The Judicial Protection of Enterprise Names — Conflict with the Registered Trademarks

By Robin Su Associate of Lusheng Law Firm and Kun Zhou Lusheng Law Firm,[Trademark]

The fact that enterprise names and registered trademarks can both indicate the origin of goods or services and are generally considered as an intangible intellectual property right, which leads to the frequent occurrence of conflicts between the two.
Article 1, Section 1 of the Provisions on Several Issues Relating to the Adjudication of Civil Disputes Involving Conflicts Between Registered Trademarks, Enterprise Names and Prior Rights released by the Supreme People’s Court (effective from March 1, 2008) provides that the infringement against prior enterprise names by registered trademarks shall fall within the scope of civil litigation. As a result, one can file a lawsuit against others’ use of certain registered trademarks based on their prior rights to enterprise names.
 
In judicial practice, the legal force of enterprise names is generally considered to be lower than that of registered trademarks. Therefore, enterprise names are seldom used to confront latter registered trademarks rights. Judges tend to be cautious about imposing more stringent constitutive requirements in such cases. Cases solely involving the infringement of prior rights of enterprise names are rarely seen in practice, but it is still an effective right. It is especially useful when the proprietors have difficulty in their claim for a well-known trademark.
 
This article intends to discuss some issues regarding the protection of prior enterprise names when conflicts occur between them and registered trademarks.
 
I. Requirements for enterprise names protection
In the enterprise name dispute case Suzhou Xiaolingyang Electric Vehicle Co., Ltd. v. Tianjin Jiean da Vehicle Co., Ltd., the court held the defendant registered certain trademarks in bad faith and lead to confusion amongst consumers. This constituted unfair competition as the plaintiff’s enterprise name, Xiaolingyang, had gained an excellent reputation and had established a connection with its own business. In the case Hengyuanxiang (Group) Co. Ltd., and Shanghai Caiyang Knitting Co., Ltd. v Yangaiguo etc., the court also held that the defendants’ acts constituted unfair competition. They had deliberately pirated the good reputation of the plaintiff and confused the public about the origin of the goods.
 
In cases involving conflicts between prior enterprise names and latter registered trademarks, the courts usually take four factors into account when deciding whether there is unfair competition. The four factors are (1) The enterprise names shall fall within the form and scope required by law (see details below); (2) The prior enterprise name shall enjoy a certain reputation and can relate to its proprietors; (3) The latter registered trademark has shown bad faith to deliberately free ride on the goodwill of others; (4) It is enough to cause public confusion.
 
II. The scope of enterprise names
I think that the definition of an enterprise name should be interpreted broadly to effectively prevent the unfair competition. That is, it should include whatever creates a fixed connection between the name and the enterprise, such as the full corporate name, trade name, foreign name, shortened name, translated name etc.
1. The enterprise name that is legally registered and approved by the registration authority According to the Provisions on Administration of Enterprise Name Registration, both domestic and foreign enterprises can apply for an enterprise name registration to the relevant administrative authorities. The registered full name of the enterprises can then be protected by law. Others who use a registered full name without authorization are deemed to conduct unfair competition without regard to factors such as location and reputation etc. However, the full version of an enterprise name consists of four parts which makes it quite lengthy and complicated. Unauthorized use of a full enterprise name is rarely seen in practice as it can hardly play its role in indicating the source of the good or service.
2. Names of foreign enterprises used in China
The key point here is how to define the word “use”. Article 7 of the Supreme People's Court, Interpretation on Several Issues Concerning the Application of the Law in the Trial of Civil Unfair Competition Cases defines it as “… including the use of the name, packaging or decoration specific to a well-known commodity, an enterprise name or a personal name on a commodity, its packaging and commodity trading instruments, or in advertisements, publicity, exhibitions and any other commercial activities…”. The problem in practice lies in whether the use of enterprise names in media reporting, web links etc. which are not directed by the enterprises themselves can be deemed as “commercial use”. Detailed analysis will be seen in the following paragraphs.
3. The Trade name
The courts have explained the definition of the enterprise name and developed the relevant theory in specific cases based on the Law of the People's Republic of China Against Unfair Competition and its judicial interpretation. In the case Qingfeng Baozi, the court held that four factors should be taken into consideration when making a judgment, which includes the similarity between the enterprise name and its trade name, the reputation of the prior enterprise name, the bad faith of the opposite party and the public confusion. This opinion is mostly adopted by other courts in practice.
4. The shortened name of enterprises
The shortened name of enterprises generally refers to words or phrases that can briefly describe the full enterprise name. The full version is usually quite lengthy and complicated and thus used in formal situations or in written, while the shortened name is convenient for speaking and promotion. In the case Tianjin China Youth Travel Agency v. Tianjin Guoqing International Travel Agency, the Supreme People’s Court explicitly pointed out that the shortened name that had been used extensively for a long time, highly recognized by the public and gained relative reputations, actually played the same role as the full trade name. A shortened name can therefore be protected as an enterprise name. 
5. The translated name of foreign enterprises
Foreign enterprises usually use their own translated names to conduct commercial activities in China. These translated names have the function of indicating the source of goods and indicating a certain commercial interest of entities. It is therefore in conformity with the legislative purpose of Law of the People's Republic of China Against Unfair Competition to protect translated names. In the case Wuhe International Architectural Design Group v. Shanghai Wuhe International Architectural Design & Consulting Co, . Ltd. etc., the court pointed out that the translated name of the foreign enterprise in Chinese can be protected as an enterprise name if it is, unique, established and has gained a reputation among the relevant public through commercial use in China. 
 
