A perspective of anti-unfair competition on the protection of foreign enterprise names in China

By Chen Shaojuan, Shanghai Office of Beijing Unitalen Law Firm,[Unfair Competition]

Enterprise name is the sign used to distinguish a market player from its counterparts. In addition to such differentiation, i t is a lso an embodiment of enterprise’s goodwill and an intangible asset of the enterprise. It is in recent years that the unauthorized use of some foreign well-known enterprise names, especially the business names, has become an increasingly prominent problem with the deepening of reform and opening-up, the rapid development of Internet technology and increasingly frequent international exchange. The author intends to have a discussion on the protection of foreign enterprise name in China from the perspective of unfair competition.


I. The right basis for the protection of foreign enterprise name in China

China has been a contracting member of Paris Convention for the Protection of Industrial Property (the Paris Convention) since 1985. In addition to Article 10 (2) of the Paris Convention by which anti-unfair competition is provided, a clearer stipulation can be found in its Article 10 (8) that “a trade name shall be protected in all the countries of the Union without the obligation of filing or registration, whether or not it forms part of a trademark.” This is the WIPO’s translation of “trade name,” whereas Black's Law Dictionary interprets it as “a name, style, or symbol used to distinguish a company, partnership, or business (as opposed to a product or service)” and it is a representation of business reputation. Therefore, the author thinks that the trade name in the Paris Convention should include the enterprise name and business name in the Anti-unfair Competition Law of People’s Republic of China (Antiunfair Competition Law). Article 7 of China’s Provisions on Administration of Enterprise Name Registration (the Provisions ) provides that “an enterprise name shall consist of the components in the following order: the business name (or trade name), trade or business operation characteristics and organizational form.” It can be seen from this provision that trade name and business name are synonym in China whereas enterprise name includes trade name or business name.


Although the Paris Convention has a broad stipulation because it has no restriction on the protection of trade name, some companies want to initiate lawsuits in China according to the Paris Convention . Then, a question of monism or dualism arises from such lawsuits in the application of international treaties. Basically speaking, dualism is applied to IP issues governed by WIPO. That is to say, an international treaty can not be directly applied in a state and should be indirectly applied by way of annulment, amendment and formulation of state law by its member states. According to Patent Related Flexibilities in the Multilateral Legal Framework and Their Legislative Implementation at the National and Regional Levels , the preliminary investigation report of the Secretariat of WIPO Committee on Development and Intellectual Property (CDIP) at its fifth session held in Geneva in 2010, “such as the Paris Convention, where the room to maneuver left to members of the Union is wide. This policy space that the Paris Convention gave to members is called by academics and experts the asymmetries of the Paris Convention. This means that, where the Paris Convention does not establish minimum mandatory standards, members of the Union are free to set those standards in their law.” Therefore, enterprise of all member states of the Paris Convention should seek for the respective domestic law for the protection of their trade names under China’s IP laws.


According to Article 5 (3) of China’s Anti-unfair Competition Law, “using without authorization the name of another enterprise or person, thereby leading people to mistake their commodities for those of the said enterprise or person” is a kind of unfair competition. A further stipulation is provided in The Interpretation of the Supreme People's Court on Some Matters about the Application of Law in the Trial of Civil Cases Involving Unfair Competition (the Interpretation) that “a name of any enterprise registered by the enterprise registration competent authority, or a name of any foreign enterprise used within the territory of China for commercial use shall be ascertained as an enterprise name as stipulated in Article 5 (3) of China’s Anti-unfair Competition Law. A business name in the name of enterprise that has certain market popularity and is acknowledged by the public concerned may be ascertained as an enterprise name as stipulated in Article 5 (3) of the China’s Anti-unfair Competition Law.” Therefore, according to the above judicial interpretation, a name of any foreign enterprise legally registered or having commercial use within the territory of China shall be directly protected by China’s Anti-unfair Competition Law.


