Judicial Protection for Trade Names of Foreign Enterprises

2007/8/1By Chen Zhen,[Unfair Competition]

In China in recent years, the issue of judicial protection for the trade names of foreign enterprises has aroused much concern. The trade names of some foreign enterprises (especially famous enterprises) embody their good commercial reputation that has accumulated over years. Coveting such reputation, some enterprises rack their brains to "hitchhike" such trade names, maliciously confuse the market and then to capture benefits without making due efforts. 

In accordance with Trademark Law, if the trade name of a foreign enterprise is rush-registered as a trademark, such action may be remedied by raising objections or pursuing dispute resolution. If the trade name is rush-registered as a domain name, then it may be dealt with by CNNIC (China Internet Network Information Centre) Domain Name Dispute Resolution Policy. But there is no specific law or regulation offering protection to remedy the rush-registration of trade names. Current remedies for the rush-registration of foreign trade names are mainly administrative and judicial ones. The administrative remedy is characterized by administrative action: the right owner will complain to a competent administration for industry and commerce which will deal with the case based on its power. The court will decide based on the litigation request, on the facts and evidence presented by the right owner. As it is not easy in practice to control a case concerning judicial protection of an enterprise's trade name, the author hereby presents some views on the judicial protection for the trade names of foreign enterprises.  
     
I. General Introduction

A trade name or enterprise name is a commercial sign to indicate the identity of a market player or enterprise in commercial activities. Trade name right is an important property of an enterprise and contains tremendous commercial value. It is protected by law and nobody can make use of it without a special examination and approval procedure, otherwise it may confuse consumers in the relevant market.  Therefore, in order to stabilize social relationships and the economic order of the market place, countries worldwide protect trade name rights as enterprises' valuable property.  

In China, as regulated by Article 5.3 of the Anti-unfair Competition Law: Operators shall not use, without authorization, the enterprise names or personal names of others on their own goods to mislead people into taking them for the goods of others and thus cause damage to their competitors. At present, the protection of an enterprise's trade name in Chinese courts is dealt with as an unfair competition act.

In January 2007, the Supreme People's Court issued a regulation on the definition of enterprise names in the Interpretation of the Supreme People's Court on Some Issues Concerning the Application of Law in the Trial of Civil Cases Involving Unfair Competition : An enterprise name registered by the enterprise registration authority and a foreign enterprise name used within the territory of China for commercial use shall be affirmed as an "enterprise name" prescribed in Article 5.3 of the Anti-unfair Competition Law. A business name that has a certain level of market popularity and is known by the relevant public may be affirmed as an "enterprise name" prescribed in Article 5.3 of the Anti-unfair Competition Law.

Protecting trade names of foreign enterprises has also become the obligation of members of the Paris Convention for the Protection of Industrial Property (Paris Convention). Article 8 of the Paris Convention prescribes that the manufacturer's name shall be protected by all the member countries, and the manufacturer is under no obligation to apply for or register the name no matter it is a part of a trademark or not. China joined the Paris Convention in 1985. In accordance with Measures for the Implementation of Administration of Enterprise Name Registration by the State Administration for Industry and Commerce (SAIC): The trade name of a foreign enterprise shall be protected according to the relevant regulations of international pacts, conventions and treaties that China has joined.

If a foreign enterprise is in a country that is not a member of the Paris Convention, but belongs to TRIPS, is the Paris Convention applicable to protect its trade name or not?

Article 1.3 of TRIPS provides: all of the members of the WTO should also be regarded as being members of the Paris Convention. In accordance with this regulation, a foreigner that is not a citizen of the Paris Convention member country but is a citizen of a TRIPS member, he also can claim intellectual property protection for trade name rights in China under the Paris Convention. But if the country where the foreign enterprise seeking trade name protection is established does not sign the same international pact or any mutual protocol with China, China will deal with it according to relevant legal provisions based on the principle of reciprocity and mutual benefit.
          
Although China assumes the obligation for protecting trade names of foreign enterprises in accordance with the Paris Convention, it is not totally unconditional; the trade name of a foreign enterprise should be used commercially in China, and should enjoy a certain degree of popularity. The high degree of popularity of a trade name can only be gained through commercial activities. Thus in China, commercial use is a precondition for getting protection for a foreign enterprise's trade name. 

