Review on the Trademark Law of the People's Republic of China

July 22, 2005
Harakenzo World Patent & Trademark
Trademark/Design Dept.    Li Li Sha

Joining the WTO in 2001, the People's Republic of China (PRC) drastically improved and revised its intellectual property laws and regulations. The Trademark Law of the PRC (hereinafter referred to as the "Trademark Law") was revised in December of 2001, following the revision of the patent law and other related laws and regulations. In addition, the Implementing Regulations of the Trademark Law and the "Provisions on the Recognition and Protection of Well-known Trademarks" (1) were revised and promulgated in accordance with the revised Trademark Law. In this column, I would like to review the PRC's trademark practice.

1. Judgment/Determination of Similarity
One example of the PRC's trademark registration requirements states that "a trademark that is the subject of an application for registration shall have distinctive character and be capable of being readily identified and distinguished, and shall not be in conflict with the legal rights obtained earlier by other persons" (Article 9 of the Trademark Law) (2) . This is a provision on trademark registration requirements which states that registrability is granted to a trademark which has distinctive character that attracts the attention of common consumers and which is capable of distinguishing one's goods and services from identical or similar goods and services of another. Meanwhile, a trademark which is virtually identified and distinguished by common consumers due to long-term use and heavy advertising can be granted registrability even without having distinctive character (3) .

Identity or similarity is determined in a comprehensive manner by using as a criterion the attentiveness of common consumers. Specifically, determination of identity or similarity is based on overall and partial observations. More specifically, identity or similarity between two trademarks is determined in consideration of such factors as letters, sounds, meanings, shapes, colors, and combinations thereof. It is determined that the two trademarks are similar if they confuse common consumers through visual perception in respect of the origin of goods.

However, whereas there is no legal definition of "common consumers" with regard to normal trademarks, the concept of the "relevant sectors of the public" is introduced with regard to well-known trademarks. The relevant sectors of the public include "consumers of the type of goods and /or services to which the trademark applies, operators who manufacture the said goods or provide the said services, and sellers and other persons involved in the channels of distribution of the type of goods and/or services to which the trademark applies" (4) . The concept of the "relevant sectors of the public" may be applied not only to the recognition of well-known trademarks but also to the recognition of normal trademarks.
In practice, the People's Court made a judgment by introducing a more objective criterion based on the "cognitive habit of common consumers", not on "individual consumers", when it cannot be said that there is absolutely no possibility of confusion but it can be said that there is a relatively little possibility of confusion (5) .

2. Well-known Trademarks (6)
In 1996, the State Administration for Industry and Commerce promulgated the "Provisional Regulations for the Determination and Administration of Well-known Trademarks". As a member of the Paris Convention, the PRC started to implement the obligation of protecting well-known trademarks. Under the 2001 revised Trademark Law (7) , well-known trademarks enjoy more powerful protection than normal trademarks.

A trademark cannot be registered without permission and its use is prohibited if the trademark is the subject of an application for registration in respect of goods which are identical or similar to the goods to which a foreign well-known trademark not registered in China applies (Article 13(1) of the Trademark Law). Furthermore, a trademark cannot be registered and its use is prohibited even if the trademark is the subject of an application for registration in respect of goods which are not identical or similar to the goods to which a well-known trademark of another person already registered in China applies (Article 13(2) of the Trademark Law). However, a trademark must be recognized as a well-known trademark by a relevant department before enjoying protection.

At present, however, a trademark is recognized as a well-known trademark on a case-by-case basis. The recognition of the well-known trademark is not considered until the administration and the judiciary executes law enforcement against an act of violating Article 13 of the Trademark Law.
Specific procedures are stipulated in the "Provisions on the Recognition and Protection of Well-known Trademarks" promulgated in 2001 by the State Administration for Industry and Commerce. Article 4 of the Provisions stipulates that when the right holder of a registered trademark believes that another person's registered trademark or trademark infringement violates the provision of Article 13 of the Trademark Law, the right holder may file an opposition with the relevant department and submit relevant documents proving that the right holder's registered trademark is well known. On receiving the relevant documents, the relevant department examines the case as to whether it falls within circumstances under which the provision of Article 3 of the Trademark Law is violated; and when it falls within the circumstances, the relevant department sends all the documents of the case to the Trademark Office (Article 6 of the Provisions). The Trademark Office determines whether the right holder's registered trademark is well known or not, within 6 months from the date of receipt of the relevant documents of the case (Article 8 of the Provisions). Note that a trademark is examined in consideration of all of the following factors, which are enumerated in Article 14 of the Trademark Law.

(1) Reputation of the trademark in the relevant sector of the public
(2) Duration of use of the trademark
(3) Duration, degree, and geographical scope of any publicity for the trademark;
(4) History of protection of the trademark as a well-known trademark; and
(5) Other factors contributing to the reputation of the trademark

When a trademark is not recognized as a well-known trademark, the interested party shall not file a new application for the recognition of the same trademark on the basis of the same facts and grounds within one year from the date on which the decision is made (Article 9 of the Provision).
Needless to say, when a trademark is recognized as a well-known trademark, there is a high possibility that the amount of damages is calculated in favor of the right holder who demands compensation for damage (8) . In practice, even in a case where it is difficult to calculate the amount of damages, the intention of "free ride", with which the infringer tries to make a profit by exploiting the commercial reputation of the victim, can be easily proved by proving that the infringed trademark is a well-known trademark. A natural corollary of this is that the People's Court calculates the amount of damages in favor of the victim.

