Preemptive trademark registration of cartoon characters-Legal protection on foreign cartoon character licensing in China

By Xie Lijia, Xu Weikang,[Trademark]

Long being popular in China, the derivative products of fashionable foreign cartoon characters, such as “Doraemon,” “Crayon Shin-chan,” and many of Disney’s characters, have been deeply rooted in China, and have profound impact on Chinese market. These products cover a wide variety, ranging from such small gadgets as toys and garments to larger commodities of furniture and home appliances which bear merchandised foreign cartoon characters.

These well-known cartoon characters have doubtless generated huge values. Where there are economic values, there are battles over these values. How, then, should the proprietors protect these well-known cartoon characters as intangible properties in commercial activities? How, indeed, can these foreign-originated cartoon characters obtain legal protection in China? And how can these cartoon character rights be shielded from infringement in the commercialization process in a huge market such as China?

Regarding these awaited problem, combining our professional experience in this area, we will analyze and share our opinions from the perspective of “dealing with preemptive trademark registration of foreign cartoon characters.”

It is not a rare phenomenon that a foreign-originated cartoon character is preemptively registered as trademarks by a non-proprietor in China. One of the most influential cases involves “Crayon Shin-Chan” character and word mark. The Japanese artist Yoshito Usui completed the cartoon work of “Crayon Shin-Chan” in 1990, which upon publication, became an immediate hit in Southeast Asia including China. Unfortunately, however, the proprietor of “Crayon Shin-Chan” failed to timely register the characters or words of “Crayon Shin-Chan” as trademarks in China. Instead, one Chinese local company preemptively filed the application on the characters of “Crayon Shin-Chan” for trademark registration in class 25 for clothing articles in January 1996, and by 1997, obtained the exclusive trademark right. From then on, the battle to recover the rights lasted more than a decade in China for the creator of “Crayon Shin-Chan,” Yoshito Usui, who first saw the light of victory only in 2012. Imagine the tremendous economic losses for the proprietor during these years.

Certainly, an effective way for the original foreign creative entities or authors is to timely obtain trademark and copyright registrations in China for their cartoon characters, but not every proprietor is in a condition to do it, or is aware of it at all. Since all trademark laws are national, protection is acquired country by country, which costs a fortune to establish global protection. For this reason, a proprietor would consider IP registration and seek protection only in any given country when he needs to enter the market in that country. For this reason, again, the merchandization project not infrequently walks before the registration of an underlying cartoon character.

That being said, how can a foreign proprietor of cartoon characters protect its legitimate interests under Chinese laws? How effectively can preemptive registration of well-known cartoon characters be curtailed under the Chinese laws? The attorney of this article suggests the following:

I. Filing opposition within opposition period

For any trademark application preliminarily approved in China, the Trademark Office requires a 3 months’ publication period for public opposition. Under Chinese laws, any one can raise opposition in writing to a trademark application within 3 months from the date of publication. In the absence of opposition this period is expired. In short, as long as a foreign proprietor takes no action to file a trademark application for his cartoon character work or raise opposition within the 3 months’ opposition period, such a cartoon character work will very likely be registered by another so as to establish the exclusive right to that other. Once the exclusive trademark right is secured, the merchandise bearing such a mark becomes legitimate in the Chinese market to be lawfully protected. It will be extremely hard to delegitimize such trademark rights.

The only way to curb preemptive registration in this stage is to conduct seamless tracking and monitoring the registration situations of the cartoon characters and its word marks, both in foreign language and in Chinese equivalents, by engaging professional practitioners. As soon as any publication occurs, a written opposition is immediately raised. But to say the least, the best defense is offense, i.e., to register the cartoon characters and their word marks in relevant classes. This, economically speaking, is roughly the same as tracking and monitoring in terms of cost control.

II. Relative grounds for removing preemptive registration of cartoon characters

Here, the grounds for removal refer to a claim against a trademark registration that has established the exclusive right. In accordance with the laws of China, for registered trademark, a proprietor or any interested parties may file a request, under a 5-year statute of limitation, with the Trademark Review & Adjudication Board (TRAB) to remove the registration on the following grounds:

1. That the registered mark is a reproduction, or a copy, or a translation of a well-known mark unregistered in China, for use with identical or similar goods, as to be likely to cause confusion among the public;

2. That the registered mark is a reproduction, or a copy, or a translation of a well-known mark registered in China for use with non-identical or dissimilar goods, and is deceptively misleading the public, as to be likely to cause injury to the proprietor’s interests;

3. That the registration is obtained by an agent in his own name without authorization from the entrusting proprietor;

4. That the preemptively obtained registration contains geographic indication, where the goods bearing the mark is not originated from that geographic location, and is likely to mislead the public;

5. That the mark under preemptive registration has established prior right (mainly IP rights), or the preemptive registration is obtained by inequitable conduct for a mark that has been used by another with certain reputation.

Any foreign cartoon character is suffering from preemptive registration which meets each above situations the TRAB for removal of the preemptive registration within 5 years.

