By Bill H. Zhang

 

On November 11, 2008, the China’s Supreme People’s Court (“Supreme Court”) published a Draft on Interpretation on Several Issues Relating to Application of Law for Recognizing and Protecting Well-Known Trademarks in The Trial of Civil Disputes Involving Trademark Infringement (“Draft”)[1] for public opinions and comments. The Draft has tried to establish certain rules for recognizing and protecting well-known trademarks in China. Once the Draft has been finally passed by the Supreme Court, it will definitively have significant influence on juridical recognition and protection of well-known trademark in China. Therefore, foreign enterprises, no matter having or having no business operation in China, shall closely watch and acquaint themselves with the rules the Draft has tried to set up.

 

Background

 

In China, two parallel remedies, i.e. administrative remedy and juridical remedy, are available for trademark owners to request the Trademark Office affiliated with the State Administration for Industry and Commerce (“China Trademark Office” or “CTO”) when the competent administration for industry and commerce (“AIC”) is investigating and raiding trademark infringement, or the people’s court hearing the trademark-related dispute, to recognize their marks as well-known trademarks which refer to marks widely known by the relevant public within China. Once a mark has been recognized as well-known trademark, it deserves overall protection. Therefore, the owners attach a great importance to get their marks recognized as well-known trademarks. The amount of the disputes on intellectual property infringement has greatly increased in recent years. Within nine months from January to October, 2008, the people’s courts at all levels received and heard 20,806 cases involving intellectual property disputes in the first instance, 36.9% increased as compared with the situation in the same period in the previous year; and 3,251 cases of the same in the second instance, 45.51% increased as compared with the situation in the previous year[2]. All this indicates, in the words of one of the vice presidents of the Supreme Court, that intellectual property trial is increasingly recognized and relied and the juridical protection to intellectual property rights is increasingly strengthened too. Under such situation, the third civil tribunal, i.e. the Intellectual Property Tribunal, of the Supreme Court had already initiated the drafting of a juridical interpretation on recognizing and protecting well-known trademark in January, 2007, then repeatedly solicited opinions and comments from the people’s court at all levels through various means and finally formed the Draft. If no material opposition is raised, the Draft will be expected to be officially promulgated by the Supreme Court soon.

 

This article mainly addresses the situations for recognizing well-known trademark; burden of proof; relevant evidence rules; and jurisdiction, the factors which the court will possibly take into account during the recognition as well as the judgment, which the Draft tries to clarify. Since the administrative methods and measures for recognizing and protecting well-known trademark have already been specially regulated by the Regulation on Recognizing and Protecting Well-known Trademark (“Regulation”)[3], this article does not address the administrative remedy which can be analyzed upon individual request.

 

Situations for Recognizing Well-known Trademark

 

The people’s court does not recognize well-known trademarks in any types of civil disputes even the disputes involve trademark infringement. The Draft has detailed five situations in civil disputed cases where the concerning parties request the recognition of the mark to be well-known trademark as the factor basis for getting the trademark infringement or unfair competition established, and then the people’s court may recognize the involving mark as well-known trademark depending on the specifics of the case. These circumstances include three situations where the plaintiff claims the defendant has infringed its trademark or has conducted unfair competition based on the reasons that

 

(1) (i) the defendant’s registered trademark for the same or similar goods is a copy, imitation or translation of the plaintiff’s well-known trademark which hasn’t yet been registered in China, and this can get the public easily confused, including misunderstanding to the source of the goods; or (ii) the defendant’s registered trademark for different or dissimilar goods is a copy, imitation or translation of the plaintiff’s well-known trademark which has already been registered in China, and this will mislead the public and cause possible damage to the plaintiff[4];

(2) the defendant’s registered and used domain name is the same as or similar to the plaintiff’s well-known trademark;

(3) the defendant’s enterprise name is the same as or similar to the plaintiff’s well-known trademark;

and two other situations

(4) where the plaintiff claims the defendant’s used trademark has infringed its trademark rights, and then the defendant defends or raises a counterclaim that the trademark being sued is the defendant’s previous unregistered well-known trademark;

(5) other situations when necessary to recognize the mark as well-known trademark according to laws and administrative regulations or the particulars of the disputed case.

