The LEHMAN, Lee & Xu China Trademarks Newsletter keeps you up to date on recent developments in
China Trademark law and practice
Trademark Licensing in China and Malicious Conspiracy
Picasso International Inc. (PII) is the owner of China registered Trademarks PICASSO. In September 2008, PII and Shanghai PaFuLuo Stationary Co. Ltd. entering into an exclusive licensing agreement by which PaFuLuo was able to utilize the PICASSO mark on writing instruments in China. The Agreement was to last through 2024, however it was abruptly terminated on January 01 2012 for unknown reasons. A month and a half later PICASSO had signed a new exclusive licensing agreement with Shanghai Art Imagine Stationery Co Ltd. (SAIS).
PaFuLuo filed a lawsuit against PII and SAIS alleging the new licensing agreement constituted "malicious conspiracy causing damage to the interests of a third party" (Article 52.2 of the China Contract Law) and seeking 1 million RMB in damages.
At first instance, the Shanghai Number 1 Intermediate People's Court held that Picasso and Shanghai Art had entered into the license with the intention only to establish an exclusive license to the mark, and had no intention to damage PaFuLuo's legitimate interests.
PaFuLuo and Shanghai Art appealed. Without sufficient evidence that Shanghai Art had intended to damage PaFuLuo's interests or had conspired with Picasso, the court found that the signing of the new license did not constitute “Malicious conspiracy”.
In order to justify the accusation of "malicious conspiracy causing damage to the interests of a third party", PaFuLuo had to prove that Picasso and Shanghai Art intended to harm its interests and conspired to do so.
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