Chanel’s Trademark Infringement Case Against Wen Daxiang and a Guangzhou Hotel

Background

Chanel, incorporated in France on August 27, 1954, owns figurative trademarks and the CHANEL word mark for goods in Class 25, including clothing, shoes, hats, scarves and swimwear.

Ramada Pearl Hotel, an affiliated operation of Guangzhou Kaixuan Hotel Co., Ltd., leased shop No. 2 in the west corridor of its ground floor to Wen Daxiang for the sale of clothing and leather goods. The lease required the tenant not to sell counterfeit or substandard goods.

Chanel alleged that shoes, wallets and other goods sold by Wen bore signs identical to its registered trademarks. It sued Wen, Guangzhou Kaixuan Hotel Co., Ltd. and Ramada Pearl Hotel, seeking an injunction and joint compensation of RMB 300,000 for economic loss and reasonable expenses.

The courts’ decisions

At first instance, the Guangzhou Yuexiu District People’s Court held that Wen had infringed Chanel’s registered trademarks and must stop the infringement and pay damages. It found that the hotel parties were not liable.

Chanel appealed. The Guangzhou Intellectual Property Court considered the reputation of the marks, the hotel’s status as an upscale establishment, the relationship between the hotel and the shop under the lease, and Wen’s repeated infringements over a long period. It held that the hotel owed a heightened duty of care toward the shop and could have discovered the obvious sale of counterfeit goods by exercising reasonable attention.

By turning a blind eye and allowing the infringement to continue, the hotel had assisted the infringement. The appellate court ordered Wen and the two hotel parties to pay joint compensation of RMB 50,000 for Chanel’s economic loss and reasonable expenses.

Significance

Trademark owners frequently bring claims against the operators, lessors and managers of shops selling counterfeit goods, including shops in clothing markets and hotels. Determining the lessor’s or manager’s responsibility is therefore important.

In this case, the court assessed whether the lessor knew or should have known of the infringement by considering the mark’s reputation, how obvious the infringement was, and the relationship between the lessor and the operator. It determined the duty of care in light of the circumstances, providing guidance on liability for assisting infringement and the protection of well-known brands.

The case was included among the representative cases of the Beijing, Shanghai and Guangzhou intellectual property courts published by the Supreme People’s Court in 2015.