II. Advantages for foreign enterprise in its choice of Anti-unfair Competition Law for the protection of its enterprise name in China

A name of any enterprise registered by the enterprise registration competent authority, or a name of any foreign enterprise used within the territory of China can launch a lawsuit to the court according to General Principles of the Civil Law of the People's Republic of China (GPCL) or seek for administrative remedy at the administrative agency or to the court according to China’s Anti-unfair Competition Law. However, there are some disadvantages for lawsuit according to GPCL. The first is that there is still disagreement in judicial practice whether the foreign enterprise has the right of enterprise name within China. The second is that there is another predicament in the pursuit of name protection under the framework of personality right: should compensatory damages or beneficial damages be applied? The right of name falls within the scope of personality right in civil law, which is formulated from the perspective of spiritual interest or personality. Infringement on right of name will generally be compensated not to exceed the damage suffered by the infringed, which is called adequate compensation doctrine. As a kind of business sign for market player identification, enterprise name has been a carrier of business goodwill and has thus resulted in commercial value beyond spiritual scope. It is such huge economic interests that some enterprises decide to use other’s enterprise names without authorization. The enthusiasm for right maintenance of the infringed will be affected if nothing but the economic damage suffered by the infringed is paid and the economic interest acquired by the infringer is not included in the determination of compensation. Of course, Tort Liability Law of the People’s Republic of China has some provisions on acquired economic interest compensation. However, it is still a question at present whether it can be applied to the acquired economic interest resulting from personality right.


Therefore, the author suggests foreign enterprises to maintain their rights from the perspective of Anti-unfair Competition Law.


III. The judicial determination of unfair competition infringing foreign enterprise name

According to China’s Anti-unfair Competition Law, the unauthorized use of foreign enterprise in an enterprise name shall be determined as unfair competition where: (a) there is a competition between the concerned business operators; (b) there is an use of enterprise name which is the same as or similar to a foreign enterprise name within China without authorization and (c) the concerned public within the territory of China may be confused or mislead by such use. The following is an expounding of the determination of the three conditions from determinative perspective.


(i) There is a competition between the concerned business operators.

The business operator under China’s Anti-unfair Competition Law refers to a legal person, other economic organization or individual engaged in commodity operation or profit service. The determination of business operator identity shall not be affected even if it or he has not applied for industrial and commercial registration or has no fixed sites for business operations. China’s Supreme people's Court ruled in the case of Shanghai Shende Systems Technology Co., et al. v. Italy O.S. Panto S.r.l that the determination of the status of business operator of Italy O.S. Panto S.r.l shall not be affected although it had no fixed sites for business operations.


As for those enterprises that are unable to have actual business in China because of the provisions of Catalogue of Prohibited Foreign Investment Industries under China’s Catalogue of Industries for Guiding Foreign Investment, should they be given protection under China’s Anti-unfair Competition Law? Beijing Second Intermediate People’s Court ruled in (UK) Sotheby’s (Sotheby's) V. Sichuan Softbill Auction Limited (Sichuan Softbill) involving unauthorized use and false publicity that “although Sotheby’s and its affiliated companies have no official auction in China’s mainland according to China’s current legal provisions, it makes some market publicities related to auction in China’s mainland; that the fundamental purpose of charitable auction, previews and other activities conducted by Sotheby’s and its affiliated companies under China’s current legal framework are to popularize its service brand and to attract buyers and clients from China’s mainland to its auction in order to develop its market in China’s mainland; that, as an important component of its auction activities, previews is of great significance for COLUMN China Intellectual Property 74 China IP 3-4/2014 the commercial profits of its auction business; that Sotheby’s and its affiliated companies had publicized its advertisement, rented houses, imported catalogues and other commercial activities in China’s mainland for the promotion and popularization of its auction business; and that it can be concluded from the above that the relevant previews and other activities conducted by Sotheby’s and its affiliated companies in China’s mainland have a broad nature of business operation, and therefore there is a competitive relationship between Sotheby’s and Sichuan Softbill.” It can be seen from the above judgment that foreign enterprise can be determined as business operator if it had all business activities in China for the purpose of its business development in China.


(ii) There is a use of enterprise name which is the same as or similar to a foreign enterprise name within China without authorization.


Not all foreign enterprise names shall be unconditionally protected. The Interpretation enumerates three kinds of enterprise names to be protected by China’s Anti-unfair Competition Law, including a name of any enterprise registered by the enterprise registration competent authority, or a name of any foreign enterprise used within the territory of China for commercial use, and a business name in the name of enterprise that has certain market popularity and is acknowledged by the public concerned. However, this concept has been extended in judicial practice. For example, the abbreviation of an enterprise name that has certain market popularity and has served as its actual business name and the Chinese translation of business name of foreign enterprise name that has certain market popularity have been protected. This can be attributed to the particularity of China’s Anti-unfair Competition Law. It has been 20 years since the promulgation of China’s Anti-unfair Competition Law, the situation has undergone major changes and complicated situations have emerged one after another. It has not been rare that Chinese courts hear cases and render judgments according to the basic principles under China’s Anti-unfair Competition Law. It is reasonable to believe that more signs with the meaning of enterprise name will be protected in the future. The following is an analysis of the types of enterprise name that has been frequently encountered in current practice.