III. The geographical restriction on the protection of enterprise name
It is generally known that there are no geographical restrictions on the use of registered trademarks in one country. Accordingly, whether there are any geographical restrictions on the enterprise name will have a direct influence on the prevention of infringements by latter registered trademarks. As there is no specific legislation regarding the trade name or the shortened name etc. scholars usually think that the registered enterprise name only has effect in the corresponding administrative area according to the Provisions on Administration of Enterprise Name Registration. Also, it is generally believed that “registered trademarks can be protected throughout the whole country while registered enterprise name can only be protected in the area they got registered”. In the trademark infringement and unfair competition dispute case Beijing Qingfeng Baozi Shop v. Shangdong Qingfeng Food and Beverage Management Co., Ltd., the court of first instance held the opinion that enterprises’ exclusive rights to their enterprises or trade names were restricted by the administrative area in which they were registered, and to the characteristics of a certain industry or business operation.
 
However, there are exceptions to this restriction in practice. For example, an enterprise name right can be licensed to use and can also confront a right of patent design or a registered trademark that are effective nationwide as a prior right.
 
I believe that the protection of the enterprise name shall not be restricted geographically. First, Provisions on Administration of Enterprise Name Registration belongs to the category of administrative regulations, the aim of which lies in regulation of enterprise name registration. It is a kind of administrative scope rather than a law establishing right. Second, the geographical effect of rights should take processes such as the generation, exertion and also maintenance of rights into consideration. As for the enterprise name right, the effect runs out of the location of the enterprise as the commodity will flow freely in nature. It follows that the geographical restriction will go against the development of the market economy.
 
For example, in the trademark infringement and unfair competition dispute case Guangzhou Xinghewan Industry Development Co., Ltd. et al v. Jiangsu Weifu Construction & Development Holdings Co., Ltd., the Supreme People’s Court pointed out in the judgment, that nowadays information circulation is quite frequent and fast, and it is common for enterprises to conduct business activities throughout the whole country. Therefore, the effect of their trademarks, names of enterprises or commodities etc. is highly likely to run out of their registered places. Finally, it is the free riding and confusing conduct that is supposed to be prevented by Law of the People's Republic of China Against Unfair Competition. Enterprise names bearing goodwill can generate huge commercial benefits for proprietors on a nationwide scale. The legislative purpose of Law of the People's Republic of China Against Unfair Competition is to safeguard the market and protect fair competition.
 
IV. Affirmation on commercial use of translated names of foreign enterprises in Chinese 
The protection of translated names of foreign enterprises in Chinese under unfair competition takes “commercially used in China” as a prerequisite. In case Wuhe Guoji, the plaintiff had been using the name “Wuhe Guoji” to provide architectural design services in China and won a number of domestic awards and received considerable media coverage long before the litigation. The court thus held its translated name constituted commercial use under the Law of the People's Republic of China Against Unfair Competition. In the case Sufubi Auction Company (UK) v. Sichuan Sufubi Auction Company, the court held that, although the plaintiff had not officially started auction activities in China, it had promoted marketing and advertising, held pre exhibition and charity sales etc, which all belonged to commercial management in a broad sense and conformed to the requirements of commercial use.
 