II. Reference factors to resolve the rights conflict of foreign enterprise's trade name in Chinese courts

At present, how to resolve the rights conflict between foreign and domestic enterprises' trade names is a salient issue in the judicial field. On one hand, we should follow the basic principles of the Anti-unfair Competition Law and other regulations. On the other hand, we should analytically determine by comparing the prior registration degree, popularity, distinctive and competitive relationship between the trade names of foreign and domestic enterprises, and whether it may confuse the relevant consumers. In the case of Starbucks Corporation vs. Shanghai Starbucks Corporation, the plaintiff Starbucks brought an action against Shanghai Starbucks Cafe on trade name infringement and unfair competition. Several key factors made important contributions to the judgment: the plaintiff Starbucks Corporation used the Chinese trade name "星巴克" and acquired the trademark "星巴克" ,"Starbucks" earlier than the defendant Shanghai Starbucks Cafe; the plaintiffs' trademark "星巴克" ,"Starbucks" and trade name "星巴克" had a high degree of popularity; the defendant provided coffee service competition with the plaintiff; the defendant's behavior in registering the "星巴克" had obvious maliciousness and caused confusion to the relevant public which included confusion of the source of the service, and the plaintiff and defendant have a certain competition relationship in business connection. Therefore, with a consideration of the above factors, the court regarded the behavior of registering and using the trade name "星巴克" by the defendant as constituting unfair competition against the plaintiff Starbucks Corporation. Hereinafter, the author will analyze the reference factors for recognizing trade name infringement which constitutes unfair competition from several perspectives.           

1. The distinctiveness and prior registration of trade names

The distinctive features of trade names refer to those that distinguish some names from others in the process of use. Every trade name has its distinctiveness, and the only difference lies in their strengths. The more distinctive a trade name is, the more protection it enjoys. The trademark "星巴克" , "starbucks", and the trade name "星巴克" mentioned above is familiar to consumers after a long period of use, and has obtained strong distinctiveness.

Enterprises, in using trade names, not only need to obtain a highly distinctive "Chinese name" when seeking registration, but also need to carry out market promotion of the trade name.

There is another issue: How to deal with the behavior of using foreign geographic names and personal names with low distinctiveness to consumers. For example, whether the registration of place names like "Washington" and "Venice" as a trade name at home should be forbidden. In fact, here we should not only consider whether the distinctiveness and popularity of the trade name would result in the relevant consumers' confusion but also the balance of social benefits as a whole. Thus, here the principle of balancing interests should be employed-- foreign geographic names and personal names, which have weak distinctiveness, should not get protection in principle. But for those that have obtained high reputation and are known by the relevant public, exceptional protection may be given because the public has recognized this enterprise and its trade name, and exceptional protection will not harm the public interest.

The prior status of a trade name, which includes prior registration and prior use, also should be considered. In accordance with the Measures for the Implementation of Administration of Enterprise Name Registration by the SAIC, the use of an enterprise name shall be in line with the principle of honesty and credibility. An enterprise name shall not contain another enterprise's name. The Notice on Some Issues Concerning Administration of Foreign Enterprise Name Registration once carried out by the SAIC also can be referred to. This Notice points out that the trade name of a foreign enterprise cannot be the same as the name of another enterprise in the same industry. With the Chinese and foreign investors' agreement, an enterprise can use either side's trade name but cannot use a famous trade name that does not belong to either of the investors. 

Whether the trade name under prior use will necessarily the protection for a prior trade name right in China still needs to be discussed. The Model Law of Trademark, Trade Name and Unfair Competition in Developing Countries provides for the protection of registered trade names. (1) Although any law or regulation has prescribed the obligation of any registered trade name, this kind of trade name is still under the protection before registration or without registration, and it may be used against the illegal behavior of any third party. (2) Especially when a third party subsequently uses this trade name, no matter whether the third party uses this trade name as a trade name, trademark, service brand or collective brand, the use of a similar trade name or trademark may make the public confused, and shall be regarded as illegal.     

2. The commercial use of a foreign enterprise's trade name in China

Two issues should be emphasized here. One is that the trade name of a foreign enterprise must have been used in China, i.e. the regional factor. The other issue is that the use of a trade name should be for commercial purposes. Because only through using the trade name for commercial activities, can a corresponding connection between the trade name and the enterprise's product and service be established, and the public can integrate the trade name with enterprise's product and service. Furthermore, only through commercial use, can a trade name create material fortune and embody the commercial reputation value of a trade name.     

The so-called use for commercial activities includes but is not limited to registering the trade name as an enterprise name, labeling a trade name in products and service of the enterprise and using the trade name in commercial advertisements and market promotion activities. In one word, all the commercial activities of an enterprise that indicate the enterprise's commercial name (full name and shortened form) to others in its market activities should be regarded as commercial use.

3.  The trade name of a foreign enterprise has a certain degree of popularity and is familiar to the relevant public

In a certain sense, most trade names having rights conflicts are well-known. The Anti-unfair Competition Law protects those trade names with high popularity as it indicates more commercial investment and input by the right owner. The reference standard for popularity of a trade name shall be evidenced by sales volume, market share, industry honors and advertisement investment. 

