Recent Domain Name Cases in the PRC: Problems and Prospects in IP Protection

The Tentative Procedures provide that where a third-level domain name (which is identical with a trademark or enterprise name registered in the PRC) is registered by a third party without authorization, if the registered trademark or enterprise name owner does not file an "opposition" then the domain name registrant may continue to use the domain name. According to CNNIC, the opposition referred to here is not a system of opposition like the trademark opposition system where there is regular gazetting of applications and a specific time limit for filing oppositions. The opposition here instead refers to the filing of a legal suit with the relevant people's court wherein the trademark or enterprise name owner objects to the registration of the pirated domain name. In other words, there is no formal pre-registration opposition process, and if a trademark or enterprise name owner wants to challenge a pirated domain name, it needs to take the pirate to court in the PRC. CNNIC does not deal with the dispute.

The first-to-file rule for domain name registration in the PRC, CNNIC's refusal to implement a formal opposition system allowing challenges to pirate applications prior to their obtaining registration, and the lack of explicit authority for CNNIC to cancel pirate registrations have provided an environment conducive to an influx of pirate registrations.

Beijing Cinet Information Co., Ltd (Beijing Cinet), a first generation internet service provider in the PRC, was reported to have registered 10% of all .cn roman letter domain names, among which many are pirate registrations of internationally well-known marks and names. These include ikea.com.cn, olay.com.cn, whisper.com.cn, dupont.com.cn, americanexpress.com.cn, bacardi.com.cn, boss.com.cn, cartier.com.cn, carlsberg.com.cn, hertz.com.cn, polo.com.cn and rolex.com.cn. In a count taken on December 18 1999, Beijing Cinet was found to have registered 3,510 .cn roman letter domain names.

Starting with the ikea.com.cn case, trademark owners have resorted to bringing action in PRC courts against pirates. Some of the cases have even gone through the appeals stage.

The PRC Supreme People's Court (SPC) on July 17 2001 issued a judicial interpretation (Several Issues Concerning the Application of Law to the Trial of Civil Dispute Cases Involving Computer Network Domain Names Interpretation, effective on July 24 2001) providing guidance on a number of issues applicable to domain name disputes in the PRC. Judicial interpretations by the SPC carry legal force in the PRC. Since the above Interpretation, the Beijing Municipal High People's Court and the Beijing Municipal No.2 Intermediate People's Court in November 2001 issued judgments in various domain name cases involving foreign well-known marks. These cases closely follow the guidance of the Interpretation and should be useful references for brand owners who may consider similar domain name actions, although it is to be noted that the concept of stare decisis does not exist in the PRC and previous court decisions are not binding on subsequent actions.

SPC Judicial Interpretation

Article 2 of the Interpretation stipulates that the intermediate people's courts of the "place of infringement" or the place of the defendant's domicile are to have jurisdiction over infringement disputes involving domain names. Where the place of the infringement and the place of the defendant's domicile are difficult to determine, the location of equipment, such as a computer terminal, through which the plaintiff discovered the domain name, may be regarded as the place of the infringement.

Article 4 of the Interpretation also directs lower courts to find that the defendant's registration and/or use, etc. of a domain name constitutes infringement or unfair competition if each of the following criteria is satisfied:

i) the civil rights or interests for which the plaintiff seeks protection are legitimate and effective;

ii) the defendant's domain name or its main part constitutes a copy, imitation, translation or transliteration of a well-known mark of the plaintiff; or it is identical with or similar to a registered mark, domain name, etc. of the plaintiff to a degree sufficient to cause mistaken identification among the relevant public;

iii) the defendant does not enjoy rights or interests to the domain name or its main part, and has no justification to register and/or use the domain name; and

iv) the defendant's registration and/or use of the domain name is in "bad faith".

Article 5 of the Interpretation gives direction to the courts to find that the defendant acted in "bad faith" if its conduct is shown to constitute any one of the following:

i) for commercial purposes, registering another's well-known mark as a domain name;

ii) for commercial purposes, registering and/or using a domain name that is the same as or similar to the plaintiff's registered mark, domain name, etc., and deliberately causing confusion with the product and/or services provided by the plaintiff or with the plaintiff's website in order to mislead network users into accessing one's own website or another online site;

iii) having offered to sell, lease or otherwise transfer the domain name at a high price and obtained unfair benefits;

iv) the defendant neither uses nor intends to use the domain name after registration, but intentionally prevents the registration of the domain name by the person holding rights therein; or

v) other situations involving bad faith.

