First come, first served

For seven years UK confectionery maker Cadbury had a doppelganger in China called Yikoulian. With the same distinctive shade of purple on the packaging for its biscuits, Yikoulian even adopted Cadbury’s Chinese name for its popular eclairs. The clarification finally came last September, with a court in Beijing ruling against Yikoulian and ordering it to pay Rmb2.43 million ($347,000) in compensation to the British brand.

More Chinese courts are finding in favour of foreign claimants in cases like these, even though the compensation on offer can be insubstantial. But in other instances, the foreign firms aren’t getting the win they expect. Case in point: Ryohin Keikaku, the owner of Japanese retail brand Muji, which lost a trademark infringement lawsuit against its copycat in China last month.

Although Muji prizes minimalist design and adopts a so-called no-logo policy, it has registered its own brand as “MUJI” in block letters in China – together with four Chinese characters spelling out Wuyinliangpin, meaning “no-brand quality goods”.

The current legal dispute began in 2001, when Hainan-based trading company Nanhua registered its own trademark for 24 woven fabric products, including towels and bed covers, as Wuyinliangpin in mainland China.

Three years later it transferred the rights to the trademark to Beijing Cottonfield Textile Corp, which then set up Beijing Wuyinliangpin in 2011.

That meant that when Muji entered the mainland China market in 2005, the Tokyo-based firm couldn’t use its own international trademark for its woven products.

Indeed, Beijing Cottonfield then sued Muji for infringing its own trademark in 2015.

A Beijing court ruled against the Japanese company on the basis that Beijing Cottonfield had registered its trademark first. Last month it maintained its original ruling – upon Muji’s second appeal – and instructed Muji to pay Beijing Cottonfield damages amounting to Rmb626,000 ($89,000).

Beijing Cottonfield previously argued that its decision to deploy Wuyinliangpin as a trademark had nothing to do with copying Muji, but was designed to convey the idea that the company made high-quality products, according to the South China Morning Post.

However, last October it opened a bricks-and-mortar outlet in Beijing known as Wuyinliangpin Natural Mill, which was very similar to a Muji outlet in terms of the products that it sold and the way that the store was designed.

The court verdict has surprised some of Muji’s local customers, with many siding with the Japanese brand. “The unscrupulous company has won, but the image of the Chinese people has lost,” fumed one customer on weibo.

“Being legal doesn’t mean it’s not disgusting,” wrote another, making clear what he thought of Beijing Cottonfield.

Others thought that any sense of triumphalism for the Chinese party would be shortlived. “For a shanzhai [the Chinese term for fake; see WiC1] store as such, even if it wins a lawsuit, it’s not going to be able to stay in business that long,” commented another netizen.

Of course, other commentators queried why Muji hadn’t ironed out its trademarking challenges before venturing into China.

After all, it’s not the first time that foreign brands have run into similar trouble, given that trademarking in China has always operated under a “first-to-register” rather than a “first-to-use” rule.

In 2012 Apple had to pay $60 million to Shenzhen-based Proview Technology to recover its “iPad” trademark in China, for instance. The sum was paid as a settlement fee after Proview lodged a complaint that it had registered the rights to the iPad name in 2000, according to a BBC report.

In 2016, Apple lost another legal wrangle with Beijing-based Xintong Tiandi, which had registered the iPhone trademark for its leather goods in 2007. The Beijing court also pointed out that the tech giant could not prove the “iPhone” brand was widely recognised in China before 2009, when Apple began selling its handsets on the mainland.

“Some enterprising firms are quick to snap up trademarks that are known overseas but not registered locally, in the hope of a pay-off down the line,” Reuters reported.

Ryohin Keikaku’s president Matsuzaki Satoru told journalists this month that he “will strive to restore [Muji’s] rights” through other legal and administrative procedures, the Nikkei Asian Review reported.

China is Muji’s largest market outside Japan. But one of its challenges is that the ‘less is more’ aesthetic of much of its product line makes it easier for counterfeiters to replicate its goods (see WiC463).

Muji’s shares tumbled last week after it lowered its operating profit target for the current financial year by 17%, Bloomberg noted. One of the analysts quoted in the report blamed flat profits in China and “a more permanent and more damaging loss of market share” versus what the company expected.

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