If the parties sign a trademark right transfer agreement as a guarantee for a loan contract, is the agreement a guarantee contract for assignment? Can the assignee's use of the trademark rights acquired under the agreement be regarded as performance of the contract and not constitute trademark infringement?
China Intellectual Property News (08/06/15/2022)
In recent years, more and more enterprises have solved the problem of capital shortage by financing through intellectual property pledge. However, due to various reasons, the contract often fails to be performed on time and makes the parties go to court. The above problems are the most difficult problems in such disputes. Recently, the second instance of the Guangzhou Intellectual Property Court concluded a dispute over a trademark license contract, responded to and clarified the issue, and found that the loan agreement signed by the plaintiff Guangzhou Bonshidi Biotechnology Co., LTD. (hereinafter referred to as Bonshidi Company) and the defendant Beijing Jialeli Co., LTD. (hereinafter referred to as Beijing Jiale Company) has the characteristics of a guarantee contract. Although the company cannot repay the loan due, the documented evidence cannot prove that Beijing Jiale Company's use of the six registered trademarks pledged by Bonshidi Company (hereinafter referred to as the trademarks involved) conforms to the provisions of the loan agreement. Therefore, Beijing Jiale Company's use of the trademarks involved in the production and sale of the products involved constitutes a breach of contract and must immediately stop the behavior.
In the view of the industry, the case is applied by law with reference to the provisions of the application of intellectual property pledge, and provides a referential judicial practice for the guarantee of the transfer of intellectual property.
The loan caused a trademark dispute
The dispute between the two sides began with a loan agreement.
Bonshidi company is one of the earliest domestic enterprises specializing in medical nutrition related products, with "Peike", "Yuanwo", "Bonshidi" and other brands of medical nutrition products, popular with consumers. In 2017, due to the urgent need for operating funds, Bonshidi Company signed a loan agreement with Beijing Jiale Company on September 7 of the same year after negotiation, borrowing 2 million yuan from the company. According to the agreement, the loan period until June 30, 2018, Bonshidi Company will own "Peike" "Peike PAYKE" and other six trademarks involved in the mortgage to Beijing Jiale Company, and cooperate with Beijing Jiale Company to handle the trademark transfer procedures.
The reporter learned in the interview that the above loan agreement also agreed that the ownership of the trademarks involved after the completion of the transfer is owned by Beijing Jiale company, if the company can operate normally, there is no change of ownership, bank court seizure and other circumstances, the right to use the trademark is shared by both parties, and Beijing Jiale Company unconditionally authorizes the long-term use of Bonshidi company; Bonshidi Company shall return all the loans to Beijing Jiale Company within the loan term, and Beijing Jiale Company shall unconditionally transfer the trademarks involved back to Bonshidi Company. At the same time, the agreement also agreed that if the company cannot operate normally and cannot meet the normal supply of Beijing Jiale Company's market demand, Beijing Jiale Company has the right to use the above trademarks involved.
However, by June 30, 2018, the company failed to repay on time, which also laid the groundwork for the next dispute between the two sides.
Zhang Xiaodong, head of the legal department of Bonshidi Company, said in an interview with China Intellectual Property News that after the expiration of the loan, the company had repeatedly communicated with Beijing Jiale Company, hoping to pay off all the debts by the end of March 2020, but did not receive a response from the other party. In April 2020, the company found that there were suddenly similar products in the market produced by Jiale Likang (Tianjin) Medical Food Co., LTD. (hereinafter referred to as Tianjin Jiale Company), which was controlled by Beijing Jiale Company, and marked with the trademark involved, which were similar to the products of Bonshidi Company. "We believe that the other party did not meet the requirements of the agreement, the use of the trademark constitutes a breach of contract, so the company sued it to the court, asking the court to order Beijing Jiale company and Tianjin Jiale company to stop using the trademark, and compensate for 48,000 yuan in economic losses." Zhang Xiaodong said.