If the defendant produces evidence that the domain name has gained a certain degree of recognition before the dispute occurred, and is distinct from the plaintiff's registered mark, domain name, etc., or if there are other circumstances sufficient to show that it has not acted in bad faith, the people's court is not required to determine that the defendant acted in bad faith.

As will be seen below, the courts have generally relied on Article 5(2) and (4) above to find "bad faith" registration, and have followed the formula in Article 4 in its finding of infringement or unfair competition.

The defendants in various cases argued that the court did not have the power to determine whether the marks involved were well known. The Interpretation confirms that the courts may make such determinations. As will be seen in the discussion on the recent cases, the courts have generally refused to make such determinations based on the grounds of insufficient evidence.

The Interpretation directs that if the case constitutes unfair competition, the court may apply Article 4 of the PRC Civil Law General Principles (Civil Law) and the first paragraph of Article 2 of the PRC Anti-unfair Competition Law (中华人民共和国反不正当竞争法) (UCL), which generally require that civil and commercial activities should adhere to the principles of voluntariness, equality, equitability, honesty and trustworthiness, and abide by generally accepted business ethics.

The Interpretation also directs that once a court determines that conduct such as the registration and/or use of a domain name constitutes infringement or unfair competition, it may order the defendant to cease the infringement and/or de-register the domain name, or, at the request of the plaintiff, order that the domain name be registered and used by the plaintiff. If the conduct has caused actual damage to the holder of the rights, the court may order the defendant to pay damages.

Recent Court Judgments

The Beijing Municipal High People's Court and the Beijing Municipal No.2 Intermediate People's Court generally followed the directions in the Interpretation in their recent judgments. The following discussion is not intended to be an exhaustive review of all of the issues but is meant to highlight some of the important points, such as those relating to the definition of bad faith registration and well-known mark determinations.

Judgments from Beijing Municipal No.2 Intermediate People's Court

These are judgments from the court of first instance. The plaintiffs were Dow Chemicals and its Guangzhou affiliate; Doctor's Associates, Inc. and Subway International B.V.; The Procter & Gamble Company; Nine West Group Inc.; Movado Watch Company S.A.; Hachette Filipacchi Presse; Hugo Boss AG; Bacardi & Company Limited; American Express Company; and United Parcel Service of America, Inc.. Their respective domain names (dow.com.cn, subway.com.cn, olay.com.cn, ninewest.com.cn, movado.com.cn, elle.com.cn, boss.com.cn, bacardi.com.cn, americanexpress.com.cn and ups.com.cn) were pirated by the defendant Beijing Cinet. The judgments also involved the domain names kfc.com.cn and pepsi.com.cn, pirated by the defendant Guangzhou Yuejing Information Network Co., Ltd (Guangzhou Yuejing). Kentucky Fried Chicken International Holdings, Inc. and PepsiCo, Inc. were the plaintiffs. Besides kfc.com.cn and pepsi.com.cn, Guangzhou Yuejing also pirated cocacola.com.cn and nike.com.cn.

Generally, the judgments closely followed the guidelines set out in Articles 4 and 5 of the Interpretation. First, the court found that the plaintiff foreign trademark owners had legitimate and valid trademark rights, including valid PRC trademark registrations, in the marks used in the third-level domain names. Some of the marks involved were also the trade names and .com domain names of the plaintiffs and their affiliates.

The court also found that the third-level domain names were identical with the relevant registered marks, trade names or domain names, and were sufficient to cause confusion among the public. Additionally, the court ruled that the defendants did not enjoy rights or interests to the third-level domain names and had no justification to register and/or use the domain names.

The court also found that the defendants had, for a commercial purpose, registered and/or used the domain names. Additionally, the court ruled that Beijing Cinet did not use the domain names after registration, but prevented the registration of the domain names by the legitimate owners. In the case of pepsi.com.cn, the court found that the registration and use of the pepsi.com.cn domain name were done in bad faith injuring the interests of the plaintiff as well as the public.

