Protecting trademark rights in China through litigation.

• Author: Lau, Timothy

This note examines the potential of trademark right enforcement through commercial litigation in the People's Republic of China ("China "). The note first summarizes the current state of trademark law in China. It then illustrates, through an analysis of a number of recent suits filed by foreign companies against local infringers, the jurisprudential approach taken by Chinese courts in applying trademark law. Drawing on the above discussion and contrasting the Chinese jurisprudential approach with American courts' application of trademark law, the note concludes with practical proposals for foreign companies to adapt their trademark enforcement strategies to the legal conditions in China.

1. BASIC STRUCTURE OF TRADEMARK LAW IN CHINA II. LESSONS FROM TRADEMARK LITIGATION A. Litigate! You Have a World to Win! B. Make Your Marks Famous C. Be Creative with Threats of Suits D. Devise Difficult-to-Replicate Product Features and Tightly Control Product Distribution III. CONCLUSION The People's Republic of China ("China") has long been known for the rampant trademark infringement that takes place within its borders. (1) As China increasingly establishes itself as one of the largest economies and one of the biggest and most important markets, however, foreign entities hoping to protect their trademarks within China must adopt specialized strategies to meet the challenges presented by the Chinese system and by the market. This note begins by examining the structure of trademark law in China and drawing comparisons to American law. It then examines the law as applied by the Chinese courts in several trademark infringement disputes between foreign entities and local infringers, and recommends trademark enforcement and protection strategies for foreign entities operating in the Chinese market.

1. BASIC STRUCTURE OF TRADEMARK LAW IN CHINA

   China's Trademark Law was adopted in 1982, (2) and experienced occasional amendments over the years, the most recent being in 2001, to meet China's treaty obligations arising from its ascension into the World Trade Organization (WTO). The law sets forth the role of the government in the area of trademarks by establishing the Trademark Office for the registration and administration of trademarks and a Trademark Review and Adjudication Board for handling trademark disputes, both under the umbrella of the State Administration for Industry and Commerce. (3) The law also sets forth the scope of the rights of the trademark owners, defines trademark infringement activities, and provides means for the owners to enforce their trademark rights. (4)

   To qualify for protection under the Trademark Law, a trademark must either be registered with the Trademark Office or be famous (5) Generally, registration is granted to a trademark that has noticeable characteristics and is distinctive, (6) with a few exceptions, such as when the trademark is deceitful or discriminatory] Famous marks, on the other hand, are ones that are widely known among the general Chinese public. (8) Unlike in the United States, where similarity to a famous trademark is not a permissible basis for refusing registration during ex parte examination, (9) the Chinese Trademark Office may deny registration to marks that are reproductions of famous trademarks that have not been registered in China. (10) Parties may also apply to the Trademark Office for famous status--a process not available under American law--in the limited circumstances arising from trademark or unfair competition litigation where the fame of the mark is at issue. (11)

   Both the Trademark Law and the Anti-Unfair Competition Law protect against trademark infringement (12) A party may infringe by using a mark that is the same as or similar to another's on the same or similar goods, selling goods that bear another's mark, counterfeiting another's mark, altering another's mark, or otherwise impairing another's right to use his or her mark. (13) Similar to the American doctrine of contributory infringement, the act of supplying facilities (such as storage, transportation, or mailing) for the purpose of infringement also incurs trademark infringement liability. (14) Trademark owners may obtain infringement remedies including injunctive relief and damages. (15) Where the circumstances are "serious" or where the amount of infringing sales involved is "relatively large" or "huge," infringement of a registered trademark might even constitute a crime. (16) If the infringer unknowingly sells infringing goods and can show that he obtained the goods lawfully, however, he will not be required to pay damages. (17)

   China's Trademark Law was designed to address many of the same concerns that motivated the development of American trademark law. Both Chinese and American law share the fundamental understanding of the "harm" of trademark infringement, as interpreted by the Supreme People's Court to be "consumer confusion." (18) However, as defined in its stated aims, which are "to protect the interests of consumers, producers and dealers and promote the development of the socialist market economy," Chinese trademark law also serves the purposes of "protecting the exclusive right to the use of a trademark, and encouraging producers and dealers to guarantee the quality of their goods and services and preserve the credibility of trademarks." (19) Like modern American trademark law, Chinese law is therefore directed not only to prevent consumer confusion but also to protect trademarks as a property right. (20)

   In addition to protecting consumers and businesses, the Trademark Law in its current form is designed to comply with the Agreement on Trade-Related Aspects of Intellectual Property Rights, an international agreement aimed at standardization of intellectual property rights that China joined as part of its WTO membership requirements. Chinese trademark law, therefore, is in structure and operation largely similar to its American counterpart.

   As this note will demonstrate, however, the realities of Chinese jurisprudence require trademark owners to be ready to implement specialized strategies in order to enforce their trademark rights.

2. LESSONS FROM TRADEMARK LITIGATION

   The following section examines the application of the law described above in several Chinese second-instance decisions in trials involving foreign plaintiffs. The cases, all decided within the last five years, are selected on the basis of the legal issues raised and the outcomes reached, so as to illustrate the bounds of trademark protection given by the courts and to derive practical lessons for foreign trademark owners in asserting their trademark rights in China. Where possible, the decisions are contrasted with applications of the American trademark law to highlight the adjustments the foreign trademark owners should adopt when doing business in China.

   1. Litigate! You Have a World to Win!

      There is no question that trademark infringement is rampant in China.

      Those that resort to litigation to seek vindication for their trademark rights, however, can find the courts surprisingly rewarding, just as Sotheby's did in suing a local auctioneer. (21) Founded in 1744, Sotheby's is one of the two premier auction houses in the world, engaging in art auction, private sales, and other art-related financing activities. It established a Hong Kong branch (Sotheby's Hong Kong) in 1974 to develop its business in the Asian market, and started a series of promotional activities in mainland China in 1988 using both its original English mark SOTHEBY'S as well as its Chinese mark "[TEXT NOT REPRODUCIBLE IN ASCII]", which it had already registered as a trademark in Hong Kong and Taiwan in traditional Chinese characters "[TEXT NOT REPRODUCIBLE IN ASCII]." Sotheby's registered "SOTHEBY'S" and [TEXT NOT REPRODUCIBLE IN ASCII] in mainland China 1995, and also filed an application for [TEXT NOT REPRODUCIBLE IN ASCII] 2006.

      Clearly hoping to take advantage of Sotheby's reputation, a local auctioneer adopted similarly...