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The Protection of Non-Traditional TrademarksCritical Perspectives$

Irene Calboli and Martin Senftleben

Print publication date: 2018

Print ISBN-13: 9780198826576

Published to Oxford Scholarship Online: February 2019

DOI: 10.1093/oso/9780198826576.001.0001

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Protecting Non-Traditional Trademarks in China

Protecting Non-Traditional Trademarks in China

New Opportunities and Challenges

Chapter:
(p.185) 9 Protecting Non-Traditional Trademarks in China
Source:
The Protection of Non-Traditional Trademarks
Author(s):

Haochen Sun

Publisher:
Oxford University Press
DOI:10.1093/oso/9780198826576.003.0010

Abstract and Keywords

Drawing on a series of cases that Hermès has litigated in China, the chapter discusses how transnational companies should tap into the potential of non-traditional trademarks to promote their businesses in China. Section I of the chapter provides an overview of the most important requirements for registering such trademarks in China. It considers why the Chinese courts rejected Hermès’ bid to register the shape of its Kelly bag as a three-dimensional trademark in China. Through the lens of several trademark cases that the French high-fashion luxury brand litigated in China, Sections II and III offer nuanced analysis of how companies can protect their trademarks in the Chinese first-to-file registration system and how to determine the well-known-trademark status in the country. Sections IV and V further examine the lessons that can be learnt from the Hermès cases about securing anti-confusion and anti-dilution protection of non-traditional trademarks in China.

Keywords:   non-traditional trademarks, China, Hermès, registration requirements, well-known trademarks, anti-confusion protection, anti-dilution protection

I. Introduction

China has become the world’s second largest consumer market.1 Chinese consumers purchased an estimated US $10.2 billion worth of luxury goods in 2013 alone, amounting to approximately 47% of the luxury sector’s total global sales.2 In addition, the country’s consumers now purchase more non-luxury goods and services than their counterparts anywhere else in the world. For example, China is now the world’s largest car market.3 Given Chinese consumers’ general preference for foreign branded products and services, China has become the most significant market for many transnational companies.

Non-traditional trademarks have become an important tool for transnational companies looking to market their goods and services in China. They offer new ways to attract consumers, as they differ from the words, logos, letters, and numbers that are traditionally used as trademarks. Today, they are increasingly being used in the marketplace thanks to the expansion of the Internet and rising use of new technologies.

This chapter addresses the scope of non-traditional trademarks in the context of China. That scope encompasses not only color, motion, sound, and three-dimensional marks, but also marks that have been adapted into Chinese-language versions. Transnational companies need to localize their marketing strategies in ways that suit the cognitive abilities of Chinese consumers. One such strategy is the use (p.186) in China of a Chinese version of a company’s trademark, which will of course look quite unfamiliar, and even strange, to people in other parts of the world who do not know the Chinese language.4 From this perspective, the Chinese version of a trademark can be regarded as a non-traditional trademark.

Drawing on a series of cases that Hermès has litigated in China, the chapter discusses how transnational companies should tap into the potential of non-traditional trademarks to promote their businesses in China. Section I of the chapter provides an overview of the most important requirements for registering such trademarks in China. It considers why the Chinese courts rejected Hermès’ bid to register the shape of its Kelly bag as a three-dimensional trademark in China. Through the lens of several trademark cases that the French high-fashion luxury brand litigated in China, Sections II and III offer nuanced analysis of how companies can protect their trademarks in the Chinese first-to-file registration system and how to determine the well-known-trademark status in the country. Sections IV and V further examine the lessons that can be learnt from the Hermès cases about securing anti-confusion and anti-dilution protection of non-traditional trademarks in China.

II. Registration of Non-Traditional Trademarks

A. Registrable subject matter

The Chinese Trademark Law was first enacted in 1982 and has been revised several times since then. Article 7 of the 1982 Trademark Law prescribes that “[a]ny word or design, or combination thereof, used as a trademark, shall have distinctive characteristics so as to facilitate identification.”5 Therefore, the law allows the registration of Chinese versions of foreign marks. However, it remains ambiguous concerning whether other forms of non-traditional marks are registrable in China.

China joined the World Trade Organization in December 2001, which made it a member state of the Agreement on Trade-Related Aspects of Intellectual Property Rights (the TRIPS Agreement). Accordingly, it revised the 1982 Trademark Law (including Article 7) in 2001 to bring it into line with the minimum standards of protection in the TRIPS Agreement. Article 8 of the 2001 Trademark Law specifies the scope of registrable marks in China as follows:

Any visible sign that can serve to distinguish the goods of a natural person, legal person, or other organization from those of another, including any word, design, letter of the alphabet, numeral, three-dimensional symbol and color combination, or any combination of the above, may be made a trademark for application for registration.6

(p.187) Article 8 clarifies two aspects of non-traditional trademark registration. First, it allows the registration of such non-traditional marks as those in three-dimensional form and those consisting of colors. Second, as it expressly requires that registrable signs be visible, it excludes sound and smell marks from the scope of registrable marks.

