China’s New Well-known Mark Regime

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(Author: Chiang Ling Li, Partner, Jones Day)

In the past ten years, there were misuses of the well-known mark system in China. For example, some companies commenced fake litigation or cases to acquire well-known mark determination. The Chinese courts and trademark authorities were therefore reluctant to make well-known mark determinations if they could decide the cases on other grounds.

The new Trademark Law (which entered into effect on May 1, 2014) and the subsequently issued new Implementing Regulation of the Trademark Law, judicial interpretation in respect of trademarks, and Well-known Mark Regulation confirm that well-known mark protection will continue to be provided and have put in place a new regime for well-known mark protection in China. It is advisable for companies and their counsels to be aware of changes under the new regime so that rights and interests are not prejudiced and opportunities are not missed.

Well-known Mark, Famous Mark, Major Trademark, Etc.

The Chinese trademark system designates different groups of marks, including “well-known marks”, “famous marks”, “marks with a certain degree of fame”, “major trademarks”, etc. Different types and scopes of protection are offered to these different groups of marks. This article focuses on well-known marks.

International Conventions

China is a signatory of the Paris Convention, and Article 6b is of the Paris Convention, which deals with the protection of registered and unregistered well-known trademarks for goods, is in force in China. Protection under the Paris Convention has been cited in Chinese court judgments, trademark prosecution decisions and local Administration for Industry and Commerce punishment decisions against trademark infringements.

An example is VOLVO steam irons, even though Volvo did not have a trademark registration for ‘VOLVO’ for ‘steam irons’, Volvo was able to take action against the infringer’s use of the ‘VOLVO’ mark on ‘steam irons’ based on the fame of the ‘VOLVO’ mark.

TRIPS provides further protection to well-known marks. TRIPS extends the protection for well-known mark under Article 6bis of the Paris Convention to services.

TRIPS specifies that member States must take account of the knowledge of the mark in the relevant sector of the public, including knowledge in the member State concerned which has been obtained as a result of the promotion of the mark. TRIPS also extends the protection for well-known marks under Article 6bis of the Paris Convention to goods or services which are not similar to those in respect of which the well-known mark is registered, provided that use of the infringing mark in relation to those goods or services would indicate a connection between those goods or services and the owner of the registered mark and provided that the interests of the owner of the registered mark are likely to be damaged by such use.

Chinese Legal Framework

A formal framework for the recognition of well-known marks was created with the Chinese State Administration for Industry and Commerce’s promulgation on 14 August 1996 of the Provisional Regulations for the Determination and Administration of Well-known Trademarks. The Regulation defined well-known marks as registered marks that enjoyed a relatively high reputation in the market and were familiar to the relevant public.

The 1996 Provisional Regulations were repealed when the Regulations on the Recognition and Protection of Well-known Trademarks entered into force on 1 June 2003.

The 2003 Regulations will be repealed and the new Regulations on the Recognition and Protection of Well-known Trademarks will enter into effect in August 2014.

When China entered the World Trade Organization, well-known mark protection was incorporated into the Chinese Trademark Law and the Chinese Implementing Regulation of the Trademark Law.

The new Trademark Law which came into effect on May 1, 2014 continues to provide protection for marks which are well-known to the relevant public.

Marks owned by both Chinese and foreign parties are eligible for protection as well-known marks.

China Well-known Evidence

Although ever since well-known mark protection was legislated into the Chinese Trademark Law, protection was stated to be for marks which are well-known to the relevant public, however, subsidiary regulations narrowed protection to only marks which are widely known to the relevant public in China.

Hence, to prove that a mark is well-known, evidence of use and fame in China must be provided.

Further, there would be difficulties with obtaining well-known mark status for marks which are only well-known to the relevant public outside of China but not to the relevant public in China.

“Relevant Public”

Well-known mark protection is for marks which are well-known to the relevant public in China. The ‘relevant public’ includes consumers of goods or services related to the trademark, business operators that manufacture such products or provide such services, as well as sellers and related individuals belonging to the distribution channels of such goods and services.

