The Court’s Attitude towards “Merchandizing Right” Concluded from the Kuroko Basketball Trademark Invalidity Case

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(Author: Ni Tinggang; Source: DeBund Law Offices)

Beijing Intellectual Property Court recently introduced some movie, TV series, music, animation and game related cases it heard in 2015 and 2016 via its public WeChat platform, including the trademark “Kuroko Basketball” invalidity case which inspired me. The way that the court dealt with this case shows a new trend of protecting merchandizing interests which we legal professionals should pay attention to.

Case Facts

Kuroko Basketball is a popular comic work about basketball created by ふじまき ただとし, a Japanese comics artist. The work was serialized on the magazine SHONEN JUMP published by Shueisha since the second issue in 2009, and then was adapted for an animation and first broadcast on 7th April 2012. The plaintiff, SL Sport Ltd. in Kaiping (“SL Company”), filed a trademark-register application to the trademark office on 19th July 2012. As approved, this trademark (“Disputed Trademark”) should be used under Class 25. In addition, SL Company registered tens of trademarks closely connected with popular comics works such as Kuroko Basketball and SLAM DUNK that Shueisha had published, including trademarks used under Class 18, 24, 25, 35 and other types of commodities or services. Thus, Shueisha filed a request for declaration of invalidity of the Disputed Trademark.

The Trademark Review and Adjudication Board (“TRAB”) stated that “SL Company did not provide any proof of use of the Disputed Trademark or reasonable explanations for its intention to register so many trademarks and the sources of the designs of such related trademarks. These registrations by SL Company were obviously beyond the necessity of its manufacturing and business running, and adversely affected the regulation of trademark registration and hurt fair competitions. For these reasons, the Disputed Trademark was “registered by unfair means” pursuant to Article 41.1 of the Trademark Law (2001) and therefore should be determined as invalid.”

Disagreed with TRAB’s decision, SL Company sued to Beijing Intellectual Property Court. The court of second instance affirmed the decision of the TRAB, and further stated that “any permission for registering names of others’ comic works or characters as trademarks would entice more people to seek for profits by taking others’ resources and advantages without following the principle of integrity.” As a result, SL Company’s claims were overruled.

Lawyer’s Opinions

There are a large number of cases in which the titles, names of characters in well-known works have been registered as trademarks by irrelevant people, causing great difficulty in the development of their derivative works. The owners of these works often request for declarations of invalidity of such trademarks to reduce the adverse effect of these trademark registrations. Article 41 of the Trademark Law (2001) stipulated a number of circumstances under which the registered trademarks shall be revoked, and the subsection 2 cited Article 31 thereof providing that any trademark application shall not infringe others’ prior rights and “infringing a prior right” was one of the reasons that such disputed trademarks could be revoked. In most cases, infringement of others’ prior rights is the first thing that the owners of copyrights to works of art or literature think of, as a reason for claiming the trademark is invalid. However, there are two main problems.

a. Works or characters are often non-copyrightable with no “prior rights”

b. Request for declaration of invalidity of a trademark must be made within five years after the trademark is registered. As for the trademarks registered over five years, there is nothing to do via this way.

So, the SL Company’s case can help to understand the above two issues.

1. “Merchandizing Right”

As we all know, the copyright law gives protection for original expressions, not ideas. The boundaries between expressions and ideas of a piece of writing are blurred, in comparison of pictures, animations and other forms of works. Furthermore, names of a work or character themselves could hardly become a copyrightable subject due to their short lengths or lack of originality. In fact, what registrant cares about is the popularity and reputation of the related names, not their aesthetic values. The right to use the popularity and reputation related to such names for commercial interests is widely known as “merchandizing right”.

As the “merchandizing right” is not a right stipulated by laws, there is always a controversy over the issue that whether it could be seen as a “prior right” defined in the Trademark Law. The opinions between the TRAB and the Trademark Court on this issue are always opposite.

In both the 007BOND case in 2011 and the TEAMBEATLES case in 2015, the TRAB disagreed with the claim that “merchandizing right” could be seen as a “prior right” that could protect the works from being registered as trademarks and declined the request for invalidity of such trademarks. In the SL Company’s case, the TRAB decided that the Disputed Trademark should be determined as invalid on the ground of “registering the trademark by other unfair means” since SL Company registered a large number of trademarks, but not the ground of infringing a prior right. In fact, Shueisha claimed that the Disputed Trademark infringed its merchandizing right of virtual characters. However, this claim was not accepted by the TRAB for the reason that “黑子的篮球” was the Chinese translation of the name of the work “黒子のバスケ”, not the name of any character in it, and did not cover all the original contents of the work.

