Louis Vuitton (LV), a French cult brand across the globe, is faring badly in China, Hong Kong's Wenweipo reported. In 2002, a Chinese businessman named Wang Jun successfully registered the trademarks LOUYIVEITEN and Chinese " 路易威登 " (LOUYIVEITEN in Chinese) with the Chinese Trademark Office, and was granted the design patent of LV's handbags on October 8, 2003. After a long string of legal actions on the trademarks and patent right, LV's case went nowhere.

In November 2007, Wang Jun released his "Christmas Ultimatum", claiming if he was not granted the exclusive franchise of LV in Wuhan before Christmas 2007 via a substantive consultation, LV would be reduced to a commoners' brand in China the very next day.

LV's Request for Patent Invalidation Rejected

Wang Jun is an apparel dealer on Hanzheng Street in Wuhan. While probing the Chinese Trademark Law in 2002, he found that in China, one trademark registration covers one class. As there are 45 international classes, each product category must be registered separately. He also discovered that LV has registered its trademarks for such products as apparel, leather products, jewelry and precious metals while leaving the product patent in China void and empty. In the same year, Wang successfully had the English "LOUYIVEITEN" and Chinese " 路易威登 " trademarks registered. At the end of the year, he worked out a package design similar to LV handbags' appearance and had it patented; on October 8, 2003, the State Intellectual Property Office of China granted a patent to his design application.

On February 24, 2004, LV requested the Chinese State Intellectual Property Office to invalidate the patent on the grounds that the pattern elements of Wang Jun's design are largely LV's world famous patterns; since LV had long ago registered its trademark in China, LV posited that Wang's patent was in conflict with LV's priority right. Subsequently, the State Intellectual Property Office set up a collegial review panel for this patent. 3 years later, the review panel ruled that the French LV did not provide sufficient evidence and maintained the validity of Wang Jun's patent at the end of 2006.

In April 2007, the French LV Malletier sued the Patent Review Board of the Chinese State Intellectual Property Office to the No.1 Intermediate People's Court of Beijing, requesting rescission of the review panel's ruling. In this action, Wang Jun took part as a third party. Nothing had happened after 7 months.

On November 22, 2007, Wang Jun applied to Wuhan Municipal Customs for a nationwide patent filing, requesting the customs authority to seize LV's products suspected of infringing his patent right. In order to retrieve its products, LV had to make a million yuan-worth (about US$140,000) counter-guarantee deposit, which will be paid to Wang Jun as compensation in the event that the infringement is confirmed.

Producing Chinese LOUYIVEITEN in the Absence of Reconciliation

Undoubtedly, Wang Jun's filing the LOUYIVEITEN trademark and product appearance patent is a malicious registration behavior. What's his purpose then? On November 6, 2007, Wang Jun offered LV a reconciliation plan, stating he was willing to transfer the intellectual property in his hands to LV with a consideration of 1 yuan in RMB, but with strings attached: LV must grant him the exclusive franchise in Wuhan. For LV, this is almost unacceptable, for it has been selling directly, without franchises.

As such, the reconciliation offer sank into oblivion. Wang Jun seemed to have been prepared for LV's response. "The reason why I keep the "LOUYIVEITEN" trademark and patent in hand and haven't yet gone into the stage of production is that I do respect LV as a lead brand, but LV's lag in responding to my offer made me feel that it is not worth the wait. If they fail to start the negotiation on the franchise with me before Christmas, I would end all negotiations at once after that and enter the production process. The price of Chinese "LOUYIVEITEN" will be only one third of LV's; so I believe, when Chinese bosses and their employees all begin to use LOUYIVEITEN, I'm afraid LV's global top brand position in China will probably collapse."

Wang also expressed that if granting the franchise is impossible, there is still the possibility of LV buying his patent. 120 million yuan RMB will be enough to make the deal. He stressed that if LV lags, the price will be higher.

Wang proposed two options:
a) LV buys the patent with 120 million yuan (about US$17,500,000);
b) LV grants him the exclusive franchise in Wuhan to trade the intellectual properties.

LV's Possible Face-lift for Sale in China

The real fatal threat to LV's trademark stems from Wang Jun's product appearance patent. From the materials provided by Wang to the journalist and with which Wang applied for the patent, it is easy to see that Wang's product appearance is in no way different from the pattern combinations seen in LV's products sold in China. In other words, LV suffers a major loss due to its carelessness-failing to patent its pattern combinations in the product appearances class. Wang Jun said it is both reasonable and legal for LV to enlarge and use any single pattern in its product appearances, but once its products show any traditional pattern combinations, it ends up having infringed the appearance patent of the Chinese LOUYIVEITEN brand. He pointed out that the appearance of LV's existing mainstream products has already done harm to his interest. He was so familiar with LV's products that he seemed to have them at his fingertips. If LV wants to keep selling its products in the Chinese market, a face-lift seems to be the only way out.

In April 2007, Louis Vuitton filed a civil lawsuit with the No.1 Intermediate People's Court of Beijing on the grounds that Wang Jun's design patent of handbags had infringed upon its exclusive right to use prior registered trademarks and thus constituted a conflict, requesting the Court to forbid the defendant to use his design patent of handbags. The No.1 Intermediate People's Court of Beijing made a judgment in December 2007. In the judgment, the Court held that Wang Jun's design patent of handbags had constituted a conflict with LV's four prior registered trademarks. In order to avoid Wang Jun's act of using the design patent from infringing upon LV's exclusive right to use the prior registered trademarks, the Court forbad Wang Jun to use the design patent.

The main threat to LV's brand comes from Wang Jun's design patent of handbags, which is a mere reorganization of LV's unique overlapped letter combination and various distinctive patterns. The subtle difference in certain details between the design patent and LV's registered trademarks will cause confusion among general consumers regarding the source of the handbags using the design patent, and this will cause damage to LV's exclusive right to use its registered trademarks. In February 2004, LV requested the Chinese State Intellectual Property Office to invalidate the No. 02369707.7 patent of handbags. In its No. 9273 examination decision made in December 27, 2006, the Chinese Patent Re-examination Board (CPRB) held that there was "indeed an apparent possibility of right conflict" between Wang Jun's design and LV's trademarks. However, according to the provisions of the third paragraph of Rule 65 of the Implementing Regulations of the Patent Law, the CPRB cannot make the final decision until a person requiring invalidation has provided either an effective judgment or an effective ruling concerning the relevant right conflict. The panel therefore maintained the validity of the patent. According to the existing provisions, without a handling decision of the administrative organ or an effective judgment of the judicial organ that may prove the right conflict, the CPRB cannot invalidate the design patent due to right conflict. However, in current industrial and commercial administrative practices, without the CPRB's invalidation decision, it is impossible for the industrial and commercial administrative organ (AIC) to handle a dispute of prior trademark infringement by a design patent, not to mention the production of an effective handling decision. At the same time, if a person, after registering another person's registered trademark as a design patent, does not adopt the design patent in its products or other tangible carriers at all, it will be impossible for the person enjoying the exclusive right to use the prior trademark to appeal to the court regarding infringement upon his right, except that the act of applying for the patent right is also deemed as trademark infringement or unfair competition. The people's court is willing to accept appeals for such lawsuits. Otherwise, CPRB will never accept the request for invalidation or make a decision on invalidation.

(Source: American Bar Association)