However, in the case of Bonshidi, Beijing Jiale Company believes that it has the right to use the trademark involved. The company's agent, Guangdong Huaxia law firm lawyer Xiong Wei told this reporter that when Beijing Jiale company used the trademark involved, the company's account has been sealed by the court, indicating that the company is in an abnormal state of operation, there is no production workshop, and does not have production capacity. Therefore, Beijing Jiale Company does not constitute a breach of contract.
Define the legal nature of the agreement
It is understood that the focus of the case is how to define the legal nature of the borrowing agreement.
In this regard, the court of first instance held that the contract involved belongs to the trademark licensing contract. Although the loan agreement stipulates that Beijing Jiale Company shall enjoy the ownership of the trademark involved after the transfer of the trademark right, it is in essence the security right and the trademark transferee in form, not the actual right holder of the trademark involved. The evidence submitted by Beijing Jiale Company cannot prove that its use of the trademarks involved conforms to the circumstances agreed upon in the loan agreement. Therefore, Beijing Jiale Company and Tianjin Jiale Company must stop using the trademarks involved and compensate Bonshidi Company for the economic loss of 20,000 yuan.
After the first instance judgment, Beijing Jiale Company and Tianjin Jiale Company refused to accept, and appealed to the Guangzhou Intellectual Property Court. The main reasons for appeal are: the trademark rights involved in the case have been transferred, and Beijing Jiale Company has the ownership of the trademarks involved. Only when Bonshidi Company meets the specific conditions of normal production and operation of Bonshidi company can it jointly own the right to use the trademark with Beijing Jiale Company. According to Article 7 of the agreement, if Bonshidi Company cannot operate normally, Beijing Jiale Company will withdraw its general use license to Bonshidi Company, and Beijing Jiale Company will exclusively use the trademark. Therefore, whether the production of Bonshi Di company is normal or abnormal, Beijing Jiale company has the right to use the trademark involved.
Guangzhou Intellectual Property Court made the above second instance judgment after hearing, on the grounds that Tianjin Jiale Company was not a party to the contract involved, supported Tianjin Jiale Company's appeal request that it did not bear the liability for breach of contract, but found that Beijing Jiale Company had no right to use the above trademarks involved.
For the above judgment, Zhang Xiaodong said that it clarified the ownership of the trademark involved and protected the legitimate rights and interests of the parties. Beijing Jiale applied to the Guangdong Provincial High People's Court for a retrial, which was recently rejected.
Then, what is the basis for the court of second instance to make the above decision? In this regard, the chief judge of the second trial of the case, CAI Jianhe, said that Beijing Jiale Company believes that the legal relationship in the dispute is a trademark license contract dispute, while Bonshidi company believes that it is a guarantee contract dispute. In this regard, the collegial panel believes that the case belongs to the dispute involving the trademark right transfer guarantee contract. Specifically, assignment security is a kind of atypical security, which refers to the debtor or a third party in order to guarantee the performance of the debt, the subject matter transferred to another person, in the event of default, the other person can be paid the subject matter priority. As an atypical security, the purpose of transfer security is to create security right rather than to acquire ownership, which can be treated by referring to the most similar provisions of the applicable civil code such as the pledge of movables, the pledge of rights and the mortgage of real estate.
"In this case, according to the relevant provisions of the loan agreement involved, the agreement has the characteristics of a transfer guarantee contract, so it can refer to the applicable provisions of intellectual property pledge." In the legal relationship of intellectual property pledge, whether the pledgee can use the pledged intellectual property shall be exercised according to the contract." CAI Jianhe said that the loan agreement involved in the case made a clear agreement on the conditions for Beijing Jiale Company to use the trademark involved in the case, but the existing evidence is difficult to prove that there is a suspension of production of Bonshidi Company. Therefore, the conditions for Beijing Jiale Company to use the trademarks involved have not been established, so it should be liable for breach of contract such as compensation for losses.
Source: Guangzhou Intellectual Property Court, China Intellectual Property News
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