In the cases of pepsi.com.cn, kfc.com.cn, subway.com.cn, movado.com.cn, elle.com.cn and boss.com.cn, the court found the serial piracy of the defendants sufficient to establish that the registrations were done for a commercial purpose or in bad faith. The court therefore found that the defendants' registration and/or use of the domain names were in bad faith, and that the defendants had engaged in infringement or unfair competition in violation of the first paragraph of Article 2 of the UCL (see above) and ordered the defendants to cease the infringement or unfair competition and de-register the domain names. In the pepsi.com.cn case, besides ordering that the domain name should be registered in the name of PepsiCo, Inc., the court ordered that the defendant issue a public apology to PepsiCo, Inc.

No compensation was awarded in the dow.com.cn, subway.com.cn, kfc.com.cn, movado.com.cn, boss.com.cn and bacardi.com.cn cases. The court awarded damages in the sum of Rmb5,060 in the pepsi.com.cn case, Rmb900 in olay.com.cn, Rmb2,000 for ninewest.com.cn, Rmb1,052 for elle.com.cn, Rmb1,000 in americanexpress.com.cn and Rmb1,500 for ups.com.cn. The defendants were ordered to pay all or part of the case acceptance fees, ranging from Rmb1,000 to
Rmb5,660.

In cases where the plaintiffs requested the court to make well-known mark determinations with respect to the marks in question, the court asserted that it had the power to make such determinations. It declined, however, to make such determinations based on the evidence submitted, although it did acknowledge that the marks had a certain degree of fame.

Judgments from Beijing Municipal High People's Court

These were all appeal judgments. The domain names involved were cartier.com.cn, ikea.com.cn, tide.com.cn, dupont.com.cn and whisper.com.cn. They involved appeals from either Beijing Municipal No.1 Intermediate People's Court or Beijing Municipal No.2 Intermediate People's Court. The court of first instance for the cartier.com.cn, tide.com.cn and dupont.com.cn cases was Beijing Municipal No.1 Intermediate People's Court, while that for the ikea.com.cn and whisper.com.cn cases was Beijing Municipal No.2 Intermediate People's Court.

Cartier International B.V., Inter Ikea Systems B.V., E.I. Du Pont De Nemours and Company, and The Procter & Gamble Company were the plaintiffs in the cartier.com.cn, ikea.com.cn, dupont.com.cn and whisper.com.cn cases while Beijing Cinet was the defendant and appellant. The plaintiff and the defendant in the tide.com.cn case were The Procter & Gamble Company and Beijing Tide Electronic Group, respectively. Again, the judgments in general closely followed the guidelines set out in Articles 4 and 5 of the Interpretation.

Cartier.com.cn, ikea.com.cn and whisper.com.cn

In these cases the appeal court found that the plaintiff foreign trademark owners had legitimate and valid trademark rights (including valid PRC trademark registrations) in the marks used in the third-level domain names. Some of the marks involved were also the trade names and .com domain names of the plaintiffs and their affiliates.

The court also found that the third-level domain names were identical with the relevant registered marks, trade names or domain names, and were sufficient to cause confusion among the relevant public. The court found further that the defendants did not enjoy rights or interests to the third-level domain name and had no justification to register and/or use the domain names.

The court also found that the defendants, for commercial purposes, registered and/or used the domain names. The court determined that the defendant Beijing Cinet did not use the domain names after registration, but prevented the registration of the domain names by the legitimate owners.

The court therefore found that the defendants' registration and/or use of the domain names were in bad faith, and that the defendants had engaged in unfair competition in violation of the first paragraph of Article 2 of the UCL. The court in the cartier.com.cn and whisper.com.cn cases also ruled that the defendant Beijing Cinet's action violated the principle of honesty and trustworthiness. The court ordered the defendants to cease the infringement or unfair competition and to de-register the domain name.

The lower courts made findings that the marks were well known. The appeal court confirmed that courts had the power to make well-known mark determinations. The appeal court, however, although accepting that the marks had a certain degree of fame, declined to uphold the lower courts' findings based on the evidence submitted and stated therefore that no trademark infringement was involved. The appeal court therefore wholly or partly quashed the lower courts' judgments.

Dupont.com.cn

First, the appeal court found that the plaintiff Du Pont had legitimate and valid trademark rights, including valid PRC trademark registrations, in the mark used in the third-level domain name. Du Pont was also the trade name and .com domain name of the plaintiff and its affiliates.

