Confusion or Association? Understanding Chinese Anti-unfair Competition Law

In reality, consumers often associate or confuse two similar goods or services. Many IP right holders are annoyed by this unfair 'free ride' they give competitors. In many cases, the consumer is also the victim as they obtain sub-standard goods which they thought were from the "real" producer or service provider. Hence, anti-unfair competition is very useful in curbing this unfair behavior and protecting IP rights owners.

According to anti-unfair competition law (反不正当竞争法)(Article 5 (2)),¹ consumer confusion is an essential requirement in determining what constitutes unfair competition. The new Judicial Interpretation (February 2007) further elaborates that confusion includes the "likelihood of confusion" (Article 4). It states: "Being sufficient enough to make the relevant public misidentify the source of the commodity, including mistaking that there are certain particular links..."

In practice, there are still difficulties in the extent of the definition of "consumer confusion." Does anti-unfair competition law govern every circumstance (in particular, where the consumer simply associates two goods) of confusion? In other words, would a mere association be sufficient for concluding that there existed a likelihood of confusion?

The Benelux jurisdiction had accepted for some time that a trade mark could be infringed even though the consumer was not misled as to origin.² That means the association conjured up in the minds of consumers was not associated with the origin.³

As for Chinese law, the highest leader of the IP Courts in China, Jiang Zhipei, has explained that the original intention of anti-unfair competition law regarding confusion does not include association. Normally, there exist four situations of confusion:

1] confusion between two products;

2] misunderstanding two products from the same business operator;

3] confusion between the goods originating from a licensee of another business operator; and

4] association between two goods.

Mr. Jiang has held that the extent of confusion caused by association is so low that it should not be covered by anti-unfair competition law. This requires a higher threshold of confusion that is ''being sufficient enough to cause confusion." He has not elaborated on this point.

A British judge's decision explained the reasoning and rationale in the Wagamama case.⁴ This case involved the nature of a trademark right and how it differed from copyright. If accepting non-origin association, it could "create a new type of monopoly, which is irrelevant to the proprietor's trade but instead in the trade mark itself. Such a monopoly could be likened to a quasi-copyright in the mark. However, unlike copyright, there would be no fixed duration for the right, and it would be a true monopoly effective against copyist and non-copyist alike." In addition, the existence of sufficient commercial justification for any such extension of trademark rights is also questionable.⁵

Hence, in determining confusion, a mere association is not sufficient. Likelihood of confusion should include the likelihood of association. This indicates that the latter cannot be more extensive than the former. Likelihood of association is only one example of a form of likelihood of confusion. In other words, a likelihood of association will infringe only if there also exists a likelihood of confusion to the consuming public. The public must be confused about the origin of the goods and assume that the infringer's trade or use of the mark is somehow associated with, or consented to, by the proprietor.⁶

To conclude with the first scenario, if you were to buy a shampoo which looked like "Rejoice" but you knew it was from a producer other than P&G, the likelihood of confusion in these circumstances would be excluded. Alternatively, if you simply associate one shampoo with another, confusion is also not established.

Endnotes

1 According to Article 5: "An operator may not adopt the following unfair means to carry to transactions in the market and cause damage to competitors... (2) using, without authorization, the name, packaging or decoration peculiar to well-known goods or using a name, packaging or decoration similar to that of well-known goods, so that his goods are confused with the well-known goods of another person, causing buyers to mistake them for the well-known goods of the other person ..."

2 Claeryn v Klarei, Case A 74/1, Jur1975, 472 (Netherland).

3 However, in the case of Sabel V Puma ([1998] RPC 199.), the ECJ ruled that the 'likelihood of association' is not per se a sufficient ground for constituting a likelihood of confusion. The former only causes a collision of two trade marks if it entails a 'likelihood of confusion'. Consequently, the former Benelux practice was already past fact.

4 Wagamama Ltd V City Centre Restaurant PLC. [1995] FSR 713.

5 David Bainbridge, Intellectual Property (5th Edition), at 602-603.

6 David Bainbridge, Intellectual Property (5th Edition), at 602-603.