1. An enterprise name registered by the enterprise registration competent authority

According to Article 29 of the Provisions, an enterprise of a foreign country (region) may apply for registration of its name in the territory of China. The registered name shall be the full name of the foreign enterprise after registration. Any direct use of such full name shall constitute unfair competition regardless of the difference in terms of region and industry between the two enterprises concerned.


2. A foreign enterprise name used within China for commercial use

The key is the meaning of commercial use. Article 7 of The Interpretation stipulates that “as regards the commercial use within China that includes the use of the typical name, package or ornament of a well-known commodity, or use of the enterprise title or name for a commodity, commodity packages or commodity exchange documents, or for advertisements, exhibitions or any other commercial activities, it shall be ascertained as the use stipulated in Article 5 (2) and (3) of China’s Anti-unfair Competition Law.” Such provision gives a very broad interpretation of commercial use, not limited to scope of business operation registered in industrial and commercial agency. In the foresaid case of Sotheby’s, the court did not limit commercial use to actual auction activities, but ruled that charitable auction, previews, advertising, publicity and other activities were all commercial use. In addition, it shall be determined as commercial use if a foreign enterprise sold its products within China through its distributors or agents. However, there shall be no determination of commercial use within China if a foreign enterprise carried out activities forbidden by Chinese laws.


3. A business name in the enterprise name that has certain market popularity and is acknowledged by the public concerned

A business name is the major sign to differentiate enterprises. Therefore, unfair competition is mainly related to enterprises’ business names in practice. As for foreign enterprises, the “market popularity” and “acknowledged by the public concerned” are to be limited to the territory of China.


4. The abbreviation of an enterprise name that has certain market popularity and has served as its actual business name

The court ruled in Shandong Crane Factory Co., Ltd. v. Shandong Shanqi Heavy Industry Co., Ltd. involving infringement upon right of enterprise name that the abbreviation of an enterprise name that has certain market popularity, acknowledged by the public concerned and has served as its actual business name may be deemed as enterprise name. This can also be applied to foreign enterprise names.


5. The Chinese translation of business name of foreign enterprise name that has certain market popularity

The court ruled in the case of Woodhead International Pty. Ltd. v. Liu Li, Shanghai Woodhead International Architecture Design and Consultation Co., Ltd. et al involving unfair competition that the protection of the Chinese translation of business name of foreign enterprise name that has certain market popularity should not only satisfy the general protection conditions, but also be conformity with the “characteristic of correspondence, uniqueness and consistancy between the original business name and its Chinese translation. By correspondence, the original foreign enterprise name should be consistent with its Chinese equivalent in transliteration or translation. By uniqueness, the obligee shall use one corresponding Chinese translation of its foreign enterprise name, and should not use several translations at the same time. By consistancy, the obligee should consistently use such Chinese translation instead of accidental use, and should not alter such translation at will,” and that such use was sufficient to make the public concerned to confuse or mistake.


The right of enterprise name has a function of possession and exclusion. The exclusion can not be unconditionally applied, but should be sufficient to make the public concerned to confuse or mistake.


According to the Provision, the post enterprise name shall not be the same as or similar to the name of an enterprise already registered in the same trade within the jurisdiction of the competent registration authority. That is to say, the early registered enterprise name has a right of exclusion in the same trade within the jurisdiction of the competent registration authority. The reason for such provision is that it will be very easy to cause confusion to the public concerned if such registration is permitted. As for the exclusion of enterprise name which is used beyond one jurisdiction or industry, it depends on the possibility of causing such confusion and whether the affected scope of such enterprise name is beyond one jurisdiction or industry. In such determination, it is generally required to take into account whether there is an affiliated relationship between such two enterprises such as upstream and downstream relationships, concurrence of market channels and other factors, or it has caused an actual confusion among the public concerned.


The foresaid can be used for the right protection for right conflicts of enterprise name between Chinese and foreign enterprises, between the use of Chinese and foreign enterprise names within China and others issues. As for Chinese enterprises, “free-ride” will never be a correct road for sustainable development. They must respect the laws and independent innovation in order to create their own famous brands.


(Translated by Yuan Renhui)

 

Member Message


Only our members can leave a message,so please register or login.

International IP Firms
Inquiry and Assessment

Article Search

Keywords:

People watch

Online Survey

In your opinion, which is the most important factor that influences IP pledge loan evaluation?

Control over several core technologies for one product by different right owners
Stability of ownership of the pledge
Ownership and effectiveness of the pledge