Protection of retail formats in China: the Decathlon case
The copying of whole retail formats in China is not unknown. For example in 2011 authorities in Kunming found 22 ‘fake’ Apples stores in their city with many of the stores copying the décor and ambience of official Apple retail outlets. Some of the employees of these stores actually thought they were working in ‘official’ Apple stores. Further in September 2015, it was reported that there were 30 Apple stores in operation in the city of Shenzhen, but Apple only had only one official store and 5 authorised dealers in the area at the time.
The protection of retail formats is notoriously difficult in most countries most notably in the United Kingdom and European Union. Although Apple have been successful in registering its store format in Germany when its minimalist format was found to have departed significantly from the norm or customs of the economic sector concerned by the Court of Justice of the European Union (‘CJEU’), the registration of such formats under trade mark law can be hard. Problems of registration centre on defining what the retail format is accurately and often such applications have to rely on evidence of acquired distinctiveness. Often retail formats have to protected via a combination of copyright, design, and via the protection of goodwill in common law states such as the UK which again can be hard to prove and enforce.
Although it is still not possible to specifically cover retail services in Chinese trade mark applications and registrations, a recent decision of the Beijing Shijingshan People’s Court has provided added protection for the protection of retail formats in China and in some ways made it easier to protect such formats than many countries.
Decathlon (Shanghai) Sports Products Co., Ltd were successful against a Chinese outdoor sports retailer under the law of unfair competition based on unregistered rights. The Chinese market is second only to its home market of France in importance for Decathlon. The retailer has been operating in China since 2003. In 2020 it operated three hundred and thirteen stores in China and in 2017 had over 10 billion RMB in sales in China. Such use and repute may well have helped Decathlon in its enforcement efforts here. The Beijing Shijingshan People’s Court held that both parties were clearly in direct competition and Decathlon argued that the format of their stores had a striking and minimalist feel. The court held although the formats of the stores were not identical, consumers would think that the styles were similar or would think they had gone into a Decathlon store because the styles were so similar or in the words of the court that the defendant had “learned from Decathlon”.
Although the court held that the law of unfair competition was not there to stop the use of formats or decoration which to a degree involved some inspiration, there was a line to draw particularly where direct copying occurred of formats and decoration which had a reasonable amount of market awareness. Decathlon obviously passed that hurdle and the defendant had crossed the line on inspiration. This decision is good news for retailers who operate in China and shows that one does not have to rely solely on registered IP rights in Chinese IP disputes.
Further, although retail services cannot be specifically listed in Chinese trade mark applications and registrations there are indeed means and ways around this difficulty which we have highlighted in previous retail scanners. The Chinese courts have effectively allowed for the protection of retail services via other means. In Shenzhen Milan Station Trading Co v Milan Station (Hong Kong) Holdings Limited: the court held that “retail services” fell within the scope of “sales promotions (for others)”, and similar reasoning was used to determine that retail supermarket services were similar to “sales promotions (for others)” (TingChao (Cayman Islands (Holdings) Co. Ltd v Min Fen.).
The takeaway from all these cases is maybe to be creative in considering the protection of retail formats and retail services in China. Do not overlook unfair competition law in China, be creative in your store formats and think about what terms can effectively protect retail services in Chinese trade mark applications.
This article was prepared by HGF Partner & Trade Mark Attorney Lee Curtis.