Prohibition against Unauthorized Registration or Use

The new Trademark Law continues to provide that a mark which constitutes a reproduction, an imitation, or a translation and liable to create confusion with another’s well-known mark not registered in China and which is the subject of an application for registration for identical or similar goods is to be refused registration, and its use is to be prohibited.

A mark which constitutes a reproduction, an imitation or a translation of another’s well-known mark registered in China and which is the subject of an application for registration for dissimilar goods or services is to be refused registration, and its use is to be prohibited, if the use of such mark would confuse the public and possibly prejudice the interests of the registrant of the well-known mark.

For example, if a well-known mark is used by someone without the authorization of the owner, the owner may request the relevant local Administration for Industry and Commerce to stop such use. The local Administration for Industry and Commerce will order the infringer to cease using the well-known mark and will confiscate and destroy the relevant trademark representations. If it is difficult to separate the trademark representations from the goods, they will be confiscated and destroyed together.

Supporting Evidence for Well-known Mark Protection

The Chinese Trademark Law stipulates that when recognizing a well-known mark, the following factors should be considered:

(1)the degree of notoriety of the mark among the relevant public;

(2)the duration of continuous use of the mark;

(3)the duration, degree and geographical scope of the publicity for the mark; and

(4)the record of protection of the mark as a well-known mark.

In order for a mark to be determined well-known, not all of the factors need to be satisfied. The distinctiveness of the mark and its level of notoriety must be taken into consideration.

Evidence to establish the notoriety of a trademark includes materials proving the degree to which the trademark is known to the relevant public; the length of the trademark’s continued use and the period, extent and geographic coverage of any advertising activities.

Evidence which demonstrates the prior recognition of a mark as well-known, whether in China or other jurisdictions, can also be submitted. For example, recognition of well-known status in one particular dispute before the Chinese Trademark Office or Chinese Trademark Review and Adjudication Board can be used as evidence in other disputes, either involving the Chinese Trademark Office, Chinese Trademark Review and Adjudication Board or judicial authorities.

Evidence proving the relevant sales income, market share, profit level, tax paid, sales territory, etc. of the main products bearing the mark during the preceding three years should be useful supporting evidence.

Procedures

In China, a mark may be protected as a well-known mark by courts as well as by the administrative authorities including the Trademark Office, Trademark Review and Adjudication Board and the local Administration for Industry and Commerce.

Rights holders may seek a determination of their mark’s well-known status in the course of opposition, cancellation or enforcement proceedings.

Well-known mark determination is made on a case-by-case basis. However, a favorable determination made in one case should also be useful in other proceedings, such as criminal proceedings against counterfeits.

Where a party requests protection in respect of a mark that has previously been determined as a well-known mark by administrative authorities or court and the other party does not dispute the mark in question being well-known, the administrative authorities or court should not carry out further assessment and should adopt the previous determination. If, on the other hand, the other party does dispute the mark being well-known, the administrative authorities or court must make its own independent assessment.

The new Well-known Mark Regulation provide detailed procedural rules as well as time limits for the authorities in handling requests for protection of well-known marks. For example, the Chinese Trademark Office and Chinese Trademark Review and Adjudication Board must determine a mark’s well-known status within the time limits for opposition or cancellation proceedings in a case where the application for well-known mark determination was made in the course of the relevant opposition or cancellation proceedings (as the case may be).

It is not clear whether a well-known mark determination may be appealed, although after a trademark is refused recognition as a ‘well-known’ mark, the applicant may make a further application. The bar against making a further application based on the same facts and reasons within one year from the date of the first decision has been removed.

Protection against incorporation into enterprise name

Where a party believes that a third party has registered its trademark as an enterprise name and this may deceive the public or give rise to misunderstandings among the public, it may apply to the enterprise name registrar for cancellation of the enterprise name registration. The previous requirement that the mark must be proved well-known prior to protecting the mark in such a case has been removed.

