A Green Light for Piracy?

Val-Sucks International Inc. is a leading international industrial valve manufacturer and its brand name "VAL-SUCKS" is well known in the industry. Without the permission of Val-Sucks International Inc., a Chinese entity, whose business is to manufacture and sell industrial valve products in the city of Piracyland, registers its enterprise name with the local administration for industry and commerce (AIC). Its proposed enterprise name "Piracyland ValSucks Valve Manufactory Co. Ltd" contains a trade name "VALSUCKS", which is the same as or confusingly similar to Val-Sucks International Inc.'s trademark VAL-SUCKS registered in China. The AIC grants the company name registration after having checked that no one else is using the same or similar trade name in Piracyland. Piracyland ValSucks uses VALSUCKS on its website, product catalogues, brochures, and other advertising materials. Is Piracyland ValSucks, by registering its enterprise name with the AIC, entitled to use the trade name for marketing or sale of its products?

Analysis

The core of the laws of trademark and unfair competition aims to protect against the likelihood of confusion among the relevant sector of the public (i.e., consumers) as to the origin of a product, or as to a certain relationship (e.g., an affiliation, connection, association, sponsorship, approval, or licence, etc.) between different businesses or entities.

Article 52 of the PRC Trademark Law (中华人民共和国商标法)provides that trademark infringement occurs if there is a "use of a trademark that is the same as or similar to a registered trademark on the same or similar goods without the permission of the trademark registrant". Article 3 of the PRC Trademark Law Implementing Regulations clarifies that the term "use" of trademarks includes the use of trademarks on goods, packaging and transaction documents or in advertisements, exhibitions and other commercial activities.

It is clear from the facts that the act of Piracyland ValSucks constitutes trademark infringement because it uses VALSUCKS, which is the same as, or confusingly similar to, the registered trademark VAL-SUCKS, in advertising for the sale of the same or similar industrial valve products and such use is without the permission of Val-Sucks International Inc. Consumers are likely to be confused as to the origin of Piracyland ValSucks' products. In this context, an administrative relief available under the PRC Trademark Law (中华人民共和国商标法)is for Piracyland ValSucks to be ordered to stop its infringement by removing VALSUCKS from its website, product catalogues, etc. The question is whether or not Val-Sucks International Inc. can ask the AIC to also amend the enterprise name by removing the trade name VALSUCKS.

Under the Administration of Enterprise Name Registration Procedures (approved by the State Council in May 1991) and a series of implementing rules, the AIC authorities have the power to amend an enterprise name registration they deem "inappropriate" if the use of the enterprise name is likely to deceive the public. An opinion issued by the State Administration for Industry and Commerce (SAIC) in 1999 provides that the use of another's registered trademark as a trade name component of one's enterprise name constitutes an unfairly anti-competitive act and must be stopped if such use is likely to cause confusion, as to the identity or source of products. However, the PRC Anti-unfair Competition Law(中华人民共和国反不正当竞争法), despite prohibiting the outright theft of another's "enterprise name" is silent on the use of misleading trade names and implementation of this SAIC opinion becomes questionable. In reality, local officials are more worried about being sued in an administrative proceeding by registrants whose enterprise names are subject to revocation and choose to neglect this SAIC opinion citing the lack of guidelines for determining the inappropriateness of enterprise names, a matter that the trademark administrative authority seems to be more competent to handle. But the situation is complicated by the fact that different divisions of the AIC authorities that handle trademarks and enterprise names respectively do not necessarily work closely.

The Several Questions on the Application of Law in Trial of Trademark Civil Dispute Cases Interpretation (issued by the Supreme People's Court in October 2002) states that a "prominent use as a trade name component of one's enterprise name of a word that is the same as or similar to another's registered trademark on the same or similar products for which the registered trademark covers and is likely to cause confusion among the relevant public" is a trademark infringement act. The judicial interpretation, however, falls short of giving any guidance on what constitutes "prominent" use. Neither does it clearly address whether the mere use of another's trademark as a trade name that does not constitute trademark infringement should be actionable if a likelihood of confusion is caused.

If Piracyland ValSucks removes VALSUCKS from its advertising and other materials, Val-Sucks International Inc. will have great difficulty demanding a change to the enterprise name because, apart from the SAIC opinion, neither the Anti-unfair Competition Law(中华人民共和国反不正当竞争法) nor the judicial opinion of the Supreme People's Court has addressed this issue in a satisfactory manner.