the medicine goods. The trademarks included:

Summary of Court Judgementk in this case.

1. Determination of the Well-Known Status of the Disputed Trademark in Class 5 of Huatuo Sinopharm

The defendants contended that the products in question should be categorized as Class 10 medical devices, which differ from the Class 5 pharmaceuticals and human medicines protected by the trademark registrations of Huatuo Sinopharm. The products allegedly infringing upon the trademark, produced by Cangzhou Qianwei and marketed by Beijing Yuetai, Guangdong Huatuo Health, and Guangdong Huatuo Pharm, included items such as Huatuo Pediatric Cough Plaster, Huatuo Medical Fever-Relief Plaster, Huatuo Cold Compress Therapeutic Gel, and Huatuo Lumbar Intervertebral Disc Cold Compress Plaster. These product names do not conform to the standard nomenclature outlined in the China Nice Classification.

According to the China Nice Classification, which categorizes similar goods and services, products such as plasters, bandaging materials, medical health bags, and medical massage gels are classified under Class 5 as pharmaceutical goods, while medical cold compresses are classified under Class 10 as medical instruments and devices. An analysis of the components and functional descriptions of the allegedly infringing products indicates that they are not entirely equivalent to Class 10 medical devices but are more closely aligned with Class 5 products such as plasters. Furthermore, based on public perception, it is more likely that consumers would associate these products with pharmaceuticals.

Consequently, after considering various factors, including the function, usage, production methods, sales channels, and consumer demographics, the Court of Second Instance concluded that the allegedly infringing products are significantly associated with pharmaceuticals, thus falling within the protective scope of Huatuo Sinopharm’s Class 5 registrations. Therefore, the Court deemed it unnecessary to ascertain the well-known status of the disputed trademark in this case.

2. Infringement of Trademark Rights by Beijing Yuetai, Cangzhou Qianwei, Guangdong Huatuo Health, and Guangdong Huatuo Pharm

The packaging of the allegedly infringing products marketed by Beijing Yuetai prominently featured the “HTGYR Hua Tuo National Medicine” logo. Additionally, Beijing Yuetai utilized the term “Hua Tuo National Medicine” for promotional purposes on its JD online store. The use of this logo is interpreted as trademark usage under Chinese Trademark Law, indicating the source of the goods. Cangzhou Qianwei authorized Beijing Yuetai to sell the allegedly infringing products, and Cangzhou Qianwei was commissioned by Guangdong Huatuo Health to manufacture these products. The packaging also identified Guangdong Huatuo Health and Guangdong Huatuo Pharm as the distributors.

The Huatuo trademarks have achieved a certain level of recognition through the marketing and utilization by Huatuo Sinopharm. If the allegedly infringing marks and Huatuo Sinopharm’s trademarks are applied to the same or closely related products, the relevant public, exercising reasonable attention, would likely experience confusion or be misled regarding the source of the products, or assume a licensing relationship or affiliation between the entities involved. Therefore, the Court determined that the actions of Cangzhou Qianwei in manufacturing the allegedly infringing products, as well as the actions of Guangdong Huatuo Health and Guangdong Huatuo Pharm in selling these products, constituted an infringement of the registered trademark rights of Huatuo Sinopharm.

3. Permissibility of Continued Use of the Trade Name “Huatuo” by Guangdong Huatuo Health and Guangdong Huatuo Pharm

In this matter, Huatuo Sinopharm asserted that Guangdong Huatuo Health and Guangdong Huatuo Pharm should cease using “Huatuo” as their trade names. The Court ruled that the determination of whether the use of “Huatuo” by these entities constituted unfair competition should be based on two criteria:

• Whether the trade name “Huatuo” has attained a certain level of influence; and
• Whether the unauthorized use of “Huatuo” by these entities has resulted in public confusion or misconception.

Firstly, the evidence presented by Huatuo Sinopharm demonstrated that the “Huatuo” trade name has garnered a significant level of recognition within the relevant industry through years of promotion and use, qualifying it as a trade name with influence as defined in Article 6, Paragraph 2 of the Anti-Unfair Competition Law.

Secondly, since Huatuo Sinopharm and its subsidiaries no longer held any shares in Guangdong Huatuo Health or Guangdong Huatuo Pharm, neither entity possessed the legal right to utilize “Huatuo” in their trade names. The legal basis for Guangdong Huatuo Pharm’s use of “Huatuo” as a trade name stemmed from an Investment Agreement for the Establishment of Huatuo Sinopharm Chain Co., Ltd., which was annulled by a shareholders’ resolution in 2016. Huatuo Sinopharm did not authorize Guangdong Huatuo Pharm to continue using “Huatuo” as a trade name. Furthermore, in 2018, Guangdong Huatuo Pharm publicly acknowledged on its official website that it had violated the agreement by establishing Guangdong Huatuo Health without authorization and using both “Huatuo” and “Huatuo Sinopharm” as trademarks and trade names without permission.

Moreover, the business scope of Huatuo Sinopharm included the production and sale of traditional Chinese medicine, while Guangdong Huatuo Pharm was also involved in the wholesale and retail of traditional Chinese medicine and pharmaceuticals. Given the established recognition of Huatuo Sinopharm, the relevant public could easily be misled into believing there was a connection between Huatuo Sinopharm and Guangdong Huatuo Pharm, resulting in confusion and potential harm to the trade name rights of Huatuo Sinopharm.

Therefore, the Court concluded that the use of “Huatuo” as a trade name by Guangdong Huatuo Health and Guangdong Huatuo Pharm constituted acts of unfair competition as defined in Article 6, Paragraph 2 of the Anti-Unfair Competition Law.