(Yicai) July 3 -- A court in China has issued a first-instance judgment in a trademark dispute between Molly Tea Catering Management and Louis Vuitton Malletier, ordering the Chinese tea brand to pay CNY10 million (USD1.5 million) in economic losses and CNY300,000 (USD44,190) for reasonable legal expenses to the French luxury giant.

The Suzhou Intermediate People's Court recently ruled that Molly Tea and its store Dongxia Beverage Shop in the city's Wuzhong Economic and Technological Development Zone infringed the exclusive rights to seven registered four-petal floral graphic trademarks owned by LV. The defendant will have to pay the fine within 10 days of the judgment date.

The floral patterns used by Molly Tea on storefronts, cup sleeves, and other items bore extremely high visual similarity to LV's registered four-petal floral trademarks in overall shape and element layout, which was sufficient to confuse consumers about the source of goods and services, according to the Paris-based company's claim.

Molly Tea would file an appeal in accordance with the law, the Shenzhen-based firm told Yicai. LV has not yet replied to a request for comment. 

Late yesterday, Molly Tea changed its standard black logo to a colorful version in its mini-program member center. The new-style tea chain targeting young female consumers has over 2,300 self-run and franchised stores across 68 Chinese cities, as well as more than 50 overseas shops in seven countries, including the United States, Canada, and Australia.

The dispute falls under the scope of cross-class protection for well-known trademarks, You Yunting, partner at D&B Law Firm, said to Yicai. LV's four-petal floral graphic boasts high popularity and distinctiveness, which the defendant ought to have avoided copying, he stressed.

Molly Tea's rapid store expansion led to extensive use of the infringing logo and far-reaching adverse impacts on LV's brand rights, You pointed out. "This may explain the relatively high compensation amount awarded in the first instance."

The core dispute for the appeal would center on the reasonableness of the compensation standard, You said. In the catering sector, product taste, cost performance, and brand positioning carry greater commercial weight than graphic trademarks, he noted.

Should Molly Tea appeal, challenging the rationality of the awarded damages would be the key argument for the second-instance trial, You pointed out.

The ruling may encourage luxury brands to step up cross-industry rights enforcement, You added. More luxury brands may launch similar trademark lawsuits, as several other new tea brands have previously faced allegations that their packaging and paper bags share similar design aesthetics with registered trademarks, he said.

Luxury brands mostly targeted counterfeit suppliers in litigation previously, yet relevant rulings were often difficult to enforce given the defendants' insufficient capacity to pay compensation, he noted.

Editors: Tang Shihua, Martin Kadiev