Opposed to opinions of the TRAB, the court always adopts a positive attitude towards the “merchandizing right”. In the 007Bond case, the court pointed out several reasons why the character names should be protected: high popularity, creative results of the owner’s work and commercial values and opportunities resulting from large amounts of invested work and capital. In the “TEAMBEATLES” case, the court clearly stated that the influence generated from the name of the band Beatles can directly attract potential consumers, increase sales and create more business opportunities”. These potential business opportunities and interests are the “merchandizing right” of the band. As it is not a right directly defined by laws, it is more appropriate to call it as “merchandizing interests”, which is also protectable by laws. The court further stated that “this kind of interests was developed from long-term intellectual work, publicity and financial investment and deserved being respected. Any use of the band’s name as a trademark without permissions could damage the right owner’s business opportunities and values and violate the integrity principle, and this should be prohibited.” In SL Company’s case, The court adopted the same opinion and found this kind of trademark registration as “an act of gaining profits by pillaging others’ investments and advantages”, commonly known as “hitchhiking”.

Subsection 2 of Article 22 of the Provisions of the Supreme People’s Court on Several Issues Concerning the Adjudication of Administrative Cases on Granting and Affirming Trademark-related Rights published in January 2017 (effective as from 1st March 2017, hereinafter called “Regulations”) stipulates that “As regards a piece of work within the term of copyright protection, if the title of the work, the name of a character in the work, etc. enjoy high awareness, and the use of such title or name as a trademark on relevant products is likely to mislead the relevant public to believe that such products are licensed by, or have specific connections to, the right holder, the competent people’s court shall uphold the claim by the party concerned on the foregoing grounds that prior rights and interests have been constituted.”

As the judicial decision was final, this issue seemed to have resolved. However, as the legal interpretation and practice should not violate existing laws (i.e. Article 31 of the Trademark Law 2001), disputes may arise from another issue, i.e. the period of limitation on request for declaration of invalidity.

2. Valid Period for Requesting Declaration of Invalidity

Article 41 of the Trademark Law (2001) illustrated the circumstances under which a registered trademark could be declared as invalid. Under the circumstance of “registering a trademark by deceit or other unfair means” stipulated in Subsection 1, the request for declaration of invalidity may survive without time limit. Under the circumstance of “damaging others’ prior rights” stipulated in Subsection 2, the request for declaration of invalidity must be filed “within five years after the trademark is registered”.

In the SL Company’s case, the court determined that the merchandizing interests should be protected and the registered trademark related to well-known works or character names should be declared as invalid (if the registrant is irrelevant), adding that “especially when the work or character name does not constitute a legal prior right, there would be no prior right owner or interested party who may prevent such kind of trademark registration from happening”. In other words, the court also holds that pursuant to current laws, the trademark that damages prior merchandizing interests could not be declared as invalid on the ground of “damaging prior rights” cited by Article 41.2 of the Trademark Law.

The court commented on this that “treating that act as misconduct of obtaining improper interests by other means offered a new approach to protecting interested parties”. Based on the judgment, I think it only possible to conclude that the court made the decision pursuant to Article 41.1 of the Trademark Law, which stipulated that there should be no time limit on declaration of invalidity. It sounds good to owners of works of art and literature. However, did the court try too hard to protect merchandizing interests without violating existing laws?

What about the Supreme People’s Court’s opinions? The Regulation above was promulgated by the Supreme People’s Court after the SL Company’s case was closed. Although Article 22.2 of the Regulation explicitly states that the court should support the claim based on merchandizing interests that really exist as prior interests, but does not specify which article of the Trademark Law should be applied. As the first subsection of this article provides that “the court should examine and investigate any trademark alleged to damage the copyright of a character or image pursuant to Article 19 of the Regulation (which specifies the circumstances of damaging prior copyrights). Considering the context, the subsection following the first subsection, both of which are of the same article should be also construed as a requirement to perform examination and investigation pursuant to Article 19 of the Regulation before the decision making.

To conclude, we can see how difficult the judicial authorities have worked on protection of merchandizing interests in the trademark registration. Despite restrictions of current laws, it is confirmed that merchandizing interests are protectable in legal practices referring to clauses that are used to protect “prior rights”. In other words, the owner of a well-known work of art and literature can protect names of the work and characters in it from being registered by others as a trademark, on the ground of prior merchandizing interests. However, the owner only has five years to claim declaration of invalidity against a false registered trademark. If the owner hesitates and does nothing effective over five years, there will be nothing he/she can do to stop enormous business interests from being lost.