CHINA TRADEMARK CASE STUDY 2015
CHINA TRADEMARK CASE STUDY 2015
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2016/10/14 By ZY Partners

Client

Industry

Areas of Law

Venue

Highlights

The Supreme People’s Court (“SPC”) is the highest judiciary in China, presenting rules and guidance on law application through issuing judicial interpretations and case decisions (majority of cases are retrials).  In the year of 2015, the SPC re-tried around 65 cases involving trademark validity.  We are proud that some cases handled by ZY Partners are selected as the SPC’s guiding cases.  

Below is a summary of some landmark trademark cases issued by the SPC in 2015 and by Beijing courts in the recent two years.  

Assessment of similarity of marks/goods 

Likelihood of confusion is the key criteria to determine the similarity of marks/goods.  In Chinese judicial practice, the assessment of similarity should not focus merely on the comparison of appearance of marks or the physical features of goods or services.  Instead, multiple factorsshall be taken into account,such as, strength of the earlier trademark, degree of similarity between the two marks at issue, similarity or relatedness of the goods and services at issue, evidence of actual confusion, purchaser sophistication, later trademark owner's intent in adopting the mark, real use state of marks at issue.  Below summarizes the SPC’s guidance on the similarity assessment.   

?  The multi-factor test 

In the “Galitt” case, the SPC confirmed the similarity between the opposed “Galitt” mark and the opposer’s cited “GARRETT”, “Garrett蓋瑞特” marks and ruled to reject the “Galitt” mark, based on the following multi-factor test: 

(a)    “Galitt” and “GARRETT” are both English wording marks with the same two starting letters “Ga” and same two ending letters “tt”, and middle letters of slight difference. However, considering that the two marks are in similar font and sounds without any specific meanings, and the Chinese relevant public’s general cognitive ability to foreign languages, the two marks are likely viewed similar by the relevant public. 

(b)   Evidence filed by the opposer at the TRAB procedure is sufficient to show the relatively high degree of distinction and reputation of the cited “GARRETT” mark, under which circumstances the opposed mark “Galitt” will likely mislead consumersas to the origins of goods. 

(c)    The supplemental evidence filed by the opposerin the court proceedings should be admitted and taken into account, because such evidence were filed to reinforce the fame of the cited marks and the opposed party’s bad faith. The lower courts’denial of such supplemental evidence is improper. 

?  Use/fame of citation marks 

In another opposition appeal case concerning the “KOMOO科牧” mark, the SPC found the “KOMOO科牧” to be dissimilar to the opposer’s “KOHLER”/“科勒” mark and unlikely cause confusion, considering (1) the low degree of similarity between the marks at issue, and (2) no evidence that is able to show the fame of opposer’s cited marks before the filing date of opposed mark.  

The SPC clarified that the comparison of marks should be conducted between the opposed mark and the cited marks, not between the opposed mark and the marks actually used in commerce by the opposer.  The SPC further clarified the time point by when the use and fame of the cited marks shall be considered, that is, only the use/fame formed before the filing date of opposed mark can be taken into account, use and reputation of the cited marks built after the filing date could not be viewed as valid factors. 

?  Scope of the relevant public 

The SPC opined in the “希能/Xi Neng” case that the scope of the “relevant public” should cover the general public to which the specified goods/services of the marks are involved, and should not be improperly narrowed only to the public who may actually use the goods. In the “希能/Xi Neng” case where the goods concerned are human medicine, pharmaceutical preparation and related goods in Class 5, the SPC confirmed that the relevant public include not only those professional doctors, nurses, pharmacists and patients whoprescribe, dispense or use drugs, but also business people whoare engaged in the distribution and sales of drugs. 

?  Consistency of examination standards 

In the refusal appeal concerning the “金香玉/Jin Xiang Yu” mark, the SPC made it clear that the trademark examinationis taking a case-by-case approach. The similarity review of marks is afactual as well as a legal issue.  Although the authorities should surely follow consistent standards in law application, this does not mean that the existence of other prior registrations can definitely justify the registration of a later mark, given that the similarity review also involves assessment of facts. 

