M ingli Chen, Esq, ( mc@shenlaw.com )
(Courtesy of Epstein Becker & Green, P.C.)
One should not assume that all accused trademark infringers are acting or acted in bad-faith simply on the basis of their allegedly infringing activities. While some are clearly bad-faith infringers intending to hijack or violate another's legitimate trademark rights, some others might just be following a good-faith strategic trademark plan which coincidentally happen to infringe another's trademark rights. Without regard to the intent of an accused infringer, it is recommended that the foreign investor take into account the following proactive and remedial actions for long-term business success in China .
Often, a single approach to IP protection is not enough to fully protect a business investment with valuable IP assets. Trademarks, copyrights, patents and trade secrets each protect slightly different aspects of a company's IP assets. A well written contract incorporating trademark and other IP protections clauses is another valuable way to protect IP assets. Such contracts usually help provide a stronger basis for IP protection, as well as an easier way to enforce IP rights later. Neither alone is perfect. But, in combination, they offer a company IP asset protection on multiple levels.
China is a member of both the Madrid Agreement Concerning the International Registration of Marks (“Agreement”) and the Protocol Relating to the Madrid Agreement Concerning the International Registration of Marks (“Protocol”) [16] which confers a broader scope of protection to the international trademark applicant. It is often recommended that the trademark owner register its trademarks internationally and request that the protection extend to as many member countries as possible.
One word of caution: when applying for international registration with China as the country of origin, applicants have to bear in mind a pre-condition found in Article 3 of the Measures for the Implementation of International Registration of Marks under the Madrid Agreement. Article 3 provides that “[a]ny party applying for international registration of a mark where China is the country of origin shall have real and effective industrial or commercial establishments in China , or be domiciled in China , or be a Chinese national.”
Alternatively, another way for a U.S. company to obtain trademark protection in China is under the Paris Convention. Both China and the United States are members of the Paris Convention. As a result, a U.S. company that has registered its trademark in the United States can benefit from the U.S. priority date in China if the company registers its trademark in China within 6 months of its initial registration of the same mark in the United States .
Article 8 of the Trademark Law of the Peoples Republic of China provides that any visual sign capable of distinguishing the goods or service of one natural person, legal entity or any other organization from that of others, including any word, design, letters of an alphabet, numerals, three-dimensional symbols, color combinations and combinations thereof, may be filed for trademark registration. This provides the flexibility of registering solely words, designs, numbers or other elements, or any combination thereo,f as trademarks. Investors should consider registering all possible and rational combinations as trademarks to avoid another's imitation or infringement.
In registering word marks, in light of the above “Starbucks” example, the registrants in that case might have considered registering both Latin and Chinese, and possibly other language equivalents/translations/transliterations/phonetic translations, as trademarks to obtain a wide scope of protection and preempt the problem they are facing now.
Another possible strategy in cross-category registration of same or similar trademarks, and registering of similar trademarks under one category of products as a precaution. An example of such a strategy is seen in the registrations of a major Chinese television set manufacturer, TCL Corporation (“TCL”). TCL not only registered the “TCL” trademark in the category for use in connection with televisions, but also registered the “TCL” trademark 71 other times in 37 other categories in order to protect its leading trademark “TCL”. [17]
In light of the earlier referenced domain name hijacking, it is recommended that foreign investors register, as early as possible, their company names, trademarks and similar company names and trademarks as domain names as a precautionary step to protect their trademarks. In China , China Internet Network Information Center (“CNNIC”) is in charge of domain name registration matters and accordingly, domain name registrations should be filed with the CNNIC.
In addition to regular trademark applications, investors should make efforts to apply for the recognition of their marks as well-known marks, because well-known marks enjoy a broader scope of protection. Article 3 of the April 17, 2003, State Administration for Industry and Commerce-issued Provisions on the Determination and Protection of Well-Known Marks provides for specific conditions for recognition of a trademark as a well-known mark. [18]
Marking provides third parties with notice that a particular trademark is registered. However, contrary to the U.S. , notice is not a prerequisite for collecting damages for trademark infringement. Marking is done by placing ® and/or using a Chinese word “ ? ” surrounded by a circle (which means “already registered (trademark)” on the product and/or on materials associated with the services.
Foreign investors in China have long been concerned about IP protection and, accordingly, organized the China Anti-Counterfeiting Coalition (also called the Quality-Brands Protection Committee) (“CACC/QBPC”) which is the Chinese equivalent of the International Anti-Counterfeiting Coalition (“IACC”). The CACC/QBPC has played a significant role in protecting the member companies' trademarks and other intellectual property rights.