Pending Applications under Old Well-known Mark Regulations

The new Well-known Mark Regulation repealed the old regulations for well-known mark protection. It is unclear how the Trademark Office is to deal with the applications for well-known mark protection which had been filed under the old regulations.

Judicial recognition of well-known marks

The new Supreme People’s Court Judicial Interpretation for implementing the new Trademark Law again confirmed that Chinese courts may formally recognize the well-known status of a mark in the context of a civil dispute. Under Chinese law, Supreme People’s Court judicial interpretation has the force of law. The judicial interpretation again indicates that courts may determine well-known status independently, without the involvement of the Chinese Trademark Office.

Courts can also consider the fame of an infringed mark when determining whether two marks are similar and when determining the level of statutory damages to be awarded.

Labelling

In an attempt to counter misuses of well-known marks, the new Trademark Law prohibits any use of well-known mark designations on products, packaging or containers, or in advertisements or other commercial activities.

Advantages of Well-known Marks

Well-known marks enjoy a wider scope of protection. Obtaining well-known mark status provides protection in a case where the infringing mark is used on goods or services that the infringed mark has no registration. Potentially higher level of compensation may be awarded to the plaintiff if the plaintiff’s mark is considered well-known.

Companies faced with infringement or pirate applications of their well-known marks in Classes that they have no registration may consider taking up the opportunity to apply for well-known mark determinations.

It remains to be seen whether the new Trademark Law would actually result in the Chinese trademark authorities and courts making more determinations of well-known mark status. If there is improvement on this front, obtaining well-known mark determination can be an effective tool against piracy and infringement as well-known mark determination offers cross class and stronger protection.

Beijing Dongfeng Lubricant Oil Co Ltd v Esso (Zhejiang)
Co Ltd

The plaintiff obtained assignment of a Dongfeng in Chinese characters mark (Reg No 184438) covering lubrication oil for watches on
3 July 1983.

A Dongfeng Car Co registered another Dongfeng in Chinese characters mark on Oct 31, 1979 (Reg No 110702) covering cars. This mark was determined well-known by the PRC Trademark Office. On 7 February 1997, Dongfeng Car Co registered its Dongfeng in Chinese characters mark covering lubrication oil (Reg No 940478) and licensed a third party company to use the mark. The third party did not have the right to license the defendant to use this mark. The defendant however claimed that it was the authorized processing factory of the third
party.

The defendant, without the authorization of the plaintiff, started using a combination mark incorporating the Dongfeng characters and labeled its products ‘Super Dongfeng Cummins Specialize Machine Lubrication Oil’

The parties were not able to settle the case and the plaintiff sued the defendant for infringement of its Dongfeng in Chinese characters mark.

After two court hearings, the court issued a judgment finding trademark infringement, ordered a permanent injunction, and ordered the defendant to issue a public apology and pay compensation of RMB150,000.

The defendant appealed the judgment to the Beijing Municipal High People’s Court. The appeal court upheld the judgment of the lower court.

China International Trust and Investment Corporation v Sichuan CITIC Travel Service

The plaintiff registered in China various marks incorporating CITIC or/and CITIC in Chinese (pronounced Zhongxin). On 15 March 1999, the Beijing AIC awarded the plaintiff’s CITIC in Chinese characters mark Beijing Famous Mark status. On 29 December 1999, the PRC Trademark Office awarded the plaintiff’s CITIC in Chinese characters mark and CITIC mark well-known mark status in respect of financial services.

On 30 April 1994, Sichuan Province AIC approved the establishment and registration of the defendant with the enterprise name Sichuan CITIC Travel Service in Chinese for carrying on the business of travel services, etc. The defendant’s company chop bore the English name ‘Sichuan CITIC Travel Service’. The defendant’s promotional materials and court documents used such English and Chinese names. The defendant’s price lists and notebooks bore marks incorporating the CITIC mark. The defendant’s tour schedules, price lists and envelops sent to an affiliate of the plaintiff that engaged in travel services bore such Chinese enterprise name and marks incorporating the CITIC mark. The General Sales Manager of the defendant also used a mark incorporating the CITIC mark in his business cards.

