Encouragement for well-known trademark owners

The draft interpretation clearly demonstrates the principle that the recognition of well-known trademarks is an approach to render broader protection to trademarks but not as the subject claim in litigation proceedings.

(a) Well-known trademarks may only be recognised in cases where there is a necessity to establish the well-known status of the disputed trademarks.

The draft interpretation sets out four circumstances in which courts may recognise well-known trademarks. The common theme of these circumstances is that only when a disputed trademark is a well-known trademark can such trademark receive protection against prior registration or use of non-well-known third-party trademarks, domain names or trade names which are of a similar nature.

The draft interpretation further lists two circumstances in which courts will not recognise well-known trademarks: where the establishment of infringement by a defendant is not conditional upon the recognition of the well-known status of the trademark; and in cases where the defendant will not be found to have infringed even if the disputed trademarks are recognised as well-known trademarks.

(b) The doctrine of admission does not generally apply to the recognition of well-known trademarks.

The general evidence rule under the PRC Civil Procedure Law (中华人民共和国民事诉讼法) Law provides that if the plaintiff brings a claim and the defendant admits to the claim, the court should uphold the claim. This rule is called the doctrine of admission. As discussed earlier, some enterprises have obtained well-known trademarks by manipulating this doctrine to their advantage. In order to avoid the misuse of the doctrine, the draft interpretation limits its application to scenarios where: (i) the disputed trademark has been recognised as a well-known trademark in previous proceedings and, in the view of the court, there is no evidence to the contrary; and (ii) the disputed trademark is generally known to the public and the plaintiff has preliminary evidence to prove the well-known status of the trademark.

(c) The recognition of well-known trademarks will not be included in the conclusion of a judgment. Rather it will only be mentioned in the reasoning section.

This arrangement is an embodiment of the principle that the recognition of well-known trademarks is to afford broader protection to trademarks but not as the subject claim in litigation proceedings. As such, recognition of a trademark as a well-known trademark in China is not a basis on which to ascribe a greater value to the trademark.

Evidential Rules for Approving Well-known Trademarks

The draft interpretation details the evidentiary rules for approving well-known trademarks from the following aspects:

(i) Burden of proof

Generally speaking, the party which claims the well-known status of a trademark is required to produce convincing evidence to prove this status.

(a) The plaintiff bears the burden to prove that its trademark is well-known.

In compliance with the general rule in the PRC Civil Procedure Law, the draft interpretation confirms that a plaintiff who claims to own a well-known trademark bears the burden of proof. Unlike the usual burden of proof provided under the PRC Civil Procedure Law, the plaintiff bears the burden of proof to establish the well-known status of its trademark even if: (i) the defendant admits to the well-known status of the trademark (subject to the exceptions set out later) or (ii) the subject trademark has been recognised as a well-known trademark in earlier proceedings, except where the defendant does not challenge this earlier recognition.

(b) The plaintiff must produce convincing evidence to prove the well-known status of its trademark if its case relies on such well-known status.

If the plaintiff produces evidence that the subject trademark has been recognised as a well-known trademark in earlier proceedings, such as in administrative proceedings or previous litigation, the burden of proof will not be transferred to the defendant to rebut such earlier recognition. The plaintiff is required to produce evidence to prove that the disputed trademark continues to be well-known if the defendant simply objects to the earlier recognition and there is no need for the defendant to produce any substantive evidence to support its objection.

According to the draft interpretation, there is therefore a high burden imposed on the plaintiff to prove that its trademark is well-known. The court will not assume any brand is a well-known trademark even though such brand is commonly known to the public. Therefore, it is important to keep a good record of any marketing surveys, finance books, media reports and so on which are useful in proving well-known trademarks.

(ii) Elements to be considered

(a) Geographic scope of public

The draft interpretation defines the term “well-known trademark” as a trademark generally known to the relevant public in China, a large and diverse country with differentiated groups of people. In order to be recognised as a well-known trademark, the disputed trademark does not need to be generally known in all regions in China. It is sufficient if the trademark is well-known to people from a significant portion of regions. Further, it is not necessary for the trademark to be generally known to all people. To be well-known to specific groups of people is satisfactory.

The scope of this test is important in respect of some high-end brands which are generally known in coastal areas, and to some specialised brands which are only well-known to professionals in specific industries. If the owner proves that its trademark is well-known in coastal areas or to highly-educated professionals, such a trademark can be recognised as well-known. However, as discussed later, such well-known trademarks may not be a basis for preventing unrelated third parties from using or registering a similar trademark in areas where the well-known trademark is not generally known.

(b) Well-known status in foreign jurisdictions

A well-known trademark must be well-known in China but, as the draft interpretation confirms, its well-known status in foreign jurisdictions is an element to be considered when determining whether it is well-known in China.

Theoretically speaking, a trademark which is well-known only in foreign jurisdictions may not be recognised as a well-known trademark protected under PRC law, but due to globalisation well-known trademarks in foreign markets will inevitably influence the Chinese market. Recently, a number of big foreign brands have discovered that their brands had been hijacked in China when they entered the Chinese market. They tried to prove that their brands were well-known in China although their products or services were not available in the country. In the milestone Starbucks case, the Starbucks brand was recognised by the court as a well-known trademark in the early 2000s partly because of its use in other Chinese-speaking regions such as Singapore, Taiwan and Hong Kong.