The court also found that the third-level domain name was identical with the Du Pont registered marks, trade name and .com domain name. In addition, the court found that the defendant did not enjoy rights or interests to the third-level domain name and had no justification to register and/or use the domain name.

The lower court determined the mark to be well known. The appeal court concurred with the finding. This is the only such determination in recent PRC domain name cases, probably due to the evidence submitted showing that Du Pont entered the PRC market fairly early.

The court then went on to state that in accordance with the relevant provisions of the Paris Convention for the Protection of Industrial Property (Paris Convention), a higher level of protection should be provided to well-known marks. The unauthorized use of a well-known mark constitutes infringement. The unauthorized use or registration of a well-known mark as a domain name is infringement of the well-known mark. The protection for the Du Pont mark, a well-known mark, is extended to the internet. The unauthorized registration of the dupont.com.cn domain name by the defendant was reproduction of Du Pont's well-known mark. Such reproduction would cause confusion for the relevant public. Beijing Cinet, as an internet service provider, should know the function and value of domain names, but still it registered the domain name without authorization. Its commercial purpose is obvious. The court also found that the defendant Beijing Cinet did not use the domain name after registration, but prevented the registration of the domain name by the legitimate owner. The court found that because Beijing Cinet did not heed the requests and warnings from Du Pont to stop the infringement prior to the litigation, there was obviously bad faith.

The court found that Beijing Cinet infringed the Du Pont registered mark and well-known mark, violated the principles of honesty and trustworthiness, and engaged in unfair competition.

The appeal court therefore upheld the judgment of the lower court. The defendant was ordered to de-register the domain name and pay the plaintiff's expenses incurred for collecting evidence for the litigation (in the sum of Rmb2,700) and the case acceptance fees in the first and second instances (totalling Rmb2,000).

Tide.com.cn

The lower court found that the plaintiff, The Procter & Gamble Company, was the registrant of the Tide trademark. Through extensive advertisement of the mark and products bearing the mark and because of the good quality of the products, the mark attained a relatively high degree of fame and had a relatively large market share. The lower court ruled that the Tide mark was well known. The lower court further ruled that the defendant, knowing that the Tide mark was well known, registered the tide.com.cn domain name, causing public confusion. The court also stated that the defendant's action diluted the goodwill of the Tide mark and prevented the plaintiff from using its own mark for commercial activities on the net. The court found that the defendant was not able to provide evidence to prove that it used the Tide mark in its enterprise name as early as 1994, nor was the defendant able to explain how it enjoyed any rights or interests to the Tide name or had any justification to register the domain name. The court therefore found that the registration and use by the defendant of the domain name constituted infringement of the plaintiff's well-known mark, violated the principles of honesty and trustworthiness and constituted unfair competition. The court ordered the defendant to cease use and de-register the domain name.

The defendant appealed to the Beijing Municipal High People's Court. There was also new evidence in support of the appeal.

The appeal court found that the defendant had in 1993 (prior to the registration date of the domain name) sold computers bearing the Tide mark and that the plaintiff's enterprise name used the Tide name in 1997 (also prior to the registration date of the domain name). The defendant also used the domain name after registering it. The court therefore ruled that the defendant had justification to register and use the domain name. The court further ruled that the defendant's registration and use of the domain name did not infringe the registered mark of the plaintiff nor had the defendant engaged in unfair competition. The court therefore quashed the judgment of the lower court and the defendant was allowed to keep the domain name.

Damages

Excepting the Rmb2,700 in damages awarded to Du Pont, the appeal court did not award any damages to the plaintiffs, even quashing the compensation awarded by the lower court in the whisper.com.cn case, although the defendants were ordered to pay all or part of the case acceptance fees (excepting the tide.com.cn case).

Retrial

A party dissatisfied with any of the appeal judgments may still petition the court which originally heard the case or a court at a higher level for a retrial, but presentation of the petition does not suspend the execution of the judgment. There are however limited grounds for the court to accept a petition for retrial. The grounds are:

i) there is new evidence that is conclusive enough to repudiate the original judgment or ruling;

ii) the main evidence on which the facts were ascertained for the original judgment or ruling was insufficient;

iii) there was a definite error in the application of the law in the original judgment or ruling;

iv) a violation of the legal procedure of the court may have affected the correctness of the judgment or ruling; or

v) while hearing the case, judicial personnel committed embezzlement, accepted bribes, practised favouritism for personal benefit or perverted the law.

