Luckin Coffee’s Trade Mark Battle in Thailand: A Cautionary Tale For International Business Expansion

5th August, 2024 - 7:27 am Categories: Legal Case Trademark 0 Comments

Introduction

In the ever changing environment of global business, trademarks become crucial assets to any organization as they help in identifying it in the market. Still, even such giants of the market can turn into participants of legal battles over the use of trademarks. An example that can still be seen today is the trademark controversy between Luckin Coffee, a Chinese coffee chain company, and Thailand. Currently in Thailand the “first-to-file” system is used for trademark registration therefore it is not obligatory to substantiate commercial utilization for a certain trademark for registration to it to be granted.[1] Such trademark owners especially those who are not yet trading in Thailand often overlook the registration of their trademarks in Thailand. Through this omission third parties are free to register these trademarks in their names as a form of safeguarding. The Thai Trademark Office also lacks an option for it to confirm the credibility or motives of applicants applying for trademarks. This results into such circumstances where the genuine trademark owners are surprised that their trademarks are already registered by the third parties.[2] This scenario raises the issues of trademark protection at the initial stage and legal risk management when entering new countries.[3]

A similar event occurred in the case of Luckin Coffee not very long ago. The Chinese coffee chain, adopting the strategy based on the application of information technology and growing at a very fast pace, tends to increase its network of coffee shops not only in China but also in other countries. Although Luckin Coffee can be considered successful in China, its expansion abroad has met some challenges, especially in Thailand.

Background of the Dispute

In Thailand, Luckin Coffee faces a serious legal battle with a local company in the use of the Luckin Coffee name. The Thai firm of 50R Group trademarked it before Luckin Coffee began making its incursion into the Thai market. This has resulted in legal action with the Thai company trying to claim huge losses from Luckin Coffee due to this early registration.

[Image Sources: Shutterstock]

The 50R Group is a diverse local company operating in “retail, new energy, tourism, real estate, catering and other industries, with ties to the Thai royal family and the military government.” Its subsidiary Thai Luckin Coffee Co., Ltd. has legally registered the Luckin Coffee brand with the Thai Business Authority and now operates more than a dozen Luckin Coffee stores in Thailand.[4] This complex background further complicates the legal stalemate and demonstrates the challenges international companies can face when expanding into new markets without securing local trademark rights. The Thai company reportedly demanded a sum of 290 million dollars from Luckin Coffee for the alleged trademark infringement[5]. This claim underscores how much is at stake in trademark disputes, especially when it comes to internationally recognized brands expanding into new markets.[6]

The claims of Luckin Coffee

1. Trademark infringement: Luckin Coffee argued that 50R Group’s use of the “Luckin Coffee” trademark was an infringement of their established trademark. They claimed that the Thai company’s use of the logo, store design and other brand elements was a direct copy of Luckin Coffee’s distinctive brand identity.[7]
2. Bad faith registration: Luckin Coffee accused 50R Group of bad faith trademark registration. They argued that 50R Group registered the trademark in bad faith, knowing that it belonged to Luckin Coffee, to take advantage of the brand’s reputation and popularity in China.[8]
3. Damage to the trademark: Luckin Coffee emphasized the severe damage caused to its trademark by the unauthorized use of its trademark in Thailand. They argued that the existence of these copycat stores caused confusion among consumers and diluted the value of the brand, as customers might mistakenly associate the Thai stores with the official Luckin Coffee.[9]
4. Confirmation of non-entry: In their public statements, Luckin Coffee clarified that they have not yet officially entered the Thai market and that the businesses operating under their name are not authorized. They emphasized that they have taken legal action to protect their brand integrity and prevent further damage.

