Judicial Activism in Action: New Interpretation on Trademark Disputes

Article 52 of the Trademark Law lists five kinds of trademark infringement.⁴ It defines the fifth kind of trademark infringement as "causing other harm to another's exclusive right to use a registered trademark". According to the Interpretation, this catch-all clause can be further defined as follows:⁵

Trademark infringement also includes:

(1) Using the same or similar words of the registered mark of another party as a trade name in respect of the goods in the same or related classes causing a likelihood of confusion within the relevant public.

The provision allows not only well-known trademark rights holders but also those with marks that have not yet reached that status to stop unrelated third parties from using their marks as trade names. Prior to the promulgation of the Interpretation, the State Administration for Industry & Commerce (SAIC) promulgated a department rule that stated a similar principle and provided practical measures to work out the problems involving trademark and trade name disputes.⁶ It should be noted that the Implementing Regulations only provide preferential protection to a well-known trademark when that well-known mark is being used as a trade name for someone other than the trademark owner and when that use is likely to deceive or cause confusion to the public.⁷ How to interpret the Implementing Regulations can be tricky because there is no limit placed on the use of the trademark within the scope of the same or related goods.⁸ Clearly, the SPC follows the non-discriminatory principle in the department rule and takes advantage of the catch-all clause to provide a solution for disputes involving trademarks and trade names. As a result, trademark owners may invoke this article to protect their marks even if well-known status has not been achieved or clearly determined.

(2) Copying, imitating and translating a registered well-known trademark or its key part in respect of dissimilar or unrelated goods and causing confusion to the public, which is likely to result in damage to interests of trademark registrants.

The Interpretation borrows this explanation from Article 13 of the Trademark Law, but broadens the protection of well-known trademarks by focusing on the key parts of well-known trademarks. This removes a potent defence for infringers who stop short of copying a mark in its entirety. Undoubtedly, this provision will benefit well-known trademarks containing multiple words, components and/or design elements.

(3) Using the same or similar words of registered marks as domain names and engaging in e-business involving related transactions, which is likely to cause confusion within the relevant public.

The Interpretation contains this new provision on domain names and thus fills a gap in both the Trademark Law and Implementing Rules. Although handling domain name issues via the trademark regime is still largely untested, it is not entirely new. Courts have been called to judge disputes involving domain names and their relationships to well-known marks.⁹ The Interpretation codifies current practices and thus explicitly strengthens the protection of well-known trademarks.

In addition, copying, imitating or translating the key part of, or a well-known trademark of, another party in respect of the goods in the same or related classes, which has not been registered in China, shall bear the civil liability of cessation of infringement in the likelihood of confusion.¹⁰ Similar to Paragraph (2) above, the SPC also restates Article 13.1 of the Trademark Law and expands the protection by focusing on the key part(s) of well-known trademarks.

ASSESSING THE LIKELIHOOD OF CONFUSION

The Interpretation elaborates on two factors used for assessing the likelihood of confusion: similarity between marks and proximity of the products or services.

Similarity between Marks

The SPC defines similar marks as marks with little visual difference.¹¹ The courts shall make a comparison between the defendant's marks and the plaintiff's registered marks to decide their similarity.¹² Similarity of marks is judged by the appearance, sound and meaning of words, the design and colour of the device, the overall structure combining all elements, and the three-dimensional appearance or colour combination that is likely to cause confusion about the source of goods/services or suggest an affiliation with the goods/services bearing the plaintiff's marks.¹³

The Interpretation further articulates the test principles for similarity of marks: (i) in making the comparison a court will look to the general attention of the relevant public; (ii) courts shall compare the overall impression of marks as well as the key parts of marks; and (iii) courts shall consider the distinctiveness and reputation of the marks.¹⁴

It should be noted that the Interpretation applies the standard of "relevant public" to the decision of similarity. Indeed, this standard is first seen in the determining of well-known trademarks under the TRIPS.¹⁵ The latest amendments to China's Trademark Law adopt the "knowledge of the trademark in the relevant sector of the public" as the standard for well-known trademarks.¹⁶ Obviously, the SPC applies the standard of "relevant public" quite broadly. Moreover, it defines the "relevant public" to include consumers relevant to the goods or services bearing the mark and other traders related to the sale of the above goods or services.¹⁷ The definition appears practicable but still leaves considerable discretion for judges to interpret the definition as they see fit.