A court must reject an application that does not meet any of these grounds. A petition for a retrial must be submitted within two years of the effective date of the relevant judgment or ruling.

Well-known Mark Determination

There are difficulties with the recent batch of domain name judgments. One difficulty relates to the determination of well-known mark status.

Ikea.com.cn was the first case in which a PRC court made a determination of well- known mark status. That development caused a lot of excitement and interest, as it was commonly understood that the PRC Trademark Office was the exclusive authority for determining well-known marks as stated in the Recognition and Administration of Well-known Trademarks Tentative Provisions (the Tentative Provisions, see below). The court, although asserting that it has such a power, seems to have retreated from that liberal move, and even the determinations made previously, including that made in the ikea.com.cn case, were quashed by the appeal court.

The PRC is party to the Paris Convention and is committed to implement the Agreement on Trade-related Aspects of Intellectual Property Rights (TRIPS). Both the Paris Convention and TRIPS contain provisions on the protection of well-known marks. Protection under the Paris Convention has been cited in court judgments, in trademark prosecution decisions and in local AIC punishment decisions against trademark infringement.

A formal framework for the recognition of well-known marks was created with the PRC State Administration for Industry and Commerce's promulgation on August 14 1996 of the aforementioned Tentative Provisions regarding well-known trademarks. The Tentative Provisions define well-known marks as registered marks that enjoy a relatively high reputation in the market and are familiar to the relevant public.

The Trademark Office has, to date, issued over 200 determinations of well-known trademark status, but only in respect of marks owned by Chinese enterprises. The Tentative Provisions do not exclude foreign marks, and foreign owners have filed numerous applications. Unfortunately, however, none of these applications have been processed.

Under the revised PRC Trademark Law (中华人民共和国商标法) that came into effect on December 1 2001, enhanced protection is provided to well-known marks. The revised Trademark Law stipulates that when recognizing a well-known mark, the following factors should be considered: i) the degree of recognition of the mark among the relevant public; ii) the length of continuous use of the mark; iii) the continuous length, degree and geographical scope of the publicity for the mark; iv) the record of protection of the mark as a well-known mark; and v) other factors associated with the recognition of the mark.

Both PRC and foreign marks should be eligible to be recognized as well known under the revised Trademark Law. The PRC Trademark Office is currently considering the procedure for granting foreign marks well-known mark status. The courts' refusals to make a well-known mark determination in the domain name cases should not mean the marks won't be granted such a status by the PRC Trademark Office or in subsequent court judgments. The court's determinations were based on the evidence of fame at the time the cybersquatters registered the domain names. Any future determinations should be independently based on fresh evidence of fame.

Reform

The recent domain name judgments also highlight some of the difficulties in using litigation to fight the rampant cybersquatting in the PRC, even in the cybersquatting cases involving the serial pirates Beijing Cinet and Guangzhou Yuejing. The PRC's present regulatory regime governing domain names allows cybersquatting to thrive, unless owners of target names and marks institute a strict watch system and are willing to fight piracy. However, as can be seen above, the appeal and lower courts award small amounts of damages, if any, helping to pay for only a small portion of the litigation costs of the plaintiffs. Despite the number of court judgments against Beijing Cinet, the company continues to hold many other pirate registrations. As long as cybersquatters are not handicapped by the judicial process, such as being ordered to pay all of the actual litigation expenses of the plaintiffs, chances are that there are legitimate brand owners who may be forced to pay cybersquatters a "ransom" to de-register the relevant pirate registrations for avoiding spending more money and time in litigation. This is the case especially with the court's more conservative attitude recently towards the determination of well-known mark status.

The PRC's current regulatory regime governing roman letter domain names will likely be reformed and a domain name dispute resolution mechanism, similar to that for resolving Chinese-language domain name disputes under the Resolution of Disputes Concerning Chinese-language Domain Names Procedures (Trial Implementation) (issued on November 1 2000 and implemented from December 1 2000), has also been considered to combat abusive registrations. Although there are also many difficulties with these Procedures, they generally deal with the straightforward cybersquatting cases fairly effectively and economically. A similar mechanism for dealing with roman letter domain names may prove necessary in fighting the currently rampant cybersquatting that China faces.