50R Group’s Contentions

1. Lawful registration: 50R Group claimed that it had lawfully registered the trademark “Luckin Coffee” with the Thai Trademark Office in accordance with Thai law. The registration was valid and granted it the exclusive right to use the trademark in Thailand.[10]
2. First-to-file principle: 50R Group relied on Thailand’s first-to-file trademark registration system, which grants trademark rights to the first person to register the trademark, regardless of prior use in other jurisdictions. They argued that their registration was legitimate under this principle and that they had the right to operate in Thailand under the name “Luckin Coffee”. As the owner of the registered trademark, 50R Group claimed the right to conduct business in Thailand under the “Luckin Coffee” trademark.
3. Economic losses: After the original judgment was overturned, 50R Group sought compensation for the economic losses allegedly caused by Luckin Coffee’s actions. It claimed that the litigation and subsequent trademark confusion negatively impacted its business and financial performance.[11]

Held

After discovering that its trademark was being used without permission in Thailand, Luckin Coffee filed a trademark infringement lawsuit and received a favorable ruling in the first instance. However, this victory was short-lived as an appeals court overturned the decision in December 2023[12]. The Thai Central Court of Intellectual Property and International Trade ruled against Luckin Coffee and ultimately dismissed the case. The defeat is due to the ‘principle of Thailand’s Trademark Act, which grants operational rights to a Thai company when it first registers a trademark with the Thai Trademark Office.

Overcoming bad faith trademark registrations in Thailand

This case illustrates the common problem of companies being unaware of previous trademark registrations abroad and often realising this too late, after the trademarks have already been officially registered. This leads to complex problems that eventually force many trademark owners to apply for the cancellation of the Thai registration of the trademark in which they have better rights than the registrant. Under the Thai Trademark Act, there are two methods to cancel a bad faith registration, depending on which authority is handling the case.

Board of Trade Marks

An application for cancellation of a trademark can be filed with the Board of Trade Marks in Thailand in two ways. One way is for “interested parties” (e.g. a legitimate trademark owner who is affected by the registration), the other is for anyone. For interested parties challenging the registrability of a trademark, the Board re-examines distinctiveness, similarity and legality under Section 61 of the Trademark Act. A legitimate trademark owner may file an application to cancel a trademark that is identical or confusingly similar to its trademark registered outside Thailand.[13]

Other persons who are not interested persons may file an application for cancellation if they believe that the registered trademark is contrary to public order, morality or public policy.[14] However, proving bad faith to the Board can be difficult as there are no witness hearings. Only documentary evidence will be considered, which may not clearly show the registrant’s intentions or knowledge of the original mark.

IP&IT Court

grounds of “better law”, i.e. the claim that the genuine trademark owner has a more legitimate right to use its own trademark than the registrant in Thailand, are usually the main legal grounds for cancelling a bad faith trademark registration[15]. Under Section 67 of the Trademarks Act, a rightful owner can file a suit for cancelation of a bad faith trademark registration on grounds of better law before the Central Intellectual Property and International Trade Court (IP&IT Court), provided it has been registered for less than five years. A trademark that has been registered for more than five years cannot be canceled.

Cancelation of long-standing bad faith registrations

It is still possible for a legitimate trademark owner to cancel a bad faith registration that has been active for more than five years, especially if there is a precedent that the trademark was filed in bad faith. In such cases, the request for cancelation and proof of the earlier decision should be submitted to the trademark office, which will then examine the evidence and possibly cancel the trademark.[16]

Legal implications

This intellectual property dispute highlights how important it is for companies to prioritize trademark protection in foreign markets. The court’s decision was in favor of Thailand because the local registration and use of the Thai Luckin trademark preceded the Chinese Luckin trademark, which is in line with the “first-to-file” principle. It is recommended that companies planning to expand internationally should register their trademarks in the target countries early and seek professional advice to understand the local laws and regulations. They should develop a careful trademark registration strategy, apply for trademark rights abroad in a timely manner and create a comprehensive trademark protection system to effectively deal with potential disputes.