 

Apart from the above circumstances, the Draft has further specified the following two situations where the people’s court does not recognize the involving mark as well-known trademark:

 

(1) The establishment of trademark infringement or unfair competition does not rely on the factor that the mark is a well-known trademark; and

(2) The trademark infringement or unfair competition being sued is not legally established because it does not satisfy other legal conditions.

 

Burden of Proof for Well-known Trademark

 

To get the people’s court to recognize the disputed mark as well-known trademark, the concerning party will have to bear the burden of proof to prove its mark is widely known when the infringement occurs. The people’s court will comprehensively take five factors into consideration to determine the recognition. These factors include  (i) how well is the mark known by the relevant public; (ii) the period during which the mark has been used; (iii) the period, extent and geographic scope of any publicity for the mark; (iv) the record of protection to the mark as well-known trademark; and (v) other factors evidencing the mark is well-known[5]. However, when either of the five factors can clearly show the mark is widely known, then such single factor is sufficient for the people’s court to make decision and recognition. Most importantly, the people’s court’s recognition will mainly base on the factor that the mark is widely known in the main regions within China. When necessary, will the people’s court consider the factor that the mark is also widely known overseas. Obviously, this is somewhat geographical protectionism. So foreign enterprise shall keep any possible record that its mark is widely known in China.

 

To convince the people’s court that its mark is widely known, the owner of the mark may keep good record of the following factors when the infringement takes place and before the mark having been granted for evidence:

 

(1) the sale volume, revenue, market share, distribution regions and tax contribution of the goods bearing the disputed mark;

(2) the period during which the disputed mark has been continuously used;

(3) the method, duration, extent, capital injection and geographic scope of any publicity or promotion for the disputed mark; 

(4) the disputed mark enjoys high market reputation; and

(5) other factors evidencing that the disputed mark is widely known, such as the record that the mark has been infringed and protected, any market investigation report, the report issued by a professional appraiser which could objectively show the market value of the disputed mark, and other relevant materials involving the disputed mark issued by the relevant industrial associations.

It is worthy noting that the previous recognition of the disputed mark as famous trademark is not a precondition to get it recognized as well-known trademark. Moreover, the people’s court will also refer to the ranking of the enterprise using the disputed mark in the industry. Therefore, such raking record can also be used as supplemental evidence.

 

Certain Evidence Rules

 

1.        Defense to Administrative Recognition

 

The self-acknowledgment rule specified by the Regulation on Several Issues Relating to Civil Litigation Evidence (“Evidence Regulation”)[6] is not applicable in the people’s court recognition of well-known trademark. Though the Draft provides that the people’s court will recognize the disputed mark as well-known trademark if (i) the disputed mark has already been recognized as well-known trademark by CTO before the incurrence of trademark infringement or unfair competition; and (ii) the defendant does not make any opposition to this factor, however, the people’s court will not recognize the disputed mark as well-known trademark even it has already been recognized by CTO if the people’s court has any opposite evidence to refute the CTO’s recognition. Moreover, the defendant can make opposition to the factor that the plaintiff’s trademark is widely known, then the plaintiff will have to bear burden of proof to prove that its mark is well-known. In return, when the defendant does not make any opposition in the first instance to the factor that the plaintiff’s mark is well-known, but make such opposition in the second instance based on legitimate reasons, then the defendant will have to bear burden of proof to support its opposite factors.

 

2.        Lessening Plaintiff’s Burden of Proof

 

Under a special situation where the plaintiff’s mark is widely known by the general public within China, the people’s court shall properly lessen the plaintiff’s burden of proof. In such situation, the people’s court shall recognize the disputed mark as well-known trademark when the plaintiff produces preliminary evidence that its mark is widely known or the defendant does not oppose to the factor that the plaintiff’s trademark is widely known. This provision reflects the principle of fairness and save of litigation resources. This is good and welcomed by trademark owners.

 

Jurisdiction, Factors To Be Considered by People’s Court and Its Judgment

 

1.        Jurisdiction

 

The Draft provides that the civil disputed cases involving recognition and protection of well-known trademark shall be accepted and heard by the intermediate people’s court. However, disagreement exists on whether all intermediate people’s courts or some specific intermediate people’s courts can accept and hear such cases. One opinion is that such cases shall be accepted and heard only by certain limited specific courts, such as the intermediate people’s court in the localities of the city of provincial capital, the city specifically designated in the State plan, those intermediate people’s courts approved by the Supreme Court and the people’s courts above the intermediate level. The other opinion is that those cases shall be accepted and heard by all intermediate people’s courts. The Supreme Court is soliciting opinions among the courts at all levels for a final determination.