The draft interpretation reaffirms the decision in the Starbucks case, stating that the fact that a disputed trademark is well-known in foreign jurisdictions may be considered when determining whether such a trademark is well-known in China. This is good news for major foreign brands. Their strong evidence in connection with their fame in foreign markets will help them in establishing the well-known status of their trademarks in China.

(c) Comprehensive consideration

The draft interpretation requires that courts comprehensively consider various aspects of a trademark in order to determine whether it is well-known or not. The list of considerations includes:

(i) the popularity of the commodities and services bearing the trademarks, which is evidenced by the turnover of, and profit generated from, the relevant products or services bearing the trademark;

(ii) the length of use and the method of use of the trademark (for example, whether the trademark is a house brand or is only a sub-brand); and

(iii) the investment in the promotion of the brand.

None of these aspects in itself is decisive, and it is not necessary for the courts to consider all aspects in recognising a well-known trademark. As such, even if the turnover of the product bearing a certain trademark (luxury products, for example) is low, it can still be recognised as a well-known trademark.

Importantly, the draft interpretation deviates from the PRC Trademark Law (中华人民共和国商标法) in that the draft interpretation does not consider historical protection of the trademark as a well-known trademark as an aspect that is necessary to be considered in recognising the trademark as well-known. Marketing surveys and industry reports may serve the same function.

Injunctive Relief for Well-known Trademarks

Under the PRC Trademark Law, in addition to monetary damages, a well-known trademark owner may prohibit a third party from using or registering any trademarks similar to or identical with its well-known trademark on dissimilar products or services so as to avoid causing confusion to or misleading the public.

The draft interpretation details the standard by which a third-party trademark will be found to cause confusion with a well-known trademark, and thus be subject to an injunction.

(a) With respect to well-known trademarks, the grounds on which an injunctive relief can be granted are broader than those for trademarks which are not well-known.

For trademarks that are not well-known, generally speaking, injunctive relief can only be granted where unauthorised use of the trademark results in confusion as to source of commodities or services bearing the trademark. The draft interpretation sets out additional grounds under which injunctive relief is available for well-known trademarks:

(i) confusion as to the source of the commodities or services bearing the third-party trademark;

(ii) confusion as to the existence of licensing arrangements between the well-known trademark owner and the third party;

(iii) confusion as to the existence of an affiliate relationship between the well-known trademark owner and the third party;

(iv) confusion as to other relationships between the products or services bearing the third-party trademark and the well-known trademark owner; and

(v) other adverse impact on the goodwill of the well-known trademark owner.

These additional grounds are important for well-known trademark owners because, in most cases, a third party exploits the goodwill of the well-known trademark by using or registering a trademark similar to the well-known trademark in relation to commodities or services which are different to those generally associated with the well-known trademark. This results in a passing off of the well-known trademark. The public may be misled to believe an affiliate relationship exists between the third party and well-known trademark owner. Although such exploitation of a well-known trademark seldom causes confusion as to the source of commodities and services, under the draft interpretation the well-known trademark owner may nevertheless prohibit such registration or use of the trademarks.

(b) Both the distinctiveness of the well-known trademark and the fame of the third-party trademark as well as the similarities between the two trademarks need to be considered in determining whether an injunctive relief should be granted.

The draft interpretation specifies the factors to be considered when determining whether a third party trademark causes confusion with a well-known trademark used on different commodities or services, including:

(i) the distinctiveness of the well-known trademark;

(ii) the fame of the third-party trademark, and

(iii) the relevance and connection between the commodities or services bearing the well-known trademark and the third-party trademark (for example whether the commodities or services are substitutable or complimentary to each other, or related to a same industry).

In particular, where a trademark is only well-known to a specific group of people and the product or service bearing a third-party trademark, which is similar to the well-known trademark, does not target such a group of people, the third-party trademark may not be considered to cause confusion with the well-known trademark and, consequently, the registration and use of the third-party trademark may be allowed.

(c) The enjoyment of well-known trademark protection may not threaten the interests of other legitimate trademark owners or impact the stability of the use of trademarks by others.

The draft interpretation specifies two circumstances where injunctive relief will not be granted to well-known trademark owners:

(i) the relevant third-party trademark has been registered for more than five years and was not registered in bad faith; and

(ii) the well-known trademark was not well-known when the relevant third-party trademark was registered.

The two exceptions are provided for to avoid misuse of well-known trademark protection and to protect legitimate use of trademarks that are not well-known. If a third party registered and started to use in good faith a trademark which is similar to a well-known trademark before such trademark became well-known, the third party may not be required to abandon its trademark only because the other trademark subsequently becomes well-known. Consequently, the well-known trademark owner, according to the draft interpretation, may not cite the PRC Trademark Law to prevent such legitimate use of a third-party trademark.

Alternatively, a well-known trademark owner may still, according to the Several Opinions on Hearing Civil Disputes on Unfair Competition Activities, require that the use of the third-party trademark is used together with certain statements or logos to distinguish itself from the well-known trademark.