The Determining Process of the Conflict between Trademarks and Corporate Business Names in Light of the JINGKE Case

2012/8/2By Xu Jun, Judge of Shanghai Pudong New Area People’s Court, Ph.D. in Civil and Commercial Law from the School of Law of Fuda,[Trademark]

I.Case overviewOn November 29th, 2010, Shanghai Precision & Scientific Instrument Co., Ltd. (PI) sued Shanghai Jingxue Scientific Instrument Co., Ltd. (Jingxue) and Chengdu Kexi Complete Sets of Instruments Co., Ltd. (Kexi) in Shanghai Pudong New Area People’s Court, complaining that the defendants maliciously registered and used plaintiff ’s business name in the abbreviated form of “精科” (JINGKE in Chinese), being relatively well-known in the industry, as a trademark; that their conducts had constituted unfair competition causing severe damages to the legitimate interests of the plaintiff, and therefore praying for injunctive and compensatory relief from the two defendants. The defendants contended that Kexi is the owner of the registered trademark JINGKE, and that its use of the trademark is protected under the law, and counterclaimed against plaintiff for trademark infringement in using SHANGHAI JINGKE in connection with its products and packaging. The court found that before the mark JINGKE was applied for registration, “Shanghai Jingke” and “Jingke” had been used as abbreviated business name, attaining certain fame and becoming in effect plaintiff ’s trade names, and therefore deserving protection as such; that defendant Kexi’s securing trademark registration and using plaintiff’s abbreviated trade name JINGKE already in use, and defendant Jingxue’s using the JINGKE mark on its products made via third parties by permission of defendant Kexi, both constituted infringement of plaintiff’s rights to its corporate business name, and are thus liable for unfair competition. The court then ruled for injunction against the defendants for unfair competition, and awarded damages. Both defendants appealed to Shanghai No.1 Intermediate People’s Court. The appellate court held that abbreviated business names may be deemed as corporate names if they have attained certain fame in the marketplace, become well-known to the relevant sectors of the public, and have in effect been used as trade names. When others later use such well-known abbreviated business names in such a way without permission as to be likely to cause confusion as to market players among relevant sectors of the public, Art.5, Cl. 3 of the Unfair Competition Law shall govern for the lawful protection of the corporate names. For this reason, the appeal was rejected and the judgment below was affirmed.

II. The determination process for similar cases as derived from the JINGKE Case(1). Jurisdiction of the courtIn the JINGKE case, the plaintiff asserted its corporate name rights entitled to protection, while defendants argued for trademark rights, the conflicting rights both being derived from administrative approval, hence a controversial and perplexing problem for judicial adjudication in IP cases of where to draw the line between administrative responsibility and courts’ jurisdiction. This problem, however, has been dealt with due to a series of analytical papers and the judicial interpretations. As early as in 2007, Kong Xiangjun, Chief Judge of the Intellectual Property Division of the Supreme People’s Court, wrote that “A civil right granted through administrative proceedings is still a civil right. A dispute arising from the conflict of using such rights is still a civil dispute at law in nature. The dispute can be included in the scope of civil lawsuits according to the non-statutory doctrine governing civil lawsuits, absent statutory provisions or regulatory measures, or policy considerations to the contrary.” In the Regulations of the Supreme People’s Court on a Few Issues in the Trial of Civil Disputes Involving Conflict between Registered Trademarks, Business Names and Prior Rights, Article 1.1 clearly provides that where the plaintiff brings a suit on the account that the word or words used by another person in his registered trademark infringe upon the right of business name or other prior rights of the plaintiff in accordance with Article 108 of the Civil Procedure Law, the people’s courts shall have subject matter jurisdiction. To include disputes involving the conflict between registered trademarks and prior business names into the scope of civil lawsuits, independent of administrative proceedings, is mainly because the conflict between such intellectual property rights, whether they are obtained through administrative proceedings or not, is a civil dispute and principally acceptable to the people’s court.

