TIPS^®  Taiwan Intellectual Property Special

China Updates 

Forward and Reverse Confusion in Trademark Disputes: the Case of Pepsi’s “Blue Hurricane”

In May 2007, Zhejiang High Court made a final decision in favor of Lan Ye Liquor Company (“Lan Ye”) in its trademark lawsuit against Pepsi, one of the world’s most famous soft drink brands.

Pepsi has a series of promotional events and strategies under a new theme each year, and in 2005, the company launched promotional activities under the theme “Lan Se Feng Bao” (translated as “Blue Hurricane” in English). Pepsi had famous celebrities in its TV commercials and printed the Chinese wordings of “Blue Hurricane” on its coke drinks produced between June and August 2005, as a special edition for the theme.

In November 2005, the Bureau of Quality Monitor and Control of Zhejiang Province seized 107 boxes of beer named “Lan Se Feng Bao” produced by a liquor company called Lan Ye, deeming that Lan Ye’s beer infringed Pepsi’s unregistered famous mark of “Lan Se Feng Bao,” when Lan Ye is the actual trademark holder of the name. Lan Ye initiated a trademark infringement proceeding against Pepsi in December 2005, claiming that since Pepsi spent thousands of millions on the promotion of the “Blue Hurricane” theme, the general public is made to believe that the trademark belongs to Pepsi, making Lan Ye’s liquor products the “fakes” in the market. Lan Ye requested that the court should enjoin Pepsi from continuing the infringement acts, and claims RMB 3 millions for monetary damages.

This is a typical example of reverse confusion in trademark in China. In a traditional trademark infringement case, i.e. forward confusion of trademark rights, an infringer violates trademark rights by deliberately using a trademark owned by another in the manufacturing of counterfeits. The infringer benefits from the publicity and fame of a well-known brand by confusing the consumers that the counterfeits are actually genuine products. In this context, the enforcement of the trademark rights is to protect the interests of the consumers and the trademark owner, and to prevent marketplace confusion. On the contrary, in a reverse confusion case, the infringer uses the trademark of another, and promotes it through measures such as advertising, TV commercials, etc; as a result, the general public identifies the mark with the infringer and the actual trademark owner’s role is unnoticed or neglected. In this case, the consumers may not be harmed, or may even benefit, from the infringer’s use of the trademark. The right of the trademark owner is nonetheless exploited.

During the proceedings, even though Pepsi responded that its Blue Hurricane Project was launched as early as 1996 when the company decided to change its packaging, and since Pepsi is already a world-famous brand, Blue Hurricane is merely a promotional slogan rather than an actual trademark. Nevertheless, the court found that the term Blue Hurricane has been massively used in Pepsi’s advertisements and promotional activities, and that the general public can easily relate Blue Hurricane to the Pepsi brand. Therefore, Pepsi still infringed Lan Ye’s trademark rights in China, and ruled that Pepsi should be liable for the compensation of RMB 3 million.