Joining CACC/QBPC has many advantages. One advantage of membership is that member companies are able to draw on each other's experiences regarding the protection of their IP rights. Another advantage to membership is that relationships with representatives of relevant government authorities can be developed during the frequent meetings held by the CACC/QBPC, which many government representatives attend. Further, joining CACC/QBPC also means that as a group, the CACC/QBPC represents its member companies in lobbying efforts to the Chinese government to make and adopt new laws specifically addressing the member companies' concerns, such as the registration of non-traditional trademarks, e.g., scent and sound marks. Currently, Chinese trademark laws and regulations do not address registration of non-traditional trademarks.
Registering trademarks with Chinese customs is an effective way to request customs to assist in the watch for the exportation or importation of products bearing infringing marks. Once such an infringement is noted, customs notifies the trademark owner who can then take immediate action against the infringing activities. Recent statistics show that not many trademark owners use Chinese customs to help police their trademarks. [19] Accordingly, a foreign investor would be well advised to avail themselves of this simple procedure.
When proactive actions need to be taken because of trademark infringement, the following remedial actions should be considered.
Establishing a good working relationship with the many Chinese government authorities such as the Public Security Bureau (“PSB”), the State Administration for Industry and Commerce (“SAIC”) and its subordinate branches, the Quality & Technology Supervision Bureau and the Chinese customs, can play an important role in trademark enforcement actions. As noted above, being a member of the CACC/QBPC is one way to establish such relationships, and is also an excellent way to lobby the government to consider and enter new laws or regulations.
Another way of developing positive relationships with Chinese government authorities, which is unique to Chinese culture, includes writing thank you letters to specific government authorities who carry out their job duties in an outstanding way.
Such reporting includes reporting suspicious trademark activities to the SAIC and its subordinate branches, and to the Trademark Review and Adjudication Board in the state trademark office. Such a report should include a request for them to make a determination of trademark infringement, and also to take administrative actions to stop and penalize the infringers.
In some instances, it is not advisable to warn a suspected trademark infringer too early. Such an early warning could give the suspected infringers the time and the opportunity to quickly hide or correct the infringing activities, which actions will become obstacles that need to be overcome in later legal actions. The better approach in such instances may be to quietly investigate the suspected infringer's activities to collect the needed evidence before sending the cease and desisting letter.
This alternative method of protecting trademark rights is not the most desirable, because the legitimate trademark owner/domain name registrant has a weak bargaining position in light of the hijacker's/bad-faith registrant's improperly registered mark/domain name. Additionally, even if the negotiation is successful, the hijacker/bad-faith registrant will demand a very high price, especially if the legitimate trademark owner has a well established history and must buy the trademark/domain name back from the registrant in order to conduct its business in China . As explained above, although cyber-squatting and bad-faith hijacking of another's mark is against the law in China, the purchasing of domain names and/or trademarks is more common than one would like and not illegal in and of itself.
This is a very strong legal remedy for protecting trademarks. However, in litigation, there are many issues to address, such as evidence collection, preservation of the perishable infringing products/evidence, which makes this process very costly.
This is the strongest legal remedy available to a trademark owner to protect its legitimate trademark rights . Remedies include incarceration and government fines, but can also include monetary awards to the claimant. [20] Criminal action is available under the Chinese trademark laws and regulations however, such actions cannot be directly taken by the trademark owners. The trademark owners must file their complaints with a request for relief through Chinese prosecutors. Furthermore, although this is the strongest action available to trademark owners, such actions are rare. Such actions are rare because the threshold for the government to open a criminal case file for trademark infringement is high and usually hard to meet. In 2002, although 23,539 trademark infringement and counterfeiting cases were handled nationwide by the administration for industry and commerce, only 59 cases were referred for criminal adjudications . [21]
Trademark protection is a theoretically simple, but practically a more complicated matter in China . Currently in China , there are many examples of different types of trademark infringement. In practice, taking remedial actions to protect trademark rights requires prudent planning and efficient management. Further, in the absence of proper proactive steps to protect trademark assets from the beginning, the efforts of foreign investors are often frustrated. Given this situation in China , it is highly recommended that foreign investors first trademark their business by adopting a comprehensive trademark protection plan before entering the marketplace in China by making substantial investments in advertisements and commercial promotions.
[1] This document has been provided for informational purposes only and is not intended and should not be construed to constitute legal advice. Please consult your attorneys in connection with any fact-specific situation under federal law and the applicable state or local laws that may impose additional obligation on you and your company.
[2] Telegraphic report from the American Embassy in Beijing : China Investment Climate Statement for 1997 (2/3).
[3] See “Why China Is So Alluring” published in BusinessWeek, March 15, 2004. The foreign direct investment (“FDI”) in China in 1999 was 40 billion USD, in 2003 China was second only to the U.S. as a recipient of FDI, and in 2004 the FDI is expected to soar as high as 100 billion USD.