It is essential for companies to register their trademarks abroad, monitor the market and secure evidence in daily business to protect their intellectual property rights. Thorough research into the international rules and trademark laws in different countries will help to identify potential problems and resolve disputes promptly.[17]

The way forward

Here are some key recommendations:

• Use a watch service to regularly check for new trademark filings by third parties.
• If you discover third-party applications or infringing activity, send cease-and-desist letters immediately. These letters can be valuable in court proceedings to prove the third party’s knowledge of the intellectual property owner’s rights.
• Consider filing oppositions or revocations to third-party registrations or initiating infringement actions with the help of experienced intellectual property attorneys to effectively pursue legal action.
• Be vigilant on e-commerce platforms to detect infringing activity. If such activity is detected, take immediate and decisive action to protect your brand.

Conclusion

For companies venturing into global markets, the challenge of their brands being imitated presents a multi-layered dilemma. On the one hand, this can be seen as a form of admiration that points to the impact of the brand. On the other hand, it also raises questions about intellectual property rights, brand authenticity and competitive dynamics in an international context. Managing this situation requires a careful balance between preserving the integrity of the brand and adapting to different legal and cultural environments.

Author: Deshna Jain, in case of any queries please contact/write back to us via email to chhavi@khuranaandkhurana.com or at  Khurana & Khurana, Advocates and IP Attorney.

[1] Panisa Suwanmatajarn, Thailand: Examiners’ Unique Approach to Distinctiveness Underscores Complex Registration Process, https://www.worldtrademarkreview.com/review/the-trademark-prosecution-review/2024/article/thailand-examiners-unique-approach-distinctiveness-underscores-complex-registration-process, (last visited June. 6, 2024).

[2] Trade Marks and Copyrights 2024, https://practiceguides.chambers.com/practice-guides/trade-marks-copyright-2024/thailand/trends-and-developments, (last visited June. 6, 2024).

[3] Id.

[4] Luckin Coffee Loses Trademark Infringement Case Against Thai Company, http://www.mingsure.com/hyzxen/1609.jhtml, (last visited June. 6, 2024).

[5] The Ongoing Battle: Luckin Coffee Trademark Dispute Takes a New Turn, https://www.trademark.net.ph/the-ongoing-battle-luckin-coffee-trademark-dispute-takes-a-new-turn/#:~:text=Recent%20reports%20indicate%20that%20Luckin,(approximately%20US%24290%20million), (last visited June. 6, 2024).

[6] Id.

[7] Luckin Coffee wasn’t lucky in Thailand against copycat, https://www.lexology.com/library/detail.aspx?g=901606d9-e035-48ee-ad8d-822c99c30c30, (last visited June. 6, 2024).

[8] Thai Luckin Coffee Claims For $290M From Chinese Luckin Coffee, https://coffeetalk.com/daily-dose/for-roasters-retailers/01-2024/101541/, (last visited June. 6, 2024).

[9] Supra note 2.

[10] Tai Luckin Coffee Demands 2 Billion USD in Compensation from China’s Luckin Coffee! The Significance of Intellectual Property Rights, https://cnpatentoffice.com/blogs/news/tai-luckin-coffee-demands-2-billion-usd-in-compensation-from-chinas-luckin-coffee-the-significance-of-intellectual-property-rights, (last visited June. 6, 2024).

[11] Luckin Coffee Wasn’t Lucky In Thailand Against Copycat, https://www.mondaq.com/china/trademark/1416716/ip-asia-luckin-coffee-wasnt-lucky-in-thailand-against-copycat, (last visited June. 6, 2024).

[12] Thai company sues Chinese coffee chain Luckin Coffee over trademark infringement, https://thethaiger.com/news/national/thai-company-sues-chinese-coffee-chain-luckin-coffee-over-trademark-infringement, (last visited June. 6, 2024).

[13] Canceling a Thai Trademark Registered in Bad Faith, https://www.tilleke.com/insights/canceling-a-thai-trademark-registered-in-bad-faith/, (last visited June. 6, 2024).

[14] Section 62 of the Trademark Act BE 2534 (1991).

[15] Id.

[16] Id.

[17] Supra note 10.