Well-known Trademark Issues that Famous Enterprises should Pay Attention to When Entering China Market

It is a common problem that enterprises' trademarks are registered or free-ridded by competitors. However, problems become complicated when it is linked to issues such as geographical names, generic names, and intangible cultural heritage. In addition, enterprises should pay more attention to well-known trademarks’ identification and its special protection of in China.

In a typical case that a prominent Chinese smoked chicken company represented by Beijing Wis & Weals Law Firm against its competitor in series of the trademark administrative confirmation, we successfully helped our clients to maintain the distinctiveness of their trademarks and get them recognized as well-known trademarks. The case also involves questions of whether a trademark with geographical elements a common name is and whether it can be identified as well-known trademarks. Based on this typical case, we discuss not only the relationship between trademarks with geographical elements and generic names, but also identification issues of well-known trademarks.

Ⅰ. Geographical name and trademark

The plaintiff in above-mentioned typical case is a time-honored and well-known enterprise engaging in the production of smoked chicken and other meat products. In 1992, the plaintiff began to successively register trademarks containing the word "Goupangzi"."Goubangzi" is the name of a town in Liaoning Province, smoked chicken is one of its local specialties. As early as in the Qing Dynasty, the ancestors of the person in charge of the plaintiff had begun to develop the unique production process of "Goubangzi" smoked chicken, hence today's local leading enterprise in the field of smoked chicken and other meat products and its nationwide high reputation.

After the great success of the plaintiff's "Goubangzi" brand, a variety of smoked chicken enterprises sprung up in a very short period and tried to use the "Goubangzi" brand in various ways.

Some competitors think that "Goubangzi", as a geographical name, can be used for the publicity of products and even for the registration of trademarks.

As for the relationship between trademark and geographical name, the we are of the opinion that:

Firstly, geographical names can be used to register trademarks. In accordance with Article 10 of the Trademark Law of 2001, geographical names as administrative divisions at or above the county level are prohibited from registering as trademarks. As far as the typical case is concerned, "Goubangzi", as an administrative division at the township level, obviously does not apply to the prohibitive provisions of the Trademark Law.

Secondly, for a geographical name that has been approved for registration as a trademark, the trademark owner enjoys the exclusive right to use the geographical name as a trademark.

Thirdly, whether others can include the geographical name in a to-be-registered trademark on the grounds that it is a geographical name. We are of the opinion that the focus of the issue is whether a geographical name can be used as a defense against the registration of other trademarks. When there are no defects in the rights of a trademark containing geographical name, such rights shall be protected, and such protection shall not be weakened due to the inclusion of geographical name.

Fourthly, whether others can use the geographical name in the publicity of products on the grounds that they use it as a geographical name. We are of the opinion that the use of the geographical name in the publicity of products may constitute trademark infringement or "hitchhiking" unfair competition. Therefore, whether the use of geographical names constitutes trademark infringement is a vague question in some respects and it depends on the specific case.

Ⅱ. Trademark and generic name

"Generic name" is a common ground of defense against trademark infringement in that once a trademark is recognized as a generic name, it shall be deemed as public property, and no longer involved with infringement.

At present, there is no definition of generic name at the legal level. Although the Supreme People's Court has promulgated judicial interpretation which stipulates the criteria for identifying generic names, the following problems still exist in practice:

Firstly, the identification of territorial scope is vague. According to the judicial interpretation, the whole country shall be taken as the territorial scope, taking into account the historical tradition, local customs, geographical environment and other factors of the disputed region. In practice, the courts will not necessarily elaborate on the identified territory, which leads to vague identification of territorial scope.

In identifying a generic name, it is necessary to define the territorial scope as China has a vast territory with diverse cultures, leading to great differences in cognition of things. Disregarding or ignoring such differences in identifying generic names is not in line with the actual market demand and is rather detrimental to the rights holders.

Secondly, the criteria for identification are too subjective, making it difficult to grasp the appropriate criteria in practical operation. What quantitative indicators should the criteria for identifying generic names satisfy? No conclusion has been drawn. In the "Guidance Case No.46 of 2009", the Supreme People's Court clearly defined the factors that should be paid attention to in identifying the generic name of goods with regional characteristics, including: (1) the name is customary in a certain area or field, and has been widely used for a long time and recognized by the relevant public; (2) the production technology of goods referred to by the name has been formed by the long-term common labor practice of the people in a certain area or field; and (3) the raw materials of the goods referred to by the name are universally produced in a certain area or field.

In addition, we hold that in identifying a generic name, the milestones, including the application date of the disputed trademark, should be strictly sorted out, the facts restored and represented as much as possible, a comprehensive analysis made based on the history and industry background around the application date, and in particular efforts made to distinguish the trademark popularity won by historical accumulation from the popularity generated by the trademark itself and its use.