Proximity of Products or Services

In accordance with the Interpretation, the proximity of products measures whether the products have similar function, usage, manufacturing sector, sales channel, consumers, etc. or whether it is likely that the relevant public will assume that the defendant's goods are associated with the plaintiff's goods and thereby will create confusion. Similarly, the proximity of services measures whether the services have similar purpose, content, means, consumers, etc. or whether it is likely that the relevant public will assume that a defendant's service is associated with the plaintiff's service and thereby will cause confusion. The proximity between products and services measures whether the products and services have some affiliation thereby creating a likelihood of confusion.¹⁸ Clearly, the Interpretation reduces the application of the relevant public standard again.

Both in the courts and before the Trademark Review and Adjudication Board (the TRAB), the degree of similarity between marks and proximity of products and/or service are factors to be considered in an analysis of any likelihood of confusion. As such, it appears that the Interpretation will become an important reference for the review proceedings before the TRAB.

DETERMINATION OF WELL-KNOWN TRADEMARK STATUS

The Implementing Regulations identify the Trademark Office (TMO), TRAB and the Administration for Industry and Commerce (AIC) as authorities for recognizing the well-known status of trademarks.¹⁹ However, in practice, the courts have also recognized the status of well-known trademarks in cases such as Ikea v. Guowang.²⁰ The Interpretation codifies this practice and provides that the courts also have the authority to make such a determination.²¹ Since the issuance of the Interpretation, trademark owners may resort to four different forums (the TMO, TRAB, AICs and courts), to seek a determination that their marks are well known.

More importantly, the Interpretation does not state that the courts must take the determinations made by the administrative agencies or other courts into consideration. Rather, the Interpretation provides that the courts will review the determination on the status of well-known trademarks made by the administrative agencies or other courts in the case that one party challenges the determination.²² Central to this provision is the principle that the status of well-known trademarks shall be determined on a case-by-case basis when trademark disputes actually arise.

REMEDIES

Compensation

The Interpretation permits the party to choose the method to calculate damages. The method can be either the actual losses of trademark right holders or the infringer's illegal gain.²³ Actual loss can be calculated as the unit benefit (profit) multiplied by the total number of infringing goods sold or the amount of legitimate goods not sold as a result of the infringement.²⁴ The infringer's illegal benefit is the total number of infringing goods sold multiplied by the unit benefit of such goods.²⁵ When it is difficult to determine the unit benefit of infringing goods, the illegal benefit shall be decided by reference to the unit benefit of goods with registered marks.²⁶ If there is still difficulty in identifying the illegal benefit or actual loss, the court may grant compensation not higher than Rmb500,000 (about US$60,000) based on: (i) the nature, duration and effect of the infringement; (ii) the type, time limit and the scope of the trademark licence agreement; (iii) reputation of marks; (iv) licence fees; and (5) the reasonable expenses for stopping the infringement.²⁷ The reasonable expenses include the cost of investigating and obtaining evidence by the trademark right holders or their agents.²⁸ However, only lawyer's fees consistent with the standards set by government agencies are within the scope of compensation.²⁹ In practice, the actual lawyer's fees are far higher than the fees regulated by government agencies. Although the Interpretation is conservative on the calculation of lawyer's fees, the provisions on compensation detail the practical way to seek compensation and thus help well-known trademark owners find solutions to the awkward situation in which a trademark owner wins a case, but the compensation is not enough to pay for all the costs.

Other Methods of Bearing Civil Liability

With the restatement of Article 134 of the CLGP in the Interpretation, courts may require that infringers undertake the following civil liability: cessation of infringements; removal of obstacles; elimination of dangers; compensation for losses; and elimination of ill effects.³⁰ Also, the Interpretation clarifies the meaning of "confiscate the property used in carrying out illegal activities" in Article 134, with the provision that the courts may confiscate the infringing goods, faked trademark labels, materials, tools and equipment used in infringement.³¹ It seems that this provision offers the courts those powers that have traditionally been exercised by the AICs. In addition, the courts may impose fines on infringers. Determination of the fine amount may refer to administrative fines under the Implementing Rules.³²

In fact, the legality of Article 134 has long been disputed because confiscating property and imposing fines is beyond the scope of private law, but is within the scope of public law.³³ The Interpretation takes Article 134 as the justification for enhancing the power of the courts. Whether this is good or not in terms of larger legal issues, it is good for strengthening well-known trademark protection.