On 15 January 1999, the plaintiff licensed an affiliate to use its CITIC in Chinese characters mark in Classes 35, 36 and 42 for a term of
one year and the license fee was RMB1,800,000. At the same time, the plaintiff licensed its affiliate which engaged in travel services mentioned above to use its CITIC in Chinese characters mark and its CITIC mark in Classes 36 and 39 for the term of one year and the license fee was RMB500,000. The two licenses were recorded on
1 September 1999.

From 22 November 1999 to 12 December 1999, the plaintiff spent a total of RMB 11,708 on airplane tickets, travel insurance, airport taxes, hotel rooms, etc for this case. The defendant did not within the period set by court supply evidence on its profits derived from the alleged infringement.

The plaintiff commenced litigation at the Chengdu Municipal Intermediate People’s Court against the defendant claiming the following:

1.    We registered various CITIC marks, CITIC and CITIC in Chinese characters combination marks and CITIC in Chinese characters marks in Classes 29, 42, etc.

2.    In September 1999, our affiliate received tour schedules and
price lists sent by the defendant, and we then found out that the defendant’s enterprise name used the CITIC in Chinese characters mark and that its promotional materials also used the CITIC mark.

3.    Further investigation showed that the defendant used the CITIC mark on its business signage, business cards, etc.

4.    The defendant’s activities not only violated Article 38 of the PRC Trademark Law, infringed our registered trademark rights but also violated Article 2 of the PRC Unfair Competition Law and constituted unfair competition.

5.    We asked the court to issue a permanent injunction against the trademark infringing activities of the defendant, and order the defendant to issue a public apology and rectify the wrongs, and pay us compensation in the sum of RMB1,000,000.

The defendant filed a defense claiming the following:

1.    Our enterprise name was approved for registration by Sichuan AIC and our trade name CITIC in Chinese characters was protected by law. We therefore did not engage in unfair competition.

2.    We only started using the CITIC mark and we used it only in a limited fashion. There was no issue of infringement of the
plaintiff’s registered mark before then.

3.    Our registered capital was RMB300,000 with five employees.
We were a small enterprise with lost over the years. The use of trademark license fees as the only evidence for assessing the amount of compensation to be paid to the defendant was improper.

4.    The volume of promotional materials bearing the CITIC mark printed by us was small and 90% of them had not yet entered the market.

5.    There was insufficient evidence for supporting the plaintiff’s request for compensation in the sum of RMB1,000,000.

The court issued judgment on 13 June 2000 finding as follows. The plaintiff’s CITIC mark registered in Classes 25 and 39. CITIC and CITIC in Chinese characters combination mark registered in Classes 16 and 29 and CITIC in Chinese characters mark registered in Classes 35, 39 and 42 were effective and protected by law.

On March 15, 1999, the plaintiff’s CITIC in Chinese characters mark was awarded Beijing Famous Mark status. On 29 December 1999, the Trademark Office awarded the plaintiff’s CITIC in Chinese characters and CITIC registered marks well-known mark status in respect of financial services. The court then stated that therefore, from the date of the award of well-known mark status, the plaintiff enjoyed exclusive rights for the CITIC in Chinese characters and CITIC marks in respect of dissimilar goods and services as well.

On 30 April 1996, the defendant obtained registration for the
enterprise name Sichuan CITIC Travel Service in Chinese. The distinctive part of the name was CITIC in Chinese characters which were the same as the plaintiff’s registered mark. The plaintiff’s CITIC in Chinese characters mark was registered on 21 April 1996, which was earlier than the registration of the defendant on 30 April 1996. The plaintiff’s trademark registration had priority over the defendant in the PRC.

