The series of disputes between JDB and Wanglaoji over the red-can herbal tea lasted for years, and the 'red can trade dress' battle was dubbed 'China's first trade dress case'. After a first instance before the Guangdong Provincial Higher People's Court and a second instance before the Supreme People's Court, it was finally held that the rights in the distinctive trade dress of a well-known product may be jointly enjoyed by the licensor and the licensee—a landmark precedent on the ownership of trade dress in trademark licensing relationships.
Case Overview
The 'Wanglaoji' trademark was originally held by Guangzhou Pharmaceutical Holdings Limited ('Guangyao Group'), licensed to Hongdao Group (JDB's parent company) from the 1990s, after which the parties signed trademark license and supplementary agreements to extend the license term. JDB invested heavily over years of exclusive operation, making the red-can Wanglaoji herbal tea a nationally well-known product; the red can trade dress was actually designed by JDB and used continuously. In 2012 the trademark license relationship broke down, and JDB continued producing red-can herbal tea under the 'JDB' brand; the parties sued each other over ownership of the red can trade dress.
Issues in Dispute
- Whether the red can trade dress at issue constituted the distinctive trade dress of a well-known product protected by the Anti-Unfair Competition Law;
- Whether the trade dress rights belonged to the trademark licensor Guangyao Group or to the licensee JDB, which actually operated and invested in promotion;
- After the end of the trademark license relationship, whether each party's continued use of the red can constituted infringement.
Judgments and Case Numbers
- First instance: Guangdong Provincial Higher People's Court, (2013) Yue Gao Fa Min San Chu Zi No. 1, found JDB had infringed, ordered it to stop using the red can trade dress, publicly eliminate the impact, and compensate Guangyao Group RMB 150 million in economic losses plus more than RMB 260,000 in reasonable enforcement expenses;
- Second instance: Supreme People's Court, civil judgments (2015) Min San Zhong Zi Nos. 2 and 3, issued on July 27, 2017 and publicly announced on August 16, 2017. The Supreme People's Court vacated the first-instance infringement finding, holding that Guangyao Group and JDB had both made important contributions to the formation of the red-can herbal tea trade dress rights at issue, and that where the parties had no agreement on ownership or the agreement was unclear, the relevant rights could be jointly enjoyed by both parties, with neither side infringing the other and neither compensating the other;
- Sources: 'Top 10 IP Cases of Chinese Courts 2017' published on the Supreme People's Court official website; CNTV report ('Red can dispute settled: final judgment 'reverses' China's first trade dress case'); IP case database of the Ministry of Commerce website.
Key Takeaways
- Trade dress rights do not automatically follow the trademark: during the subsistence of a trademark license, where the licensee has made substantive contributions to the formation of the distinctive trade dress of a well-known product, the trade dress rights do not necessarily belong to the trademark owner;
- Contribution is the core consideration: the court weighed the design origin of the trade dress, promotional investment, and market influence in determining ownership;
- Agreement prevails over presumption: where the license contract clearly stipulates the ownership of results such as trade dress and design patents, the stipulation governs;
- The Anti-Unfair Competition Law protects market achievements: the basis for protecting the distinctive trade dress of a well-known product is the stable cognition of the relevant public, not the registered trademark itself.
Lessons for Businesses
Trademark license contracts must clearly stipulate the ownership of results such as product packaging trade dress, design patents, and advertising materials, as well as the arrangements for their use after the license ends, to avoid later disputes; licensees should keep complete records of their investment in packaging design and brand promotion as the basis for future ownership claims; and trademark owners should not take for granted that all of the licensee's business results belong to them—actual contribution determines the share of rights.
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