How to cope with an evil twin: resolving enterprise name disputes

Ying Yihong

Rouse

[email protected]

Recent civil cases such as Sotheby's vs Sichuan Sufubi¹ and Swarovski vs Beijing Shihualuo², suggest there is a growing trend of IP infringement of trademarks or trade names with an enterprise name registration.

Enterprise name disputes involve differences between the concepts of the enterprise name and the trade name. Both are distinct identifiers that serve different purposes in trading. These rights are markedly different as to the concept and registrability.

• An enterprise name is ascribed to a corporate entity in China, and it should be registered within the competent Administration for Commerce and Industry (AIC) at different levels and in different regions. It must consist of the following: Enterprise name = Administrative Region + Business Name / Shop Name + Industry + Organization Type.

• A trade name is a relatively complex conception. The Paris Convention said a trade name shall be protected; however it does not provide a clear definition. Though academic disputes have risen on the connotation and denotation of a trade name, in practice it is mostly referred to as a Business Name / Shop Name that forms the identifiable part of an enterprise name. This is the definition used in this article. Generally, a trade name can be registered as a trademark and enjoys the protection of Chinese trademark law.

Often when ABC business enters or expands in China with XYZ brand, it can be frustrated in finding another company with the ABC name in a neighbouring province or selling XYZ products where XYZ refers to a trade name. This will not only block the registration in that region, but also causes problems with customers. This problem has endured mainly because:

• the enterprise names are registered within various local AICs, and such registration does not have a centralised system for cross-checking; and

• from a legislative point of view, the enterprise names, trade names and trademarks are regulated and protected under different laws.

This leads to the question of how to cope with an evil twin that has a confusingly similar enterprise name.

First of all, one must possess prior rights to a trade name or trademark. Generally a registered trademark is afforded the strongest protection against a latter-registered enterprise name under Chinese law. Without the registration of a trademark, an enterprise name or trade name is not well protected, unless the use of a same or similar enterprise name by someone else amounts to misleading or deceptive conduct under the PRC Anti-unfair Competition Law. Establishing this involves considerable legal cost and management time. In other words, having registered an enterprise name, a business should not forgo seeking trademark registration for its trade name.

With prior rights secured, a business may challenge a registration with the AIC. It needs to prove that the registration would deceive or confuse the public³. However, AIC officials are often reluctant to take action based solely on prior IP rights including a conflicted trademark. This is particularly relevant where the local AIC in fact approved a target enterprise name. In China, lobbying and education is particularly important in approaching local AICs.

Alternatively, one may also challenge the registration in court. A recently issued judicial interpretation by the Supreme Court clarified a cause of action for enterprise name conflicts. It recommended Courts accept these cases and apply the Anti-unfair Competition Law⁴. This shows evidence of improved judicial protection for the enterprise name. Nevertheless, it is still a challenging task to establish customer confusion and for the court to find unfair competition. Enforcement of a judgment that orders the change of enterprise name is still questionable.

In a nutshell, it has been increasingly important for companies with marketing operations in China to familiarise themselves with enterprise name issues. Companies can act against a confusingly similar enterprise name, and should always be cautious with due diligence in a case of infringing another trade name or trademark. It is always advisable to set up and maintain a good portfolio of registered IP rights by securing Chinese trademark registrations in advance, and involving local counsel from the beginning.

Endnotes

1 Swarovski Aktiengesellschaft vs Beijing Shihualuo Wedding Photography Company Limited, Beijing No. 2 Intermediate Court: in this case the Court found Beijing Shihualuo's trade name is confusingly similar to Swarovski's trademark and trade name and constituted unfair competition.

2 The Sotheby's Auction House vs. Sichuan Sufubi Auction Company Limited, Beijing No. 2 Intermediate Court: here, the Court found that Sichuan Sufubi's trade name is confusingly similar to the Sotheby's trade name and constituted unfair competition.

3 See Article 41 and 42, Implementation Measures on the Administration of the Registration of Enterprise Names, issued by the State Administration of Industry and Commerce and effective from July 1 2004.

4 See Article 2, Supreme Court Interpretations on handling Disputes between Registered Trademarks, Enterprise Name and Prior Civil Rights, effective from March 1 2008.