SPC Issued the Long-awaited Trademark Interpretations, Addressing Challenging Issues in Trademark Registration and Enforcement

The long-awaited Supreme Court’s trademark judicial interpretation -“Provisions of the SPC on Certain Issues Related to Trials of Administrative Cases Involving the Grant and Confirmation of Trademark Rights” (“Provisions”) - has been just published in January 2017 and will enter into force on March 1st , 2017. The new Provisions address the outstanding challenges and issues in relation to trademark registration and enforcement, including bad faith trademark registration, well-known mark, and mechanizing rights. The Provisions contain some articles favorable to trademark owners’ future enforcement actions.

The highlights include:

Ex officio review of defects in TRAB’s decisions by the court:

  • Art. 2 of the Provisions clarify that in principle, the court should only review the claims raised by the plaintiff. But if there are obvious defects in a TRAB decision, the court may adjudicate on the issues ex officio, after hearing the opinions from both parties.

Criteria for the distinctiveness of 3-D trademarks:

  • The threshold for registering 3-D trademark seems to be raised a bit higher. Art. 9 of the Provisions stipulates that “Even the shape of the 3-D trademark is originally designed or first used, it does not necessarily create inherent distinctness.” The long-lasting and broad use seem to be a must for registering the shape of the products as a 3-D trademark. The wording is consistent with our understanding of the current rules.

Extended scope of prohibiting trademark agents and representatives from hijacking trademarks

  • Art. 15 and 16 of the Provisions offer broader applications of Article 15(2) of the Trademark Law, e.g., listing 5 types of situations which fall into the definitions of “agents and representatives”. If the applicants are relatives of the agents and representatives, bad faith would be presumed.

Presumption of the ownership of copyright

  • Article 19 of the Provisions provides practical means of proving the ownership of copyright. The design drafts, manuscripts, consignment contracts etc. could be used for presuming the existence of existing copyright. The prior trademark gazette or certificates could also be seen as initial evidence.

Protection of titles of copyright works as well as names and images of fictional characters

  • Article 22 of the draft Provisions offers protection to the titles of copyright works as well as names and images of fictional characters, under the condition of “notoriety” and likelihood of association. The rules may contribute to clarification of the scope of “mechanizing rights” protection.

Protection of personal names

  • Article 20 of the Provisions defines the conditions for protecting personal names, which requires the stable “association” between the person and the names. This is consistent with SPC’s opinion reflected in the “Jordan” case. Also, the Provision extends the protection of personal names to nicknames, pen names, translated name and the like.

Criteria for defining “bad faith” of well-known trademarks

  • Article 25 of the Provisions further defines the conditions to identify “bad faith registration” of well-known trademarks.

Procedural issues are also touched upon in the Provisions.

Read the text

 

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OEM Liability Decision Protects against Bad-faith Trademarks, but Leaves Border Protection Questions Unanswered

 Authored by Mr. He Jing (hejing@anjielaw.com), Mr. Zhao Kefeng (zhaokefeng@anjielaw.com) and Ms. Anita Chen at Anjie Law Firm

China's Supreme People's Court (SPC) recently held that an original equipment manufacturer (OEM) may not be held liable for trademark infringement for exporting products bearing a trademark that is registered outside China.  The SPC ruled that the trademarks used on exported OEM products are not intended to serve as an indication of origin to Chinese consumers; therefore, there is no likelihood of confusion and such use does not constitute trademark use under the Trademark Law.

The decision is the latest in a series of court rulings on OEM-related trademark issues.  Back in 2004, Nike prevailed in a case in which the Shenzhen court confirmed that the export of goods bearing unauthorized marks constitutes infringement. But in recent years, courts in various locations have decided in favour of OEMs, especially  in the context of border protection seizures.  Chinese courts and Customs have discussed these issues regularly with industry players,  but no consensus has been reached.

This case was being closely watched by the trademark community because of the potential implications. The issues were whether the defendant's manufacturing infringed the plaintiff’s exclusive trademark rights and constituted trademark use under the Trademark Law.