For the JINGKE case, in the first and second instances, the courts implemented this judicial interpretation by affirming the competence of the court in handling the dispute between the registered trademark and the business name. It needs to be noted, however, that the interpretation has its regard only to the unauthorized use of another person’s business name or trade name in a registered trademark, other than to the application for a trademark that employs another person’s prior business name, and for which registration has not been granted. In the latter case, the act of application alone is not a tort, and the dispute arising from such act is not in the scope of civil lawsuits. The considerations are as follows: to register a trademark is an administrative act that is initiated by application; the applying act, as part of the registering act, is the initiating act by legal nature; although it uses another person’s business name, the initiating act alone is not the usual commercial use of the business name, nor up to the use in the civil law sense.

(2). Defining corporate namesIn the Unfair Competition Law, Article 5.3 provides that an operator shall not engage in unauthorized use of other persons corporate or personal names, to cause the relevant public to confuse his goods with those of such other person. In the Interpretation of the Supreme People’s Court on several Issues in the Application of Laws in the Trial of Unfair Competition- Related Civil Dispute, Article 6 provides that a trade name included in a corporate name, attaining certain reputation in the market and being well-known to the relevant sectors of the public may be deemed a “corporate name” within the meaning of Article 5.3 of the Unfair Competition Law. However, none of the above clarifies whether the abbreviated form of a corporate name is protected by the Unfair Competition Law.

In the JINGKE case, is the use of the abbreviated corporate name “Shanghai Jingke” or “Jingke” by the defendants governed by Article 5.3 of the Unfair Competition Law? The answer is concerned with the science of legal construction and the adjudicatory methods employed by the justice. For the definition of business name, in the Implementation Rules for Business Name Registration Management of the State Administration for Industry and Commerce effective on July 1st, 2004, Article 9 states that a business name shall comprise, in the order of, the administrative division, trade name, industry, and organization of the enterprise, except otherwise stipulated in laws, administrative regulations and the Implementation Rules. However, if a judgment is made by mechanically following this definition, numerous unfair competitive acts will practically escape from legal punishment. To study the legislative objective, Article 5.3 of the Unfair Competition Law is intended essentially to protect business names against unfair competition and to prevent others from misusing them to cause confusion or mistake. Since a business name mainly functions to identify a subject in the market, its abbreviated form that has been recognized by the relevant public through long-term use has the same function as the very business name. It is unreasonable to exclude the abbreviated name from the scope of legal protection.

In judicial judgment, on the legislative intention of Article 5.3 of the Unfair Competition Law, it is reasonable to interpret “business name” as inclusive of the “abbreviated business name.” In real life, a business name might possibly be passed off in full or in various other ways. In judicial practice, trade names, abbreviations and short titles are protected as business names. In Shandong Shanqi Heavy Industry Co., Ltd. v. Shandong Crane Factory Co., Ltd. for business name infringement, the Supreme People’s Court held that a business name can be abbreviated for convenience of communication. The formation of an abbreviated name is concerned with two processes, namely, that the abbreviated name is used by the company to replace the formal name, and that the abbreviated name is recognized by the public. As an abbreviated name omits some limiting factors in the formal name, it might inappropriately enlarge the scope of identification by the formal name. Thus, whether an abbreviated name specifically designates a given company is determined by whether the abbreviated name has been recognized as being correlated with the given company in the relevant public. An abbreviated business name that has achieved a certain reputation, which is known to the relevant public, and has actually worked as a trade name, may be deemed as a business name.