3. "Decoration of Goods" (9)
Any one of the following acts constitutes an infringement on the exclusive right to use a registered trademark:

(1) using a trademark that is identical with or similar to a registered trademark in relation to identical or similar goods (Article 52(1) of the Trademark Law);
(2) selling goods that are in infringement of the exclusive right to use a registered trademark (Article 52(2) of the Trademark Law);
(3) counterfeiting, or making without authorization, representations of a registered trademark of another person, or selling such representations (Article 52(3) of the Trademark Law); and
(4) changing a registered trademark and putting goods bearing the changed trademark on market (Article 52(4) of the Trademark Law); and
(5) causing, in other respects, prejudice to the exclusive right of another person to use a registered trademark (Article 52(5) of the Trademark Law).

Furthermore, Article 50 of the Implementing Regulations of the Trademark Law stipulates that the exclusive right to use a registered trademark is infringed, as in Article 52(5) of the Trademark Law, by using any signs which are identical or similar to another person's registered trademark as the name of the goods or decoration of the goods (10) on the identical or similar goods, thus misleading the public. A provision of the same principle is included in the Unfair Competition Prevention Law of the PRC (11) .
Meanwhile, the Trademark Law of Japan does not include a provision on decoration of goods. However, "it can be said that the provision on the act of causing confusion in Article 2(1)(i) of the Unfair Competition Prevention Law of Japan approximates to the provision on decoration of goods. That is, the act of using 'goods or other indication' with another person's registered trademark and causing misleading and confusion constitutes trademark infringement in an indirect manner." (12)

The Trademark Law of Japan has the concept of "use virtually as a trademark" emphasizing a focus on a trademark's function of indicating the origin. That is, even when a person who is not the owner of a registered trademark commits an act which formally constitutes trademark infringement, "the acts does not need to be interpreted as constituting trademark infringement, as long as the trademark clearly does not fulfill its function of identifying the designated goods or designated services. When a trademark similar to the registered trademark is used in respect of goods similar to the designated goods but clearly does not fulfill its function of identifying the origin, it is held that the registered trademark is not infringed, on the ground that the similar trademark is not used virtually as a trademark" (13) .

In this respect, however, according to the Trademark Law of the PRC, even when the act does not constitute the Japanese concept of "use virtually as a trademark," it is held that the registered trademark is infringed, under such conditions that the act misleads consumers. The argument that the similar trademark is "not used virtually as a trademark" is unacceptable (14) .
Afterword
As described above, I've tried to review the Trademark Law of the PRC. I would like to pursue my studies of determination of similarity, scope of protection, and other points in respect of trademark rights from a practical and legal point of view.

Bibliography
(1) Decree No. 5 of the State Administration for Industry and Commerce

(2) Other examples of the trademark registration requirements are as follows. "An application for registration of a trademark shall not be of such a nature as to infringe the existing earlier right of another person. An application shall not be made with intent to register a trademark which is used by another person and enjoys certain reputation" (Article 31). "Where two or more applicants apply for registration of identical or similar trademarks in respect of identical or similar goods, the application filed the earliest shall be accepted and published; if the applications are filed on the same day, the trademark which is used the earliest shall be accepted and published, and applications of other persons shall be refused and not be published" (Article 29).

(3) Huang, C. D. & Liang, S. W., New Translation and Interpretation of the Trademark Law and the Combined Provisions Thereof , 1999, Democracy & Law Press of China, p. 124.

(4) This is stipulated in the "Provisions on the Recognition and Protection of Well-known Trademarks" promulgated by the State Administration for Industry and Commerce.

(5) In the case of Japan's Shiseido vs. PRC's Trademark Office (2003, First Trial No. 664), the Beijing No. 1 Intermediate People's Court held that the cognitive habit of individual consumers should not be considered in determining whether two trademarks are similar or not. Therefore, the Beijing No. 1 Intermediate People's Court overruled the decision of the Trademark Review and Adjudication Board of the Trademark Office on the ground that the Board had made a mistake in determination of facts and in application of the law.

(6) In China, they are called "chi ming shang biao".

(7) There had been no provision on the protection of well-known trademarks before the Trademark Law was revised.

(8) In the "BAOXINIAO" case, the People's Court calculated the amount of damages "with due consideration for the reputation of the trademark, the degree of intentional damage incurred by the infringer, and the duration and geographical scope of the infringement."

(9) In China, this is stipulated as "packing and exterior decoration".

(10) In the Trademark Law, the concept of "decoration of goods" is not defined. However, in the Unfair Competition Prevention Law, the concept of "decoration" of well-known goods to be protected is defined as "letters, designs, colors, and their combinations which are added to the goods or packaging in order to make the goods identifiable and beautiful." Therefore, it is believed that the concept of "decoration of goods" in the Trademark Law is practically understood in much the same way.

(11) Article 5(ii) of the Unfair Competition Prevention Law of defines, as an act of unfair competition, the act of "using, without authorization, the name, packaging or decoration peculiar to well-known goods or using a name, packaging or decoration similar to that of well-known goods, so that his goods are confused with the well-known goods of another person, causing buyers to mistake them for the well-known goods of the other person."

(12) Iwai, T. "China's first trademark infringement lawsuit against a foreign corporation", APPI (2002) Vol. 47, No. 3, p. 193.

(13) Tamura, Y. Introduction to the Trademark Law, p. 141-142.

(14) In the case of China's Xuzhou Handu Industrial Development Corporation vs. Japan's Corporation X, the Beijing High People's Court held that use of the mark "QIANXILONG" as the decoration on cameras to indicate the dragon year of 2000 is sufficient to misled the public, and therefore, constituting trademark infringement. This is a case in which use of a trademark of another person as decoration of goods was recognized as trademark infringement.