The two defendants in the original trial (Zhongbai Jewelry Store and Chendai Town Zhou Liu Fu Jewelry Store) used the above sued marks on the background walls, store signs, jewelry counters, jewelry boxes, billboards, packaging bags, quality assurance certificates and other places in their stores and made the following defense: firstly, this was a reasonable use of the franchisor's business name rather than trademark; secondly, the franchisor enjoyed the right of prior use. The first instance judgment determined that ""(Zhou Liu Fu), ""(Zhou Liu Fu Jewelry) and other sued infringing marks which prominently used "周六福"(Zhou Liu Fu) constituted trademark infringement, while the mark "香港周六福黃金鉆石首飾公司加盟店"(Hong Kong Zhou Liu Fu Gold Diamond Jewelry Company Franchised Store) that did not prominently use "周六福"(Zhou Liu Fu) constituted unfair competition. The two defendants in the original trial appealed, and the second instance judgment revoked the determination of unfair competition in the first instance judgment, on the grounds that the two defendants lacked subjective bad faith, and that no evidence proved that their marks were "confusing and misleading enough to the relevant public", and thus did not constitute unfair competition. After the retrial request made by Zhou Liu Fu Jewelry Co., Ltd. ("Zhou Liu Fu Jewelry"), Fujian Provincial Higher People's Court determined as follows in the (2021) Min Min Zai No. 250 and (2021) Min Min Zai No. 253 civil judgments: (1) the trademarks "" and ""(Zhou Liu Fu) have possessed relatively high reputation and the two defendants in the original trial, as peer competitors, should reasonably avoid these trademarks; (2) "周六福"(Zhou Liu Fu) is the most recognizable and distinctive part in the sued infringing mark "". The trade name of this Hong Kong company is exactly the same with the word part in the registered trademark of the right owner. In the case that the business scopes of both parties overlap, such using manner is sufficient to cause confusion and misunderstanding and thus constitutes unfair competition; (3) the two defendants in the original trial have no right to defend by using a subsequently obtained business authorization to claim for prior use; (4) the copyright registration date provided by the two defendants in the original trial as evidence is later than the application date of the right owner's registered trademark, which cannot prove the prior copyright; and (5) according to the judicial spirit of the Supreme Court, if enterprises registered abroad carry out business activities in the mainland, they must abide by the domestic laws and reasonably avoid the prior rights that have been protected by the domestic laws when using business marks such as the foreign name of enterprises. Therefore, the two defendants in the original trial cannot be exempted from infringement liability, but after assuming the infringement liability, they can claim rights from the franchisor based on the contract.

Both defendants in the original trial were unsatisfied with the retrial judgment of the Fujian Provincial Higher People's Court and filed an application for civil procuratorial supervision with the Fujian Provincial People's Procuratorate. After civil supervision and review, the Fujian Provincial People's Procuratorate rejected the supervision application of the two cases and determined that: the trademarks "" and "" of the right owner have high reputation in the market, and the sued infringing mark "" is used in prominent positions in stores and billboards, wherein "香港"(Hong Kong) is the name of the administrative region, "黃金鉆石首飾"(gold and diamond jewelry) refers to the scope of business, "公司"(company) or "加盟店"(franchised store) is the form of organization, none of which has the function of identifying the source of goods; and only the trade name "周六福"(Zhou Liu Fu) is the most distinctive and identifiable part of the foreign enterprise name, and is exactly the same as the Chinese part of the registered trademark of the right owner. Therefore, the defendants should avoid the legitimate prior right. In the case of overlapping business scopes of both parties, the using manner of the sued infringing mark can easily confuse and mislead the consumers, thereby eating into the trading opportunities of Zhou Liu Fu Jewelry. Therefore, the retrial judgment is clear in fact determination, correct in the application of law and is proper, and thus the supervision application of the two defendants in the original trial is rejected.

Typical significance:

Domestic entities should perform the careful review duty with reasonable attention when joining a commercial chain. Especially when using the enterprise name registered abroad as a business mark, it is necessary to carefully review whether the prior rights of the peer business operators are infringed, so as to avoid high infringement compensation claims despite low threshold for franchising.