In the JINGKE case, the first-instance court commented that the abbreviated business name “Shanghai Jingke” or “Jingke” had achieved a certain reputation in the industry. The plaintiff’s long-term external use of them had caused the relevant public to associate them with and direct the public directly to the company of the plaintiff. They had functioned to identify the source of goods and as trade names. Thus, they should be deemed as the business names of the plaintiff and be protected by law. The second-instance court commented that through use, the specific abbreviations had been recognized by the relevant public, achieved a related market reputation, and had been connected with the company in a stable way. They had developed the meaning of commercial mark to identify an operator in the market. Moreover, the court analyzed the objective historical causes for the appellee to use “Jingke” or “Shanghai Jingke.” It noted that the appellee was named Shanghai Precision & Scientific Instrument Co., Ltd. without a trade name. This was common in naming some historically state-owned enterprises. Thus, for the sake of convenience, they often used their abbreviated names instead of the full names.

(3). Determining infringementThe affirmance of the jurisdiction of the court over the trademark/corporate name conflicts, and the clarification of the expansive view on of corporate names for judicial adjudication do not necessarily mean finding of infringement under unfair competition. In the trial of disputes involving commercial marks, infringement should be determined on a comprehensive examination of all the factual elements in the concrete and specific situation as well. These elements are interrelated and interactive, and may get involved entirely or partially. In the trial, they should be considered comprehensively and given different weights to dynamically grasp and implement the fairness and good faith doctrines and to maintain the normal order of competition in the market.

Some of the factual factors are as follows:

(a). The reputation of a commercial mark. Under the Unfair Competition Law, the protection for a business name, as different from the usual civil law protection, is conditioned upon the fame of the business name. In other countries or Taiwan region, similar protections are offered, but are limited to business names that are known “in the country” or “by the relevant public.” According to authoritative academic interpretation, the same limitation should be expected from, though not clearly stated in, the related clauses of the Unfair Competition Law. As a trademark has national coverage, the fame of a business name should not be restricted to a small area, but should be known throughout the country, or at least, in the same industry nationally as registered for the trademark concerned.

(b). The timing to obtain the right of commercial mark. To protect prior rights is an important principle in dealing with conflicts of rights. The principle, however, is not absolute in its application. Trademarks and business names are both commercial marks. Trademarks function to identify the source of goods, and business names work to differentiate market subjects. Their basic function is to designate, and they both have their separate valuable existence. If the time interval between the obtaining of these rights is short, the principle to protect the prior right cannot be applied mechanically. The judgment should be made on the basis of overall examination and comprehensive analysis.

(c). The intent to obtain the right of the later mark. It is difficult to directly prove the subjective intention of a defendant. However, it helps to indirectly prove it by examining the preparation and incorporation of the defendant’s company and the knowledge that the defendant has about the prior mark. In the JINGKE case, the defendant Kexi was a manufacturer and dealer of meters and instruments as the plaintiff PI was. It had had a distribution relationship with PI as early as in August 2001. It should have known about Jingxue’s abbreviated name “Shanghai Jingke” and JINGKE in the meters and instruments industry. Thus, its still application for and registration of the JINGKE mark proved its subjective intention in doing so.

In the Annual Report on Intellectual Property-related Cases 2010, the Supreme People’s Court clarifies that if any person registers as trademark a business name that has been used previously and has achieved a certain reputation in the market, in a way that is sufficient to cause the relevant public to confuse about the source of goods, he infringes upon the prior right of the business name and competes unfairly, and should be held responsible for the civil liability to stop using the registered trademark.

In the JINGKE case, by complying with the above interpretation of the Supreme People’s Court, the courts analyzed the reputation of the business name of the plaintiff’s company, the timing of the registration or use of the commercial marks of the plaintiff and the defendants, and the subjective intention of the defendant in registering the later mark, before they concluded on the unfair competition infringement. It should be noted, however, that cases may be different in thousands of ways in real life.

In the determination of unfair competition infringement, in addition to the above factors, considerations should also be given to, for example, the consistency between the industry of a company and the category of goods approved for a registered trademark, the similarity between a business name and a trademark, the awareness and recognition of the relevant public and the operating status and marketing channels of the parties, or whether any confusion or mistake has been resulted.

(Translated by Ren Qingtao)

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