The suit was filed by Chinese company Focker Security Products International Limited, owner of the China- registered trademark PRETUL and device mark.   Defendant Zhejiang Pujiang Yahuan Locks Co, Ltd. was an OEM which exported goods to Mexican company TRUPER SA, which owned a registration for the PRETUL trademark and device mark in Mexico. 

Focker was said to have been a distributor for the Mexican company for some time previously.

Focker sued Yahuan for trademark infringement in the Zhejiang Ningbo Intermediate People's Court, which ruled in favour of the plaintiff, awarding damages of Rmb50, 000. Both parties appealed to the Zhejiang High People's Court, which affirmed the decision and increased the damages to Rmb80, 000. Yahuan applied for a retrial to the SPC as the last resort.

The SPC stated that under the Trademark Law, 'trademark use' refers to the use of a trademark on goods, packaging or containers and similar, or in advertisements, exhibitions  and other commercial activities, in order to indicate the origin of the products.  The SPC further explained that as in this case the products were all exported to Mexico and would not be sold on the Chinese market, the mark did not serve to distinguish their origin in China, as a trademark normally does. The relevant public in China thus would not confuse these products with those of the plaintiff.

The SPC further observed that as the mark did not serve as an indication of origin,   it was not necessary to compare the similarity of the marks at issue and the respective goods they covered. The SPC overturned the entire decision.

Brand owners may have ambivalent feelings about this result. To some extent, the exemption for OEMs - at least in certain circumstances - helps companies which have fallen victim to bad-faith registrations in China, allowing their OEM partners to export their products without hindrance.  This may be particularly helpful for medium-sized brand owners that primarily source their goods from China, but have somehow failed to register their marks in China.  The SPC decision allows these companies to continue their activities.

But many brand owners are also concerned that a broad reading of the SPC ruling could open up a big loophole for counterfeiters. What if counterfeiters or infringers managed to register a well-known trademark somewhere in the world and then came to China to order OEM'  goods? At a deeper level, the decision even undermines the legal foundations of the IP border protection regime.  Chinese Customs has been stopping significant numbers of exports of counterfeit goods. If the court really means that export-only goods are not infringing, exporters will be able to challenge every customs seizure order in the courts.  Predictably the Supreme Court may have to either figure out a way to deal with these problems or clarify the scope of the decision in some form in the near future.

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Will China Welcome Amicus Briefs in Patent Cases?

 Authored by Mr. He Jing (hejing@anjielaw.com) at Anjie Law Firm

The Beijing IP Court  published a notice on its website in October 2015 entitled Collection and Publication of Opinions Regarding Law Application on Issues Related to Article 19.4 of the Trademark Law. This notice looks like irrelevant to the patent world, but actually the implication goes well beyond trade marks. Arguably, this court notice started something similar to the amicus brief sys- tem for Chinese IP cases. The issue in this case is related to whether or not Chinese trade mark agent firms are entitled to register trade marks under their own names except for their own trade names.
What is significant is that the panel adjudicating this case went out to associations and IP law centres in several law schools for opinions. The notice cited above published five law professors’ opinions in full text. We do not know how the Beijing IP Court informed the law professors about the background of the case. But it is very interesting that the Court conducted such an experiment. Imagine what becomes possible if the same court issues a similar request in an injunction case involving standard essential patents?
 
The notice itself includes several interesting details:
 
First, it is the court panel that was as- signed to this particular case that sought the opinion from the Universities, associations and research centers. The court said it sent out “survey forms” to such entities. The notice was signed by the three judges’ names.
 
Second, the reason the panel sought the opinion is that the relevant legal provision is new and the very issue is of importance to the trade mark filing practice and growth of the trade mark agency sector.
 
Third, the notice states that the panel published five opinions it received, for the purpose of “impartiality” and “transparency”. The panel did not say how many opinions it received in total.
 