[4] Article 52 of the Trademark Law of the Peoples Republic of China provides five basic infringement causes of action: a) to use a trademark that is identical with or similar to a registered trademark on identical or similar goods without the authorization from the trademark registrant; b) to sell goods that one knows bear a counterfeit registered trademark; c) to counterfeit, or to make, without authorization, representations of a registered trademark of another person, or to sell such representations of a registered trademark as a counterfeit or without authorization; d) to replace, without the consent of the trademark registrant, the registered trademark and market again the goods bearing the replaced trademark; and, e) to cause, in other respects, prejudice to the exclusive right of another person to use a registered trademark. “Other respects” include: (i) using any signs which are identical or similar to another person's registered trademark as the name of the goods or decoration of the goods on the same or similar goods, thus misleading the public; and, (ii) intentionally providing facilities such as storage, transport, mailing, concealing, etc. for the purpose of infringing another person's exclusive right to use a registered trademark.
[5] Each Chinese character unanimously has four different tones: first, second, third and fourth. The pronunciations of the two words “ ? ” and “ ? ” are the same, except that “ ? ” reads in its fourth tone and “ ? ” reads in its third tone. This is why they sound almost exactly the same in Chinese.
[6] For example, other factors to consider include, how serious the claim of infringement is, how many infringing products are produced, how similar the infringing mark is to the trademark, whether the accused infringer has infringed that particular trademark owner's trademarks in the past and how often this has occurred, etc.
[7] See article “A Case Regarding Protecting Trademark ‘Discovery Channel' and Its Design,” published on the web site of Trademark Office of the State Administration for Industry and Commerce of People's Republic of China “http://sbj.saic.gov.cn”
[8] Note: Southern areas of China have historically been more aggressive about pursuing economic growth, whereas northern areas of China have a reputation for being more economically conservative.
[9] A kind of traditional Chinese cake catered during the August 15 Holiday (Mid-Autumn Festival) in the Chinese lunar calendar year.
[10] A copy of the court decision is available from the co-author, Mr. Chen, who was personally involved in the case.
[11] South China Morning Post, February 21, 2004: Hyundai Pays High Price to Win Back Trademark Rights; The Deal Has Highlighted the Problem of Intellectual Property Ownership.
[12] This is one of the major Chinese administrative authorities which is in charge of investigating and correcting trademark infringements.
[13] See, “A Case Regarding Protecting the Trademark ‘Benz',” published on the web site of the Trademark Office of the State Administration for Industry and Commerce of People's Republic of China “http://sbj.saic.gov.cn”.
[14] China Industry: Coffeecat published in EIU ViewsWire, March 17, 2004.
[15] See, “Resolutions to the Conflicts Between Domain Names and Trademark Rights” by Lebo Zhuang published on the web site “http://markbook.nease.net”
[16] Interestingly, although the Protocol was passed on June 27, 1989, at the Madrid convention, it did not become effective due to the inadequacy of the member countries until December 1995, when China joined the Protocol as the fourth member.
[17] Marketbook, April 18, 2001: Registering Joint and Precautionary Trademarks to Avoid Trademark Infringements.
[18] Article 3: The following may serve as evidences to prove that a mark is well-know: (a) documents concerning the degree of knowledge or recognition of the mark in the relevant sector of the public; (b) documents concerning the duration of the use of the mark, including those related to the history and scope of the use and the registration of the mark; (c) documents concerning the duration, extent and geographical area of any promotion of the mark, including the approach to, geographic area of , the type of media for and the amount of advertisements for the promotion of the mark; (d) documents concerning the record of successful enforcement of rights in the mark, including the relevant documents certifying the mark in question was once protected as a well-known mark in China or any other country/region, and, (e) other evidence certifying that the mark is well-known, including, in the past 3 years, the outputs, sales volumes, sales incomes, profits and taxes and sales regions, etc. of the principal goods to which the mark applies.
[19] See, “The Customs Protections of the Trademark Rights” by Yongshui Wang, Customs General Administration of the Peoples Republic of China .
[20] Article 59 of the Trademark Law of the Peoples Republic of China provides:
“Whre any party uses, without the authorization from the trademark registrant, a trademark identical with a registered trademark, and the case is so serious as to constitute a crime, he shall be prosecuted, according to law, for his criminal liabilities in addition to his compensation for the damages suffered by the infringer.”
“Where any party counterfeits, or makes, without authorization, representations of a registered trademark of another person, or sells such representations of a registered trademark as were counterfeited, or made without authorization, and the case is so serious as to constitute a crime, he shall be prosecuted, according to law, for his criminal liabilities in addition to his compensation for the damages suffered by the infringer.”
“Where any party sells goods that he knows bear a counterfeited registered trademark, and the case is so serious as to constitute a crime, he shall be prosecuted, according to law, for his criminal liabilities in addition to his compensation for the damages suffered by the infringer.”
[21] See “ Statistics of Trademark Infringement and Counterfeiting Cases in 2002,” published by the state trademark office of P. R. China on its web site http://sbj.saic.gov.cn