In October 2017, advised by King & Wood Mallesons (KWM), the case “Shanghai Story Silk Development Co., Ltd. and Shanghai Ziqi Clothing Co., Ltd. (hereinafter, Shanghai Story Company, Shanghai Ziqi Company, the plaintiffs in the first instance and the appellants in the second instance) v. Shanghai Binli Clothing Co., Ltd. (hereinafter, Shanghai Binli Company, the defendant in the first instance and the respondent in the second instance)” was settled. It was another success for Shanghai Story Company after its registration of trademark “Shanghai Story”, a 5-year case advised by KWM. The Shanghai Intellectual Property Court decided that the Shanghai Story branded silk and scarves were well-known products, and Shanghai Story was a distinctive name. Shanghai Binli Company’s unauthorized use of "Shanghai Story", a distinctive name of well-known product, constitutes unfair competition, infringing the right of appellants in respect of distinctive name, and therefore should compensate the appellants. The respondent Shanghai Binli Company was ordered to cease unfair competition and compensate appellants for economic losses including reasonable costs.

This case has raised concerns from consumers, media and many well-known domestic enterprises. The case protects the trademark of the enterprise, prior to the decision of trademark registration, in accordance with the provisions on distinctive name of well-known product as provided in Article 5(2) of the Anti-unfair Competition Law.  It is a typical case and reference for specific legal practice of trademark protection in terms of intellectual property.

“Shanghai Story”, a brand with unique Shanghai culture, was created by Shanghai Ziqi Company in 2003. Since its establishment, Shanghai Ziqi Company focuses on the sales of scarves (including silk and shawl) with “Shanghai Story” as product name. The “Shanghai Story” silk scarves have become one of the popular gifts of Shanghai and are appreciated by visiting tourists. However, as the brand gained popularity, piracy and counterfeits emerge in both physical and online stores. Shanghai Binli Company, founded in 2015, sells the same kind of merchandise as Shanghai Ziqi Company and Shanghai Story Company do. The latter two companies found out that Shanghai Binli Company uses Shanghai Story as product and store name to sell the same kind of merchandise without their approval; moreover, it applied exactly the same characters of “Shanghai Story” in its store and on product package as originally designed by the plaintiffs.  Shanghai Ziqi Company and Shanghai Story Company brought a lawsuit against Shanghai Binli Company for its malicious act of unfair competition and confusing customers, and demanded that the defendant cease improper conduct and destroy all the infringing packages, eliminate adverse effects and financially compensate the plaintiffs.

This case has been through two hearings. The Court of Second Instance held that Shanghai Binli Company, Shanghai Story Company and Shanghai Ziqi Company are competitors under the Anti-unfair Competition Law because they all operate in Shanghai and have overlap in business scope. Under the circumstance that the name “Shanghai Story” has become famous in Shanghai, Shanghai Binli Company, operating in the same region, still used “Shanghai Story” as store name and applied it on packaging, demonstrating its obvious purpose of maliciously utilizing business reputation of famous commodity “Shanghai Story” and this in fact would cause customers to be confused and misled. Therefore, Shanghai Binli Company’s conduct constituted unfair competition by using distinctive name of famous commodity without approval. The court eventually supported the claims of the appellants (the plaintiffs in the first instance), deciding that “Shanghai Story” constituted a special name of well-known commodities and should be protected by the Anti-unfair Competition Law.

KWM, representing Shanghai Story Company and Shanghai Ziqi Company, provided professional services and support to clients in strategy formulation and providing evidence. Through presenting substantial proof including publicity on various platforms and honor certificates received from many Shanghai shopping malls, KWM proved that the silk and scarves of “Shanghai Story” are of considerable visibility in Shanghai and well recognized by the public, reversing the adverse situation in the first instance. In addition, KWM presented proof from different aspects during the hearings, helping clients in obtaining the decision of infringement under the Anti-unfair Competition Law in the second instance.

The case was led by partners He Fang and Ding Xianjie.