 

2.        Factors To Be Considered by People’s Court

 

When the people’s court makes orders to prohibit the defendant from using the trademark which is the same as or similar to the plaintiff’s registered well-known trademark on different or dissimilar goods, the people’s court shall take those factors, such as the distinctness of the well-known trademark, the knowingness of the goods being accused by the relevant public as well as the connection between the relevant goods, etc. into consideration for making its decisions.

 

3.    Expected Judgment

 

When the plaintiff claims that the defendant’s registered trademark is a copy, imitation or translation of the plaintiff’s well-known trademark which has already or hasn’t yet been registered in China, the people’s court may make judgment to prohibit the defendant from continually using its registered trademark. Unfortunately, the Draft fails in specifying any compensation when infringement is established. Moreover, two exceptions still exist for the people’s court to make the aforesaid judgment: (1) the five-year time limit for requesting the Trademark Review and Adjudication Board to revoke the disputed registered trademark has already expired from the date the mark has already been registered[7]; and (2) the plaintiff’s trademark was not well-known when the defendant filed application to register the disputed mark. However, if bad-faith registration is established, the owner of the well-known trademark and the people’s court will not subject to the aforementioned five-year time limit to complain or make the aforesaid judgment, respectively. Obviously, this sub-exception provision is dedicated to prevent bad-faith registration and protection to well-known trademark.

 

Very regretfully, the Draft provides that the recognition of well-known trademark will not be written into the main text of the judgment. Further more, the people’s court will not address the recognition of well-known trademark in its conciliation statements when the plaintiff and the defendant have reached any settlement agreements. This will have certain adverse impact to motivate the plaintiff and the defendant for mediation. If the recognition of well-known trademark is written into the main text of the judgment or addressed in the conciliation statements, such recognition may possibly be used as supporting evidence to request the local AIC to raid trademark infringement when any infringement is detected in the future.

 

Conclusion

 

In order to strength protection to well-known trademark, the Supreme Court has published the Draft for public opinion. The Draft will expect to be officially passed soon if no material opposition is raised. The Draft has detailed the specific situations for recognition, the burden of proof as well as certain evidence rules for the recognition. Foreign owners of well-known trademarks shall be very familiar with these situations and rules so as to get their marks fully protected in China.

 

As so far, certain disagreement and uncertainty still exist to the Draft. Particularly, it is unclear whether the recognition of the mark to be well-known trademark by the people’s court can be directly used as evidence to request the local AIC to raid trademark infringement when such acts detected. Further clarification is essentially expected. We will track its further development.

 

About The Author

 

Bill H. Zhang is the managing partner of China Sunbow & Associates with rich experience in cross-board transactions involving China with more focus on intellectual property transaction such as patent and trademark prosecution, enforcement, dispute resolution, infringement analysis, due diligence, technology license and transfer, as well as on corporate and commercial matters, such as mergers and acquisitions, direct investment in China, joint venture, international trade, corporate governance and compliance, restructuring and reorganization, labor and employment, and dispute resolutions. He has represented many multi-national companies to register, prosecute and enforce various trademarks, patents and copyrights in China and also counsel them on merging and acquiring Chinese enterprises, making investment, resolving commercial disputes in China. He has also counseled many foreign invested enterprises on their daily operations in China.

 

For more information about this article and the author, please contact:

 

Bill H. Zhang

T: +8621 5081 5229

F: +8621 5081 5239

E: bill.zhang@chinasunbow.com

 

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[1] The deadline for public opinions and comments to the Draft was December 12, 2008. However, more than one month has already passed since the deadline, no formal juridical interpretation has yet been officially promulgated by the Supreme Court.

[2] These data come from the People’s Daily dated December 10, 2008.

[3] The Regulation was promulgated by CTO on April 17, 2003 and took into effect on June 1, 2003.

[4] Article 13 of the PRC Trademark Law.

[5] Article 14 of the PRC Trademark Law.

[6] Article 8 of the Evidence Regulation which was issued by the Supreme Court on December 6, 2001 and took into effect on April 1, 2002.

[7] Article 41 of the PRC Trademark Law.