?  Similarity among goods and services 

In an opposition appeal case concerning the opposed “Doctor Turtle in Chinese” mark in Class 37, the SPC affirmed the similarity between services of “car maintenance and Greasing (Vehicle —)” covered by the opposed mark and “glazing wax, cleaning fluids” goods covered by the opposer’s cited mark in Class 3.  The SPC believed that in commerce, the goods/services at issue are overlapping in aspects of sales/service places and target consumers, and hence if allowing the same marks to be used on the said goods/services, the relevant public would be likely misled as to the origin of the goods/services. 

?  Common sense on goods similarity 

The SPC viewed in the “ARM&HATCHET and Design” case that, evidence is not a mandatory requirement to assess the similarity of goods/services. During the process of assessment, the authorities can make a conclusion based on common sense of life or the general daily life knowledge, with regard to whether the goods at issue are same or in high degree of associations in terms of functions, usages, production departments, sales channels, consumer targets. It is not absolutely necessary for parties to provide specific proof evidencing the similarity of goods. 

?  Inclusive development 

The “inclusive development” policy allows a later similar trademark to co-exist with earlier trademark provided that the later trademark has, via extensive use, formed its own stable market and consumer groups so that the relevant public is able to distinguish the later from the earlier mark.  This judicial policy was raised by the SPC in 2009, and has since received hot criticism because under such policy, some pre-emptive marks were protected and trademark squatters are encouraged to put pirating marks into extensive use.  

In the “Doctor Turtle in Chinese” case, the SPC tried to narrow the application of the “inclusive development” policy.  The SPC clarified that an appropriate co-existence of trademarks can only be allowed in very special situations involving historical reasons, and should also consider factors like the willingness of the earlier mark owner, and whether there indeed exists objectively distinguishing markets.  The SPC dismissed the opposed party’s “inclusive development” defense on two main grounds: (1) the case involves no historical factors; and (2) there is no sufficient evidence to prove that the later mark used on services of “vehicle maintenance” has established a separate market reputation and fixed consumers that can be distinguishable from those of the opposer’s cited mark. 

How to evidence copypright ownership 

In trademark dispute cases, it often happens that the trademark owner claims for prior copyright protection over its earlier mark. Whether such claim can be supported will rely on proof of the below three aspects – (a) whether the earlier trademark could be viewed as a copyrighted work, (b) whether the earlier trademark owner enjoys copyright over the sign; and (c) whether the later trademark owner has access to the earlier sign.  In practice, a work will be viewed publicly available once it is published, and thus others are deemed to have access to the work.  It turns to be a difficult issue on how to evidence (b) - the ownership of the copyrighted work in form of a trademark sign. Below the “SECUREMME and design” case may provide some guidance on how to collect evidence that can be used to support the copyright claim. 

In the “SECUREMME and design” case, the opposer Securemmes claimed for copyright protection over its “SECUREMME and design” mark but such claim was dismissed by the TRAB.  The TRAB found that in the opposer’s evidence like the initial design, revised and final drawings, no creation date was marked.  The TRAB denied the registrations in other jurisdictions and trademark protection declarations to be relevant to show the copyright ownership.  Securemmes appealed and supplemented promotional documentation for the “SECUREMME and design” mark on a European magazine but still these documents were found insufficient by the trial court. Securemmes further appealed and supplemented invoices issued by its design agent for the design project and a copyright declaration; but unfortunately, such evidence was again deemed insufficient. 

Securemmes then had to file a re-trial petition with the SPC and further submitted a statement by the designer along with his identification document.  The SPC affirmed that that all of aforesaid evidences filed at previous proceedings are now sufficient to prove Securemmes is the copyright owner of the “SECUREMME and design”.  However, given these documents were not filed at one time but constantly supplemented at court procedures, it is not improper for the TRAB and lower courts to rule against Securemmes. 