While the proprietors in the above cases were found to have actively used the translated names in relevant business activities, there were also “passive use” situations. Passive use refers to the situation in which the foreign enterprise does not promote or conduct business activities using its translated names, instead it is the media who translates its foreign name into Chinese and then uses it in their reporting. This raises the question whether proprietors can confront the latter registered trademarks based on their passive use of the translated names?
 
In the case CHATEAULAFITEROTHSCHILD v. the TRAB, the plaintiff enjoyed the rights of registered trademark and enterprise name on “LAFITE”, but it had not fixed its Chinese translation. There were various versions such as “拉斐” 、”拉斐堡” or “拉菲” in circulation. The plaintiff’s claim about the prior right on trade name could only be proved through domestic media reports. The TRAB stated that sometimes passive promotion can prove the popularity of “拉菲” in a better way. The Supreme People’s Court held the view in the re-trial judgment that the key point of this case was to establish whether there was a fixed connection between “LAFITE” and its Chinese translation “拉菲”. As extensive media reporting could prove “拉菲” enjoyed high popularity among the public, the latter registered trademark cannot be approved for registration if it would cause any public confusion. 
 
It can be seen from the above case that the key point of whether passive use can fall into the scope of commercial use lies in the existence of fixed corresponding relations between the foreign name and its Chinese translation. I believe that Law of the People's Republic of China Against Unfair Competition focuses on preventing acts that disrupt competition in the market, such as the passing off and free riding on another reputation. The key point in deciding whether certain acts fall within its regulatory scope lies in whether such acts disrupt competition or infringe upon the legitimate rights and interests of other business operators or consumers. Therefore, the interpretation of commercial use shall be based on the legislative purpose of law rather than rigidly applying the relevant articles. The fact of active use or passive use should be a minor factor in determining the existence of unfair competition. As long as the translated names in Chinese of the plaintiff have a fixed connection and their goodwill is under the risk of being used by the defendants, they are entitled to the protection of the law.
 
The right of enterprise names has gained legal protection and the relevant theory is being perfected by the courts at all levels. It demonstrates a virtuous cycle of development through the interaction between judicial and legislative practices.
 
On November 4, 2017, the revision of the Anti-Unfair Competition Law of the People's Republic of China was adopted and will come into effect at the beginning of 2018. Article 6, section 2 of the new law explicitly stipulates that unauthorized use of another business operator's corporate name (including its shortened name, trade name, etc.) that leads people to mistake its products as another business operator's products or to believe certain relations existing between its products and another business operator's products constitutes unfair competition. This shows that the judgments as to the scope, effect, constitutive requirements of enterprise names should be based on the legislative purpose of Law of the People's Republic of China Against Unfair Competition, and should be seen from a developing perspective rather than just from the literal meaning of law.
 
Note:
1.(2010) Su Zhi Min Zhong Zi No. 0161.
2.(2015) Hu Zhimin Zhongzi No. 242.
3.See, Su Zhifu, Supplementary Explanation of the Name of the Enterprise in Trial Practice, People’s Justice, Issue 19, 2012, pp 97-101.
4.The case is No. 29 guiding case publicized on the Supreme People's Court bulletin issued in June 2014.
5.See, Ji Ying, Ling Zongliang, The Legal Protection of Chinese Translated Trade Name of Foreign Enterprises, People’s Justice, Issue 12, 2011, pp 38-42.
6.Article 6 Section 1 of Provisions on Administration of Enterprise Name Registration stipulates that an enterprise shall only use one name which shall not be identical or similar to a registered enterprise name in the same industry within the jurisdiction of the registration authorities.
7.See, Liu Chuntian, Intellectual Property Law, Press of Renmin University of China, 4th ed., 2009, p 253.
8.(2016) No. 238 of the Supreme People's Court, this case is one of the top ten magistrate cases released in 2016 by Supreme People's Court.
9.(2013) No. 102 of Min Ti Zi, this case was the fourth of the top 10 intellectual property cases in the Chinese courts in 2015 issued by the Supreme People's Court.
10.See, Chen Shaojuan, Protection of Name of Enterprises Abroad Under Unfair Competition Law, China Trade Mark, Issue 12, 2013, pp 25-28.
11.(2016) Xing Zai No. 34 of the Supreme People's Court, this case was the fifth of the Top Ten Intellectual Property Cases released by the Supreme People's Court in 2016.
 
 
 

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