CONCLUSION

While the Interpretation is not a panacea, it certainly is a step in the right direction as it provides further clarity and transparency regarding the protection of well-known trademarks. In particular, the expansion of protection through the clarifications made regarding the "catch-all" clause of Article 52 of the Trademark Law is extremely useful. Of particular interest is the manner in which the Interpretation provides supplemental provisions to the Trademark Law and takes advantage of the CLGP to strengthen judicial power. Perhaps, as a response to a more complex commercial environment in which technological innovation leads to commercial advantage, the courts are seeking to expand beyond their traditional roles of implementing and interpreting laws and venture into a quasi-legislative role. While this level of judicial activism does not cause much alarm, we need to be wary of the potential for abuse of judicial power, particularly in the areas of assessing fines and confiscating property. In any case, the continuing progress in China in this area brings optimism for the protection and enforcement of foreign and domestic trademark rights holders alike.

Endnotes

1 Zhongguo Zhishi Chanquan Sifa Baohu [IPR Judicial Protection in China], at http://www.chinaiprlaw.com/english/case/case1.htm. Guanyu Shenli Shangbiao Minshi Jiufen Anjian Shiyong Falv Ruogan Wenti de Jieshi [Interpretation on Trademark Disputes], Zhongguo Guojia Xinxi Zhongxin Falv Fagui Ku [Database of Laws and Regulations by China National Information Center].

2 PRC Trademark Law, originally promulgated on August 23 1983. The first revision was promulgated on February 22 1993 and the second revision on October 27 2001.

3 PRC Trademark Law Implementing Regulations, originally promulgated on March 10 1983. The first revision was promulgated on January 3 1988; the second on July 15 1993; and the third on August 3 2002.

4 Article 52 of the Trademark Law provides that any of the following constitute infringement of the exclusive right to use a registered trademark:

(1) use of a trademark that is identical with or similar to a registered trademark in respect of the same or similar goods without the authorization of the proprietor of the registered trademark;

(2) sale of goods that infringe the exclusive right to use a registered trademark;

(3) counterfeiting, or manufacturing representations of a registered trademark of another person without authorization, or selling such representations of a registered trademark as were counterfeited, or manufactured without authorization;

(4) replacing registered trademarks on goods without the authorization of trademark registrants and putting these goods back into the market;

(5) causing harm to another's exclusive right to use a registered trademark in any other way.

5 Interpretation, Article 1.

6 Guanyu Jiejue Shangbiao Yu Qiye Mingcheng Zhong Ruogan Wenti De Jijian [Department Rules on Settling Disputes on Trademarks and Tradenames], the State Administration for Industry & Commerce, April 5 1999, at Zhongguo Guojia Xinxi Zhongxin Falu Fagui Ku [Database of Laws and Regulations by China National Information Center].

7 Implementing Regulations, Article 53.

8 Idem.

9 A recent widely reported case is Ikea v. Guowang Corp. [Beijing 2nd Appeal Court], see Zhongguo Zhishi Chanquan Sifa Baohu [IPR Judicial Protection in China], at http://www.chinaiprlaw.com/english/case/case1.htm.

10 Interpretation, Article 2.

11 Ibid, Article 9.

12 Idem.

13 Idem.

14 Interpretation, Article10.

15 TRIPS, Article 16.2.

16 Trademark Law, Article 14.1.

17 Interpretation, Article 8.

18 Ibid, Article 11.

19 Implementing Regulations, Article 5 and Article 45.

20 See supra note 12.

21 Interpretation, Article 22.

22 Idem.

23 Ibid, Article13.

24 Ibid, Article 15.

25 Ibid, Article 14.

26 Idem.

27 Interpretation, Article 16; Trademark Law, Article 56.

28 Interpretation, Article 17.

29 Idem.

30 Interpretation, Article 21.

31 Idem.

32 Idem.

33 Zhang Junhao, Theory of Civil Law (1st ed. 1991), pp. 826-827.