How to reject agent’s pre-emptive application 

The PRC Trademark Law (2001), under Article 15, prevents an agent from pre-emptively applying for marks that are identical or similar to the marks owned by its client – an act violating the client-agent relationship. However, there were inconsistent understanding and application of this article in practice.  One viewwas that Article 15 could be applied only when the client had not yet registered its trademark in China; if the client had prior trademark registration in China, other provisions of the Trademark Law could deal with the issue. Controversial opinions were that the “client-agent relationship” protection could always be applied to prohibit bad faith filings, regardless of whether the client had registrations in China.  

The SPC made clarifications in the “Doctor Turtle” case. The SPC ruled that Article 15 should be applicable to protect the client’s registered marks as long as the agent intentionally applied for the client’s marks in violation of the “client-agent relationship” principle. 

Whether to grant suspension 

In course of trademark prosecution, if a new application encounters TMO’s refusal by citing others’ prior marks, it is usually a meaningful strategy to take adverse actions (such as opposition, invalidation, non-use cancellation) to clear the way. However, timeline of these adverse actions are in most times significantly behind the refusal appeal.  The trademark applicant thus must file a request with the refusal review court for a time suspension pending the outcome of the adverse actions. 

Due to the absence of specific written provisions, courts in Beijing which have exclusive jurisdiction over trademark validity review cases are principally not willing to grant asuspension unless the cited mark is likely to be cleared within the court’s internal timeline. 

The SPC has presented guidelines on whether to grant the suspension in the “Lebron James in Chinese” case. In this case, the SPC officially stayed the refusal review proceedings to wait the outcome of the applicant’s opposition appeal action with the TRAB against the cited mark, and finally rendered a favorable decision allowing the applicant’s application to register after the cited mark was rejected by the TRAB.  The SPC recognized the applicant’s continuous efforts in coordinating the timelines of the parallel proceedings – the applicant filed written suspension requests with courts and in the meanwhile filed requests with the TRAB to expedite the opposition appeal against the cited mark. 

Whether to grant well known mark recognition 

Well known mark protection in China needs to meet three requirements (a) the earlier mark had been well known before the filing date of the later mark, (b) the later mark constitutes a copy, imitation or transliteration of the earlier well-known mark; and (c) registration of the later mark would cause consumer confusion or mislead the public, and damage the rights and interests of the earlier mark owner. 

In the recent “巨化/JuHua” case, the SPC clarified that only when all the three requirements are satisfied, the court may grant well-known mark protection by giving a well-known mark recognition.  The SPC further elaborated that, the fundamental purpose for granting well-known mark protection is to give a famous mark a protection in an appropriate scope and strength that are corresponding to the degree of distinctiveness and reputation the mark enjoys, rather than a grant of an honor or title.  Hence, such recognition shall be given when necessary.  If a later mark does not constitute a copy or imitation to the earlier mark or there would be no consequence of public misleading or damages to the rights of the earlier mark owner, it will be unnecessary in a specific case to determine whether the earlier mark has reached the well-known status. 

How to determine a mark of “unhealthy Influence” 

In the “YeChun in Chinese and design” case, the SPC affirmed that the judgment on “unhealthy influence” as provided in Article 10.1(8) of the PRC Trademark Law should focus on the concerned mark per se and its elements, instead of other factors beyond the concerned mark. If a sign is found incapable of registration or use because it would cause “unhealthy influence” to society, this will mean that no one can use or register the sign as a source-identifier. 

In a final judgment by the Beijing Higher People’s Court recently issued in April 2016 on a review of opposition case concerning the registrability of “微信/Wei Xin” (the Chinese name of WeChat) for telecommunication services under Class 38, the higher court corrected the trial court – Beijing IP Court’s wrong finding that the two Chinese characters “微信/Wei Xin” per se may bring unhealthy social influence; however, the higher court still affirmed that “微信/Wei Xin” is incapable of registration because it is lack of distinctiveness when registered on services under Class 38. 