The implications of this notice could be far-reaching in terms of improvement of the judiciary transparency and quality of adjudication. A system similar to amicus briefs will allow the courts to hear from those interested parties on some very complex legal issues that may have significant social impact. The involvement of key stakeholders and thought leaders, including those from the international legal community, will assist the courts to in- crease the depth of thinking. China now uses “guiding cases” or leading cases to improve the consistency of judgments and to guide local courts to deal with controversial issues. Amicus brief will certainly benefit the courts to decide what should be those “guiding cases”.
 
The court notice issued on October 13 is clearly another sign of commitment to a better IP system in China. The Beijing IP Court is the first IP court to be established in China. The judges appointed to this court have been considered among the best in China. Hopefully, the first experiment in trade mark cases will soon expand over to the patent world.
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Beijing Higher People's Court Recognises "Merchandising Rights" as Tool to Fight Bad-faith Applications

Authored by Mr. Zhao Kefeng (zhaokefeng@anjielaw.com) and Mr. Han Jinwen (hanjinwen@anjielaw.com) at Anjie Law Firm

In a recent trademark opposition case involving the famous film Kung Fu Panda , the Beijing  Higher  People's Court  has confirmed that DreamWorks Animation SKG Inc had prior "merchandising rights"  in the name  of the film and refused to register  the trademark KUNG  FU PANDA.  DreamWorks' success highlighted the possibility of using merchandising rights to block bad-faith trademark applications in China.
 
This case is a typical example of pirated trademarks and the facts were simple. A Chinese individual applied for the registration of the trademark KUNG FU PANDA for "car steering wheel covers" in Class 12. DreamWorks filed an opposition against the application as producer of the film Kung Fu Panda. The main ground for the opposition was that the trademark infringed its prior "merchandising rights".
 
DreamWorks' success did not come easily. In the opposition and following appeals, the China Trademark Office, the Trademark Review and Adjudication Board and the Beijing Number 1 Intermediate People's Court all decided that "merchandising rights" were not among the "Iegitimate rights" pursuant to the Chinese laws and did not uphold the opposition.
 
However the Beijing Higher People's Court disagreed. The court held that the name of a movie or movie character with a high reputation shall benefit from "merchandising rights" if the following conditions are met:
 
1. the relevant public identifies the name of the movie or character with a particular business entity;  and
2.   the business entity may derive  additional commercial value  or business opportunities from such identification/affiliation.
 
The judgment also specified essential factors when determining the scope of protection of Merchandising rights: fame and the likelihood of confusion. It was suggested that the courts should evaluate whether the registration and use of the pirated trademark on the designated goods  or services may cause damage  to the real rights owner by taking away trading opportunities.
 
The judgment is significant as it is the first time that "merchandising rights" have officially been recognised as a type of "prior rights" that can be used to block bad-faith trademark applications. Article 32 of China's Trademark Law stipulates that a trademark should not infringe any prior rights owned by a third party. The current practice recognises that "prior rights" include trade names copyright, design patents and the names of famous persons, but merchandising rights had never been  included - until now.
 
In fact, the Kung Fu Panda case is not the first case in which an IP rights owner has fought for the recognition of merchandising rights.  In an earlier similar opposition case against the trademark驯龙高手 ('how to train your dragon' in Chinese) the Beijing Number 1 Intermediate People' s Court  upheld the opposition by confirming that DreamWorks had "Iegal interests" in the movie  name, but insisted that "merchandising rights" were not "prior rights" for the purpose of Article  32. In 2011, in a cancellation action against the trademark CRAYON SHIN-CHAN, the Beijing Higher People's Court confirmed the cancellation of the mark on the grounds of bad faith, without any comments on merchandising rights.  In other earlier cases, the Chinese courts had ruled against infringers who had copied the name of a movie or movie character on the grounds of "unfair competition".
 
There is no doubt that the present case is a welcome development in the battle against pirated trademarks. The judgment means that rights owners have an additional weapon to crack down on trademarks that copy or imitate the names of famous movies, characters, actors or songs.
 
What is interesting, though, is that the case itself is still being debated in China.  After the judgment was published, some scholars questioned whether judges were in fact "making" the law, because "merchandising rights" have not been  recognised by the Chinese  laws. The debate is likely to continue for a while, and IP owners should  keep monitoring the issue.
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