Pepsi's "Blue Storm" marketing campaign created a hurricane for itself

PepsiCo (NYSE: PEP) is found liable for infringing a trademark of a small Chinese beverage company.

The "Blue Storm" Trademark

A small Chinese beverage firm Wild Blue (author's own translation) registered the "Blue Storm" trademark in China in May 2002, see Fig 1.

Fig 1. "Blue Storm" trademark registration by Wild Blue

However, PepsiCo used the same words "Blue Storm" as a marketing campaign slogan starting in the summer of 2005. PepsiCo put "Blue Storm" on its soda can, poster and TV commercials. One of the advertisements, see Fig 2, of this marketing campaign featured four pop stars from China, Hong Kong and Taiwan dressing in blue and has the words "Blue Storm" at the bottom. PepsiCo also put the slogan on its bottle.

Fig 2. PepsiCo "Blue Storm" poster (source: sina.com)

This could be a free advertisement for the small Chinese beverage firm. Unfortunately, PepsiCo "Blue Storm" marketing campaign was too successful. Distributors and retailers in were well aware of the PepsiCo marketing campaign and understand the importance of trademark IP rights. They assumed "Blue Storm" was a trademark owned by PepsiCo. They refused to carry beverage from Wild Blue as they were afraid of trademark infringement. In one occasion, a retailer called the police. The police seized products from Wild Blue until Wild Blue showed the "Blue Storm" trademark registration certificate.

Court Decisions

With no choice, Wild Blue decided to defend its intellectual property rights and brought PepsiCo to the city court of HangZhou. In the first court decision announced in December 2006, PepsiCo successfully argued that the use of "Blue Storm" was not an infringement. PepsiCo claimed that they did not use "Blue Storm" as a trademark, but merely as a marketing theme. They also claimed that consumers were not confused.

Wild Blue appealed the decision. On 24 May 2007, ZheJiang Senior Court, a provincial senior court, accepted the appeal from Wild Blue The court ruled that the use of "Blue Storm" words on a can was equivalent to trademark use. PepsiCo was ordered to (1) pay damage to Wild Blue RMB 3 million, (2) stop using "Blue Storm" in all activities related to manufacturing, sales, advertising and marketing, and (3) publish statements in media to clear the confusion created. The ruling is in Chinese and can be found here.

It is not clear yet if PepsiCo will appeal the decision from the Zhejing Senior Court.

Implication

How could this happen? Either (1) PepsiCo staff forgot to check the trademark registration, (2) its legal advisors did not believe that it was a trademark infringement, or (3) its business manager believed that Wild Blue would take legal action. Nevertheless, it reflects that corporations, both domestic and foreign, have to educate their staff continuously about the relationship of IP and their work. I believe Chinese companies are beyond the stage of being IP ignorant. They are at the stage of "IP confused". They may not know when to involve their legal counsel to make business decision. Legal counsels should help their companies or clients by proactively engaging in their daily business activities.

Unfair treatment? The author of this article used the keywords "Pepsi infringement" in Chinese and English to search related news about this case. There are 1,020 hits reported by Baidu (the leading search website in China) and 5 hits reported by Google. 4 of the 5 hits from Google are unrelated to this case. Why did the foreign media not report this case? Could this news not be interesting enough? May be foreign journalists do not believe PepsiCo could make such mistake? There is a growing feeling in China that the western countries are using IP to oppress development in China.

IP Enforcement Distributor and retailers in China are very aware of IP related issues now. As this case demonstrate, they do not want to carry goods that may infringe others' IP rights. They may even report cases to local authority. Also, small companies are ready to fight as David fought against Goliath. They are not shy to take legal action any more.

Afterthought

The table has turned. Chinese companies and Chinese government have learned many hard lessons on intellectual property. It will not be surprised that Chinese companies will launch series of patent lawsuits against foreign companies in China soil.