Mars Food (China) vs. Jinlitai Food
On June 6 the Guangzhou Intermediate Court published its final judgment in an unfair competition dispute and ordered Jinlitai to:
• Immediately stop infringement of Mars’ unique packaging design and decoration
• Pay Mars Rmb200,000 (US$30,000) in damages
The appeal decision overturned the earlier decision of the Haizhu District People’s Court of Guangzhou City vindicating Mars’ strategic shift towards pursuing infringers through the civil courts rather than focusing all its efforts on administrative actions.
As more and more rights owners begin to seriously incorporate litigation into their brand protection planning (24,000 IP cases were heard in China last year), Mars’ decision to protect its IP through litigation reflects a growing confidence in the expertise of the IP court system as an effective alternative to managing infringements.
Change in strategy
As one of the biggest chocolate and pet food producers in the world, Mars is also the proprietor of many famous brands in China including DOVE, SNICKERS, M&M’S, WHISKAS and PEDIGREE. Mars invests time and money in not only the quality of its products, but also in the creation, development, maintenance and protection of all elements of its product branding, including the design of its packaging.
Since entering the Chinese market, countless entities have sought to unlawfully obtain the benefit of Mars’ investment in China by imitating its products and branding. As such, Mars has been forced to make huge efforts to enforce its rights against infringers using a combination of warning letters, educational campaigns and administrative enforcement actions. This ensures that customers are not misled and can have confidence that they are purchasing the highest quality Mars products.
With the increased sophistication and complexity of infringement cases, Mars began to realise the limitations of effective enforcement through administrative channels. The increase in look-alike and unfair competition issues further highlighted the limitations of administrative enforcement, leading Mars to rethink its strategy in 2004.
Noting that litigation in China was becoming more predictable and transparent, Mars placed it at the forefront of its new deterrent strategy. Bringing cases before the civil courts would not only enable Mars to obtain injunctive relief and damages against infringers, but also obtain clear guidance as to the effect and scope of its rights.
In order to successfully implement and support this new litigation strategy, Mars introduced three broad disciplines.
Greater internal communication
To pre-empt major threats to key brand properties and to enhance and maintain the distinctiveness of its brands, Mars took internal steps to ensure that the marketing and legal functions were working as close together as possible.
With support from senior management, the Mars legal team is now involved much earlier in brand and marketing initiatives with Mars’ associates at all levels of the business. This has led to the development of an even stronger portfolio of core and protective rights which reflects the needs and interests of the business and its customers.
As there is no discovery process in China, collection of original and notarised evidence is particularly important. To meet the greater evidential demands of more complex infringements and to maximise chances of greater compensation levels, Mars introduced internal systems to proactively identify and retain key materials required for litigation proceedings.
A continuing education and awareness programme was implemented to insure that Mars associates were aware of the ongoing need to retain vital evidence. In order to support continuing enforcement and litigation strategies, an “evidence bank” was created to facilitate greater cost efficiencies.
Targeting best venues
Unlike some brand owners who opt to litigate in larger cities such as Beijing and Shanghai, Mars decided to take its fight to the infringers’ backyards, selecting Tianjin (near Beijing), Quanzhou (the intermediate court venue covering the city of Jinjian in Fujian province) and Guangzhou as the preferred venues for litigation. These cities are home to a concentration of factories manufacturing chocolate and pet food and are thus an appropriate choice.
The aim was to establish a presence within the regions by building up a reputation and case history that would be felt by other companies in order to gain a first-mover advantage.
Four years on and the seeds of Mars’ litigation strategy has begun bearing fruit. Mars is benefiting from greater cost efficiencies driven by greater procedural awareness, better systems and having core banks of evidence in place. It has also received many positive judgments and driven greater judicial understanding of trademark infringement and unfair competition activity.