Ⅲ. Intangible cultural heritage and trademark

As far as the typical case is concerned, the plaintiff's smoked chicken production technology was identified the intangible cultural heritage of Liaoning Province. This fact, though not the focus of dispute in the typical case, has aroused our thinking about the relationship between intangible cultural heritage and trademark.

The Beijing Higher People's Court pointed out in its (2016) Jing Xing Zhong No.1479 Judgment on the invalidation of the registered trademark No.399308 "Tang Ping Ba Zhen" that although the disputed trademark "Tang Ping Ba Zhen" had gained a certain popularity through use and had been named a famous trademark in Ningxia Province, its popularity gained through use was not enough to offset or surpass the public's recognition that "Tang Ping Ba Zhen" is a health care therapy with the characteristics of Chinese Hui ethnic group, whether in terms of the time and scope of use of the disputed trademark, or in terms of the objective cognitive effect of the relevant public, for the "Tang Ping Ba Zhen Therapy of Hui Nationality" had a history of 1300 years and had been widespread among Hui people and recognized as a national intangible cultural heritage.

According to the above, we hold that in judging whether the name of intangible cultural heritage can be used as a registered trademark, we need to consider the popularity of the name of intangible cultural heritage and the related registered trademark in the relevant public.

In addition, more than one inheritor is often appointed for one intangible cultural heritage due to the special attributes of intangible cultural heritage. Intangible cultural heritage administration authorities often identify the representative inheritors of an intangible cultural heritage. However, it is difficult to deny the right holder status of the existing "non-representative inheritors" whether in the light of their historical origins or of their on-going commercial operations. How to distribute the rights in trademarks related to intangible cultural heritage between representative and non-representative inheritors of intangible cultural heritage is a question that needs to be gradually answered in practice.

Ⅳ. Trademark dilution

The Trademark Dilution Theory can be traced back to Frank Schechter's article entitled "Theoretical Basis of Trademark Protection" published in Harvard Law Review, which pointed out that: "In all these cases, the real damage can only be measured by taking into account the functions of trademarks. This damage is manifested in the fact that the image and influence of a trademark or name will be gradually waning and degrading among the public when it is used on non-competitive goods. The more distinctive or unique a trademark is, the more impressive it will be to the public, and the stronger the need to prevent the link between the trademark and its particular goods from being weakened or disappearing". In the United States, "anti-dilution" is committed to protecting well-known trademarks in an "open" way. "Well-known trademarks are regarded as a property right of their owners, and dilution of them is prohibited in an exclusive and absolute manner, rather than merely in competitive fields." This Anti-dilution Theory is also called Association Theory, i.e., in judicial practice, an infringement upon the prior well-known trademark shall be established as long as the relevancy between the disputed trademark and the well-known trademark can trigger the public's ideological association and cause the public to consciously or unconsciously compare and contrast the two trademarks, instead of really causing confusion among consumers about the sources of goods and services. "The rationality of the Association Theory originates from the prohibition of hitchhiking".

Regarding whether there are provisions on trademark dilution in China, a relatively unified answer is that Article 9, Paragraph 2, of the Interpretation of Several Issues Concerning the Application of Law in the Trials of Civil Disputes Involving the Protection of Well-known Trademarks promulgated by the Supreme People's Court in 2009 is essentially a provision on trademark dilution, which stipulates that: "Activities that are enough to make the relevant public think that the disputed trademark has a certain degree of connection with a well-known trademark and weakens the distinctiveness and derogates the market reputation of the well-known trademark, or activities that involve the illegal use of the market reputation of a well-known trademark accord with "...which may mislead the public and cause damage to the interests of the registrant of the famous trademark" stipulated in Article 13, Paragraph 2, of the Trademark Law. From the perspective of the expression of this provision, the affirmation of trademark dilution in China is based on Confusion Theory, which is different from the legislative spirit of the United States in the related field.

The traditional Confusion Theory regards trademark as a mark to distinguish the source of different goods while the prohibition of confusion aims to protect the rights of consumers, rather than the property rights of the right holders directly. The Prohibition of Confusion Theory is not to protect private rights from the perspective of private law, but to safeguard the normal competition order of the market from the perspective of anti-unfair competition.