The plaintiff’s mark was awarded well-known mark status. The registration of an enterprise name with a trade name identical with a well-known mark would cause the relevant public to mistaken that the defendant and the plaintiff were somehow connected or were the same entity, and cause the relevant public to confuse about the source of the relevant goods or services. The defendant’s such actions violated the PRC Unfair Competition Law and infringed the legal rights of the plaintiff, disturbing social order and constituting unfair competition. The defendant should bear civil liabilities.

The defendant’s price lists, notebooks, business cards, etc. promotional materials used marks similar to the plaintiff’s marks.

As the plaintiff was awarded well-known mark status, it had the right to prohibit third parties from using similar or identical marks on dissimilar goods and services as well. The unauthorized use of a similar or identical mark by the defendant on similar and dissimilar goods and services violated the PRC Trademark Law and constituted trademark infringement. The defendant should therefore be civilly liable.

The plaintiff did not provide evidence on its lost or the gain by the defendant as a result of the infringement. The defendant also did not within the period prescribed by court provide evidence on the profits it reaped. The lost by the plaintiff and the gain by the defendant therefore could not be confirmed. The court would therefore exercise its discretion in the assessment of damages.

In accordance with the first three paragraphs of Article 134 of the
PRC Civil Procedure Law, the first paragraphs of Articles 2 and 20 of the PRC Unfair Competition Law, and Article 38(1) and (4) of the Trademark Law, on 13 June 2000, the court issued judgment ordering the following:

1.    From the effective date of the judgment, the defendant was to stop infringing the plaintiff’s CITIC, CITIC and CITIC in Chinese characters combination mark, and CITIC in Chinese characters mark.

2.    From the effective date of the judgment, the defendant was to stop using CITIC in Chinese characters in its enterprise name and was to apply for rectification of its trade name with the Sichuan AIC.

3.    Within 30 days of the effective date of the judgment, the defendant was to issue an apology in Legal Daily, Industry and Commerce Daily and Sichuan Daily. The content was to be pre-approved
by court. If this order was not complied with in the above prescribed time frame, the court was to publish the main contents of the judgment and the defendant must bear the necessary expenses.

4.    Within ten days of the effective date of the judgment, the defendant was to pay compensation in the sum of RMB300,000 to the plaintiff.

5.    All other requests of the plaintiff were denied.

The first three paragraphs of Article 134 of the PRC Civil Procedure Law provide as follows:

‘A people’s court shall publicly pronounce its judgment on all cases, regardless of whether the case was tried publicly or in a closed court.

After a judgment is pronounced in court, the written judgment shall be issued within 10 days. If judgment is pronounced on a fixed date, the written judgment shall be issued immediately after the pronouncement.

On pronouncement of a judgment, the parties concerned must be informed of their rights of appeal, the time limit for lodgement of appeals and the court to which they may appeal.’

The first paragraphs of Articles 2 and 20 of the PRC Unfair Competition Law provide as follows:

‘Article 2 In the course of conducting business in the market, business operators shall observe the principles of voluntariness, equality, equitability, honesty and trustworthiness and abide by generally accepted business ethics.’

Article 20 If a business operator violates this Law and thereby causes the injured business operator to suffer loss, it shall be liable for damages. If the loss suffered by the injured business operator is difficult to calculate, the amount of damages shall be the profit derived from the infringement by the infringer during the infringement; in addition, the infringing business operator shall bear the reasonable expenses paid by the injured business operator as a result of the investigation of the infringing business operator’s act of unfair competition that infringed the lawful rights and interests of the injured business operator.

If the lawful rights and interests of an injured business operator are harmed by the act of unfair competition, it may institute proceedings in court.’

Article 38(1) and (4) of the Trademark Law provides as follows:

‘Article 38 Any of the following acts shall be an infringement of the exclusive right to use a registered trademark:

(1) to use a trademark which is identical with or similar to a registered trademark in respect of the same or similar goods without the authorization of the proprietor of the registered trademark;

(4) to cause, in other respects, prejudice to the exclusive right to use the registered trademark of another person.’

(Courtesy: http://www.jonesday.com)