Regarding the situation 1, the key point for the aggrieved proprietor to successfully remove the preemptive trademark registration is that the proprietor proves the foreign cartoon character has been well-known and already held great market influence in connection with the relevant goods before the preemptive registration application filed. In other words, being well-known in China is a prerequisite for protection; otherwise, different route has to be taken.

Situation 2 also requires well-known status, as it mainly focuses on free riding problem and applies to that the proprietor has secured trademark registration on particular classes of goods but he/she wants to get exclusive trademark protection in all other classes.

Regarding the situation 3, it applies to restrict the foreign cartoon characters being registered in bad faith by the agent or representative of the real right owner. Currently in China, such bad faith behavior always arises from Chinese agencies or representatives, by taking advantage of the negligence and ignorance by the licensor (or foreign real right owner); or the licensor being unfamiliar with the laws of China; or relevant contents never be stipulated in the agreement by each other, preemptively register foreign cartoon images as trademark in China by themselves. What’s more, it may also happen to the licensor that the bad faith domestic agencies or representatives by means of the opportunity on discussing the business such as foreign cartoon character licensing, registration or promotion in China with the licensor (or foreign proprietor), preemptively register foreign cartoon characters as trademark in China in name of themselves or their related companies in secret once the preliminary negotiation is broken, etc.

Regarding the situation 4, it is quite easy to understand. Generally, geographic mark is clearly indicative. This article may be cited where foreign cartoon characters were preemptively registered as trademark which contains geographic mark.

Regarding the situation 5, prior right means the legal right forms before the preemptive registration application filed, which generally includes but not limited to copyright, well-known trade name, business name, domain name, etc. In the “Crayon Shin-Chan” case, copyright owner of “Crayon Shin- Chan” claimed the infringement due to the preemptive registration trademark on his characters exactly for the reason that the preemptive registration trademark infringed his prior copyright on “Crayon Shin-Chan.” This reason supporting the claim of infringement issued by the proprietor was finally recognized by the court in commercial litigation procedure, but in the procedure of registration trademark revocation judged by the TRAB, the claim on this reason was dismissed due to 5 years limitation expired. Even so we insist on that Article in situation 5 shall play a very positive role in legal protection of foreign cartoon characters in China. Generally speaking, cartoon characters always fall in the scope of “works” defined in the Copyright Law of China and China is also a contracting party of Berne Convention. So the foreign cartoon characters will also be protected by the Copyright Law of China. In summary, the Article in situation 5 can apply to registration revocation when preemptive trademark registration happens to foreign cartoon characters, but the claim shall be filed within 5 years.

In a word, the limitation period of 5 years is the precondition of realizing above-mentioned 5 legal remedies, and the period is fixed without suspension or discontinuance. But is there any legal remedy applying to the foreign cartoon characters preemptively registered as trademark persisting for more than 5 years?

III. Absolute grounds for removal of preemptive registration of cartoon character as trademark

The absolute grounds for removal are in relation to the above Section II of relative grounds for removal. With absolute grounds for removal, the proprietor of foreign cartoon characters has the support which is not limited within 5 years period and is entitled to request removal of preemptive registration trademark at any time. According to the Law, other entities or individuals can request removal of registration trademark without time limitation once following situations occur:

1. A mark that is the emblem of the state, the Party or an international or g a n iza t ion , or i s r a c i a l ly discriminative, or exaggeratively deceptive, or publicly scandalous;

2. A mark that lacks distinctiveness, or is generic for the goods it covers;

3. A three-dimensional mark that is the natural shape of the product, or the shape for technical effect, or the shape that renders the product substantially utilitarian;

or 4. A mark that is preemptively registered through fraudulent or other inequitable means.

Regarding above situation 1, 2 and 3 they are related to the characteristic and nature of the cartoon character. Whatever the foreign cartoon characters involved in this article or preemptive registration characters, they absolutely will not be protected by law due to above 3 situations. So the details will not be explained further here.

Regarding the situation 4, it has a strong practical significance and wide interpretation space and is even used as a catch-all-clause in revocation of preemptive registration trademark. Someone registers the trademark by deceitful or other illegitimate means here can be legally interpreted: (i). when filing the application for trademark registration, the preemptive registrant deceives the Trademark Office in order to get the registration by means of falsification; or (ii). the preemptive registrant registers the trademark in bad faith in order to seek illegal profits or subject to unfair competition. Especially the latter (ii), which is the powerful weapon we often use to claim the preemptive registration revocation. Therefore, we hold the views that this type of regulation will limit the preemptive trademark registration on the base that the preemptive registrant has already or is obliged to know the character or trademark belongs to others but not him/herself, and also will limit the preemptive registrants by means of registering large number of trademarks then re-selling for illegal profits. Basically, the similar behaviors of preemptive registration mentioned above, without any doubt, have materially broken the management orders of trademark registration system and even public orders, furthermore, public interests will be deeply damaged.