In practice, the administrative procedure for disputes over the granting and confirmation of trademark rights still shows an adherence to the “Confusion Theory”, but in the litigation stage, courts have begun to adopt the “Association Theory”. For example, in the case of Baidu Online Network Technology (Beijing) Co., Ltd. (hereinafter "Baidu") v. TRAB and the third party Shenzhen Yelaixiang Health Care Products Co., Ltd. (hereinafter "Yelaixiang") for disputes over "Baidu Condom", TRAB held in the trademark invalidation stage that goods like condoms are far beyond Baidu's scope of business and that the disputed trademark would not cause confusion, and therefore ruled that the trademark "Baidu" registered by the third party remained valid under Catefory 10 "uterine caps, condoms, and non-chemical contraceptive tools". Dissatisfied with the ruling, Baidu lodged an administrative lawsuit. The court of first instance affirmed that Baidu is a well-known trademark and canceled the ruling of TRAB. Thereafter, TRAB filed an appeal and the court of second instance upheld the first-instance judgment. The second-instance judgment stated that: "When the public see the trademark 'Baidu', they can easily think of the Internet search engine service provided by Baidu. The third party's goods will gain remarkable distinctiveness for use of the trademark 'Baidu'. The disputed trademark registered by Yelaixiang is almost identical to the trademark 'Baidu'. Although the goods and services on which the two trademarks are used are not similar, when consumers see the disputed trademark used on goods such as condoms, they will inevitably establish a considerable degree of association between the disputed trademark and the well-known trademark 'Baidu', thus undermining the close association between the trademark 'Baidu' and the Internet search engine service provided by Baidu and weakening the distinctiveness of the well-known trademark 'Baidu'." The court of second instance has apparently adopted the Association Theory.

Chinese legislation has not made it clear which theory to adopt, resulting in cognitive differences in practice, which is typically manifested in the fact that TRAB, a quasi-judicial organ, has issued a different judgment from that issued by the court in the same case. We believe that in a judicial-led environment, standards should be unified as soon as possible so that the public can have a clearer expectation in such disputes.

Ⅵ. Issues concerning the protection of well-known trademarks

1. The nature of protection of well-known trademarks

The existence of "Registered well-known trademarks" gives trademark owners protection stronger than that given general trademark owners, and this stronger protection is mainly embodied in cross-category protection. The main differences between well-known trademarks and common trademarks in terms of protection received are listed as follows:

As for the essence of well-known trademark protection, some scholars point out that, according to the international practice of well-known trademark protection and current Chinese legal provisions regarding well-known trademarks, the identification of well-known trademarks is only a means and procedure of resolving trademark disputes, and "is only a prerequisite fact for the provision of special protection according to law, which falls within the scope of fact finding". Therefore, the identification of well-known trademarks is only one of the necessary means of resolving trademark disputes.

The rationality of the strong protection for well-known trademarks is closely related to market operation rules. There are huge commercial investment and market operation costs behind well-known trademarks. The protection of well-known trademarks is a dispute resolution mechanism, and the strong protection for well-known trademarks at the legal level respects and caters to market discipline.

2. Deficiencies in the protection for unregistered well-known trademarks

The main legal provisions on the protection of unregistered trademarks in Chinese laws are scattered in the Trademark Law and the Law against Unfair Competition. The provisions of the Trademark Law concerning the protection of unregistered trademarks include: Article 13, Paragraph 2, which is about the unregistered well-known trademarks; Article 15, Paragraphs 1 and 2, which are about the protection of unregistered trademarks of the principals; the latter half of Article 32, which is about prohibiting applicants from preemptively registering a trademark that is already in use by another party in an unfair manner and enjoys substantial influence; and Article 59, Paragraph 3, which is about the continual use of unregistered trademarks under the original conditions. The Law against Unfair Competition deals with the protection of unregistered trademarks in Article 6 which stipulates about the protection of "names, packaging and decoration of goods with substantial influence", and about "other confusion acts which are enough to cause people to mistake the goods as another party's goods or to think that they have specific connections with another party".

China adopts a trademark registration system under which unregistered trademarks are generally not protected by the law. If we apply the principle of the registration system with complete inflexibility, the unregistered well-known trademarks should not be protected at all, but this is obviously unreasonable. Firstly, both the Trademark Law or the Law against Unfair Competition are committed to protecting the orderly and normal operation of the market. The owners of unregistered well-known trademarks have not only objectively generated actual market influence and interests, but also have outstripped most of the registered trademarks on the same or similar goods. It is not only unfair not to protect them, but also unfair to protect them inadequately.

Inflexibly adhering to the principle of the registration system will not be able to meet the needs of the market. Take "malicious preemptive registration" for example. Most of the trademarks maliciously registered by others preemptively are well-known foreign trademarks which enjoy substantial brand awareness but have not been registered in China. If we merely adhere to the principle of the registration system and the principle of territoriality, the owners of the trademarks maliciously registered by others preemptively can do nothing to protect their legitimate rights and interests. In response to this phenomenon, Professor Kong Xiangjun argues in his book that: "If a foreign trademark has a high reputation and well-known to the domestic peer industry or the relevant public, it can be deemed that it has substantial influence in China. If the foreign enterprise uses the trademark in its business contacts with domestic enterprises in China, it can be deemed that it is in use within the territory of China. If a domestic enterprise preemptively registers the trademark in China, such domestic enterprise shall be deemed to have violated the second half of Article 32 of the Trademark Law for preemptively registering a trademark that is already in use by another party and enjoys substantial influence." In conclusion, popularity is the soul of a trademark, and may play a role of concealing flaws to a certain extent. It is good to have a system to follow. Better still, it is necessary to jump out of the system's restraints, to base on its essence, and to seek solutions to practical problems.