There are many foreign enterprises using and advertising their own trade names before entering China's market, so they have obtained a certain popularity and influence. But it is necessary for the trade name to be familiar to the relevant public in order to obtain legal protection. As for the scope of the relevant public, there is no specific legal basis. With reference to the provision of ‘relevant public' prescribed in the Interpretation on Some Issues Concerning the Application of Law in the Trial of Civil Cases Involving Trademark, relevant public being familiar with well-known trade names at least includes consumers of the product and the service represented by the trade name, and other operators having a close relationship with the operation of aforesaid product and service. 

4. Whether the Chinese translation of a foreign enterprise's trade name is exclusive and whether it establishes a relevant corresponding relationship with other language translations of the same trade name

With the influence of the Western "unified recognition theory", many international enterprises achieve the unification of outside image design, that is, they unify the trade name, trademark, logo, etc. in design and use, which may not only indicate the source of the commodity and service, but also represents the image of the enterprise, thus avoiding the conflict of rights. Especially in the Chinese translation of a trade name, there should be no case with the same pronunciation but different characters; otherwise the relevant public may have a different recognition of the enterprise, making it hard to connect the trade name of the enterprise with the market place and the products or services represented by it.   

For example, in the case of Dell Inc. vs. Beijing Haidian Dell Training School (北京市海淀区戴尔培训学校) and Beijing Zhouji Culture and Art Communication Ltd. Co.( 北京洲际文化艺术交流有限公司) involving the infringement upon an enterprise name right, the infringement upon the exclusive right to use a registered trademark and false publicity, "戴尔有限公司" is the Chinese translation of Dell Inc. instead of the enterprise name. In addition, many institutes acting as the agent and after-sale agent of Dell Inc. contain the word "Dell" (戴尔), as the Chinese translation for Dell Inc. in a trademark registration certificate of Dell Inc. is "笛尔电脑公司". Therefore, the court held that the popularity formed in the relevant public should not automatically be available to its enterprise name. The Defendant Beijing Haidian Dell Training School (北京市海淀区戴尔培训学校) legally used its own enterprise name and thus did not infringe the Plaintiff's trade name.  
  
5. The degree of sameness or similarity of trade names

Whether the accused infringing trade name is the same as or similar with the trade name of the right owner is the premise for determining the confusion of the relevant public. In Honeywell International Inc. vs. ShenYang Honeywell Radiator Ltd. Co. concerning the infringement upon a trade name, the defendant registered the trade name Honeywell and used it on its packaging, the logo Honeywell "霍尼威尔" used by the defendant was similar with the logo "霍尼韦尔", for which the plaintiff had the trade name rights, and three words "霍、尼、尔" were totally the same and only "威" and "韦" were different. But their pronunciations are similar enough to confuse general consumers. Therefore, the court held that the trade name "霍尼威尔" registered and used by the defendant on its products infringed the trade name rights of the plaintiff Honeywell International Inc. 
  
In judging the sameness or similarity of trade names, we shall compare the whole and main part of the enterprise name indicated in such a trade name. The said major part is the most significant and it mostly attracts the attention of the relevant public to the enterprise name. We should compare the pronunciation, connation, font and order, and the situations in different times and places.

6. Whether it is enough to cause public confusion or misidentification

The confusion and misidentification to the relevant public requires that the market place, the indicated commodity and service be the same, or that the misidentification of both of them have an economic or legal relationship. Whether it is sufficient to cause confusion includes factual confusion and the possibility of producing confusion.

Whether there is sufficient confusion caused to the relevant public is a necessary condition to recognize trade name infringement. Since confusion to the relevant public may materially damage the right owners trade name and bring about a vague identification to the relevant public when purchasing its products, and confuse the source of the commodities.

In Atlas Copco Inc. vs. Kunshan Atlas Inc. on the infringement upon an enterprise name1, the plaintiff had commercially used the trade name of Atlas Copco for a long time, having obtained high reputation. When the defendant Kunshan Atlas Inc. registered the trade name Atlas and used it on air condenser products, this could easily confuse the relevant public to misidentify the commodity indicated by the accused trade name as the plaintiff's products, or as the commodity having a certain connection with the plaintiff. That is, there is the possibility of causing confusion to the relevant public. Under such a circumstance, the court held that infringement had occurred as the accused trade name is exactly the same as the rights owner's trade name, and both are in the same industry. Further, the popularity between the products was greatly different, the actual malice of the defendant was evident, and the relevant public could easily be confused.
The generally considered factors in identifying confusion include the similarity of the trade names, their popularity, and the enterprise's operation scale, the similarity of the product or service and the attention paid by consumers. 

Endnote
1. Minsanchuzi No. 0118 Civil Conciliation Document of Suchou Intermediate People's Court of Jiangsu Province
                                                                                   (Translated by Luo Duoqun)

 

 

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