Among the cases we having focused and settled on foreign cartoon characters preemptively registered as trademarks, there are many illegal behaviors including but not limit to (i). already knew or is obliged to know the trademark is owned by others but still preemptively register; or (ii). continuously and preemptively registers trademarks in large-scale and then re-selling for illegal profits but without personal use; or (iii). unfair competing by means of preemptive trademark registration, etc. We always take full advantage of this point to win the case or build dominance in the negotiation. Additionally, it is necessary for real right owner to prove that foreign cartoon characters belonging to others shall be already known by preemptively registrant or the preemptively registrant shall be obliged to know, meanwhile, the popularity of the foreign cartoon characters also plays a role in this situation.

IV. Ex officio removal

Besides removal by the real right owner personally, they can also draw support from the authority of the Trademark Office to remove the preemptive registration once it complies with following situations, including: (i). Registered trademark is altered without authorization especially in using; or (ii). The name, address or other registered information of registered trademark are altered without authorization especially in using; or (iii). The registered trademark is sold without authorization; or (iv). The registered trademark has not been used in the appointed commodity category for three consecutive years. Especially, high percentage of individuals or companies preemptive register the foreign cartoon characters always intends to make illegal profits, so they rarely use the registered trademark in business which results in the trademark being suspended for a long time. In view of this situation, the real right owner had better to submit these relevant clues to the Trademark Office and require them to revoke the registered trademark by administrative power.

V. Injunctive relief from trademark litigation based on conflict of IP rights

In China, regarding any formally registered trademarks, even they have above problems, they shall be protected by law before being revoked by the TRAB. What’s more, only TRAB is authorized to revoke the registered trademarks in China, and courts in China are not authorized to directly revoke the registered trademarks in commercial litigations. For a long time, even IP cases such as copyright and trademark disputes on the same cartoon characters, probably could not be heard by courts. But this kind of phenomenon has been changing gradually. Though the court has not been authorized to directly revoke the registered trademark in commercial litigation, the IP cases can be heard by court. This development in juridical practice of China will add a new and effective legal measure against foreign cartoon characters preemptively registered as trademarks.

As we mentioned above, cartoon character basically belongs to works defined in the Copyright Law. In accordance with the Copyright Law of China and the Berne Convention, most foreign cartoon characters will be authorized copyright in China. Therefore, if the copyright of the images are formed before they are applied for trademark registration by preemptive registrants, the real right owner of the foreign cartoon characters would be more likely protected by laws. Because in our opinion, the copyright has absolute validity, the exclusive control of the cartoon images without the license of the copyright owner can probably be thought to have fault and it is not the obligation of the copyright owner to provide evidence against the preemptive registrant.

Subject to the purpose of this article, in case that the preemptive registrant registers the foreign cartoon images as trademark, then he/she uses the registered trademark in business personally or licenses it to any third party, such as use the images on related commodities by means of manufacturing, selling, and packaging. Whether these uses of registered trademarks infringe the copyright of the cartoon images owned by real right owner, especially the above said licensing act?

The author holds the view that these uses of registered trademark shall constitute infringement. Even those images or similar images have been registered as trademarks through legal registration procedure by preemptive registrants, their use of the images still could not cover up the nature of copyright infringement on the images.

In contrast, someone will doubt by the first reason that the trademark through legal procedure shall be completely protected by law and the registrant shall enjoy the rights according to the Trademark Law unless TRAB revokes the registration trademark. Secondly, they thought that power of registered trademark revocation is solely authorized to TRAB but not the court in commercial litigations. So the commercial litigations cannot restrict the use of trademark.

But we think that above view is too one-sided. From the practice in many cases, we will find the application of trademark registration by preemptive registrants and especially being in bad faith apparently. In detail, the preemptive registrants always focus on others’ potential foreign cartoon images, and then covet huge money that will derives from the real right owner who has not registered the trademarks in China yet. By means of registration, the preemptive registrants can benefit a lot through licensing or re-sell. Basically, this kind of registration usurps the legal profits owed to creative works by others and it even takes advantage of the favorable influence and reputation accumulated by the foreign cartoon images for long time among a large group of people. It is typical example of getting something for nothing. What’s more, as it is known, both copyright and registered trademark right have their own boundary. According to this, the utilization of preemptively registered trademark definitely strides into the space of the copyright for foreign cartoon images and is contrary to the legislative purpose of the Trademark Law.

Meanwhile, as if such preemptive registration or utilization were indulged or omitted by law or justice system, there shall be no beneficial to IP protection in China. As we said, the preemptively registered trademark could not be revoked directly in commercial litigations in court, but the court can support the real right owner in the verdict as follows: (1). confirm preemptive registrant’s infringement against copyright of foreign cartoon images during the utilization of registered trademark; (2). confirm the invalidity or impropriety of preemptive trademark registration; (3). confirm the restrictions to the utilization of the registered trademark. In summary, during the utilization of the registered trademark, once the design, manufacture, selling, packaging etc. involves the use of foreign cartoon images owned by others, the court has the reason to confirm infringement against copyright and judge compensation for infringement, which provides another approach for foreign cartoon images protection in China.

In conclusion, with the high development of licensing industry in China and especially the foreign cartoon images are keeping entering into the Chinese market, it is inseparable for local judicial practices and legal services to escort. We also hold that only keep being familiar with the current situation of the judicial practice in China, can the related business develop more smoothly.

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