Two months before Tencent. Inc. (“Tencent”) publicly released WeChat 1.0 in January 2011, Trunkbow Asia Pacific (Shandong) Co., Ltd. (“Trunkbow”) applied for “微信/Wei Xin” for telecommunication services under Class 38. Both parties applied for and used the “微信/Wei Xin” trademark without knowledge of the other’s use of the mark.  The software developed by Trunkbow dropped the name of “微信/Wei Xin” in June 2011 while the WeChat social network application developed by Tencent achieved unprecedented success: the number of users rocketed to 400 million by July 2013 and rose to 800 million by November 2014. 

The trial judgment rendered in March 2015 affirmed TRAB’s refusal of Trunkbow’s application, on the ground that Trunkbow’s“微信/Wei Xin”mark, with no bad faith intent though, would have an “unhealthy influence” or “ill effect” on the existing and stable market order to potentially lead to false recognition among the public, given the fact that WeChat or “微信/Wei Xin” had established a significant amount of public awareness on the social media market and the public had formed clear recognition of “微信/Wei Xin” and its association to Tencent.  

This trial judgment has attracted wide discussion and debate in China as to the court’s application of Article 10.1(8) and its reasoning about the public interest. What is particularly noted by the trademark community is that the court believes that allowing the earlier-filed mark to be registered would harm the public interest. If a mark violates an absolute ground for trademark registration, it should not be registered by any party on any goods, while the trial judgment made a differentiation on parties. 

The recently issued final judgment by Beijing Higher People’s Court has avoided citing the “unhealthy influence” ground.  But whether or not the new rejection ground – lack of distinctiveness is persuasive and reasonable, discussions are continuing. 

How to calculate the amount of damages 

In mid of 2015, the Guangzhou Intermediate People’s Court ordered New Balance Trading (China) Co., Ltd, an affiliate of the US-based Sports footwear manufacturer New Balance, to compensate a Chinese trademark owner, Zhou Yuelun, RMB 98 million for infringing his Chinese “新百倫” trademark, a Chinese transliteration from the English word New Balance. The infringement determination and the high amount of damages have drawn extensive attention from the Chinese and international societies. The case is now under appeal.   

The trial court first decided that defendant got the total profit of RMB 195.8 million during the period of infringement, and then calculated half of the total profit, RMB 98 million, shall be paid as damages. The trial court’s methodology of the damages calculation is challengeable because the consumer awareness and popularity of the defendant’s NEW BALANCE mark are significant and actually contributed the sales revenue of the defendant, rather than the plaintiff’s Chinese mark.  The trial court’s damages awarding has apparently ignored the critical facts.  We hope the appellant court would provide persuasive reasoning on how to determine the amount of compensation. 

Whether to protect merchandising rights 

In China, the protection of the merchandising right is not an established practice, because the merchandising right is not expressly provided by the statute.  In general practice, the claim of merchandising right protection was sometimes dismissed for lack of legal basis.  Nevertheless, in recent trademark opposition cases against third parties piratingthe “Kungfu Panda” and  “How to Train You Dragon” marks in remote classes, the Beijing courts recognized the movie titles to enjoy the right of merchandising over goods and services that are usually derivative from movies in the industry. Similar findings and protection were also granted in the “TEAM BEATLES” case, 

In these cases, the courts are of view that, the “Prior Rights” provided under Article 31 of the PRC Trademark Law (the old law) shall include civil rights and interests according to the general provisions of the PRC General Principles of Civil Law and other laws.  Even though the merchandising right is not expressly provided by written laws, since the commercial use of the famous animation movie titles “Kungfu Panda”, “How to Train Your Dragon” in Chinese characters and the famous band name “Beatles” on specific goods or services will bring commercial value and trading opportunities, such movie titles and band name deserve protection as civil rights and interests.  The protection will encourage the creative passion and property investment for intellectual achievements. On the other hand, if protection of the famous movie titles/band name was excluded, other market operators would be encouraged to register the famous titles/band name as trademark to quickly capture the market, such free ride and trademark pre-emptive behaviors will disrupt the normal economic order and are against the legislative purpose. 

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