French Wine “Castel” Mark – An Interesting Case to Decipher

A recent move by a local court in Wenzhou, China may well indicate that in the future a lawsuit against a foreign brand owner in China could cause the foreign defendant to lose its valuable trademarks if it loses the case.  Earlier this year a local Chinese merchant sued a famous French wine producer in the Wenzhou Intermediate People’s Court and successfully secured an “ex-parte” relief, by which, the defendant’s valuable trademark would be subject to freeze until the case is decided.    Defendant in this case is Castel Group, which is the owner of the “Castel” trademark in China.  However, the Chinese plaintiff had managed to register the Chinese “Ka Si Te (卡斯特)” mark first in China, a phonetic translation of the famous “Castel” mark.  It sued Castel Group in the Wenzhou local court on three accounts of infringement and requested damages up to US$31 million. 

What makes this case unique is not the case itself, but the court’s decision to freeze the Castel Group’s valuable “Castel” trademark at the initial stage of the lawsuit until the case is decided.  Chinese civil procedures offer plaintiffs, in some situations, an ex-parte temporary relief, to prevent defendants from transferring property and money during the course of a case.  Normally such relief has been taken the form of freezing bank accounts or real property (by appointing a conservator).    In this case, what the court did directly touched on Castel Group’s  intangible assets, meaning that the “Castel” mark cannot be licensed or assigned to any third party while the case is pending.  More importantly, the “Castel” mark may be subject to auction if the court decides in favor of the local Chinese trader and Castel Group otherwise does not comply with the court’s order requiring it to pay damages. 

Our colleagues at ZY Partners in Beijing pointed out that this case could start another round of problems especially for companies that do not have significant assets in China.  Such companies used to be less concerned about litigation risks in China.  However, even they very often have trademarks or other intangible assets in China.  Now they could face risks of losing their valuable intellectual property (trademarks or even patents) if they end up losing legal battles in China. The flipped side of the story is that foreign plaintiffs may find this new development helpful when they seek to recover damages against Chinese defendants. 

Posted by: Pei Zhang

Categories: China Desk