In 2013, China revised the Trademark Law7 again, with the revised Article 8 further expanding the scope of registrable marks:

Any signs, including words, graphs, letters, numbers, three-dimensional symbols, color combinations, sound or any combination thereof, that are capable of distinguishing the goods of a natural person, legal person or other organization from those of others may be applied for registration as trademarks.

By removing the visibility requirement, the 2013 Trademark Law permits the registration of sound marks, but the revision made no attempt to render other types of non-traditional trademarks, including smell, taste, and motion marks, registrable in China.8 The draft revision proposed allowing the registration of single-color marks if they had acquired distinctiveness through use, but the proposal was not adopted.9 Therefore, single-color marks remain unregistrable in China.10

B. Distinctiveness and functionality

Distinctiveness is a core requirement for registering trademarks, including non-traditional trademarks, in China. Article 9 of the 2013 Trademark Law states that “[a] trademark submitted for registration shall bear noticeable characteristics and be readily distinguishable . …”

The distinctiveness requirement under Chinese trademark law has two layers: inherent distinctiveness and acquired distinctiveness. On the one hand, Article 9 of the 2013 Trademark Law allows a sign that has inherent distinctiveness to be registered as a trademark. On the other, Article 11 permits a descriptive or generic sign that lacks inherent distinctiveness to become registrable if it has acquired distinctiveness through use.11

(p.188) Among all non-traditional trademarks, it is most difficult for an applicant to demonstrate the distinctiveness of a sound mark. This is because average consumers do not necessarily treat sound as an indicator of source of goods. Rather, they may perceive sound merely as background music in an advertisement or as an emission generated by a product when it is used. In 2014, Tencent applied to register the “Di Di Di Di Di Di” sound mark, which was a notification sound used in its QQ instant messaging software. The Chinese Trademark Office rejected the application on the grounds that the sound lacks distinctiveness. Given that the sound is simple and not creative, consumers would not associate the instant messaging software with Tencent.12

However, a sound mark could still acquire distinctiveness through long-term use. The first successful registration of a sound mark in China was achieved by the Chinese Radio International (CRI) in 2016. The sound mark consists of forty-seconds of music with a human voice pronouncing the full Chinese name of CRI. Owing to CRI’s consistent use of this sound mark at the beginning of its broadcasting programs since 1998, listeners have become able to associate the mark with CRI.13

In addition to distinctiveness, the 2013 Trademark Law has a special requirement for three-dimensional trademarks. To be registered as a trademark, a three-dimensional sign must be non-functional. Article 12 of the 2013 Trademark Law stipulates this requirement as follows.

No application for registration of a three-dimensional symbol as a trademark may be granted, where the sign merely indicates the shape inherent in the nature of the goods concerned, or it is only dictated by the need to achieve technical effects or the need to give the goods substantive value.

The Chinese Supreme Court’s ruling in a case brought by Hermès sheds important light on how the distinctiveness and non-functionality requirements should be applied to assess the registrability of three-dimensional marks. The case concerned Hermès’ attempt to register the shape of its Kelly bag as a three-dimensional trademark, which the Chinese Trademark Office refused. That refusal prompted Hermès to litigate in the Beijing First Intermediate Court and High Court, both of which upheld the decision made by the Chinese Trademark Office. Hermès then petitioned the Chinese Supreme Court, requesting that it review the lower court decisions. The Supreme Court handed down a decision against Hermès, ruling that the shape of its Kelly bag could not be registered as a three-dimensional trademark in China.

(p.189) On the one hand, the Chinese Supreme Court explained why functionality is a bar to registering a three-dimensional mark as a trademark. Because the three-dimensional shape of a product is inseparable from the product itself, the public will normally view a three-dimensional mark as an integral part of the product concerned, thus rendering it unsuitable for registration as a trademark.

On the other hand, the Supreme Court also pointed out that a three-dimensional product shape can be registered as a trademark if it has inherent or acquired distinctiveness. A three-dimensional such shape has inherent source-identifying distinctiveness if it contains distinctive features allowing it to be differentiated from the shape of similar products. Alternatively, it can acquire distinctiveness through repeated use in the marketplace. Acquired distinctiveness through use enables the consuming public to associate the shape with the product’s manufacturer.

Hence, the Supreme Court decided the case on the basis of whether the shape of the Hermès Kelly bag had inherent or acquired distinctiveness. With respect to the former, it opined that the main features of the Kelly bag design, such as its upper cover, belt, and metal lock, were common elements of other bag designs. Given that the combination of those features did not render the Kelly bag distinguishable from numerous other bags on the market, its three-dimensional shape could not be deemed inherently distinctive. With respect to the latter, the Supreme Court further ruled that the evidence submitted by Hermès did not demonstrate that the bag’s three-dimensional shape had acquired distinctiveness through use for two reasons. First, in the Court’s opinion, Hermès had presented a paucity of evidence of advertising in mainland China. Furthermore, the promotional materials it offered had nothing to do with the three-dimensional shape of the Kelly bag, but primarily concerned the company’s historical developments and commercial operations. Second, the consumer survey report that Hermès submitted to the Court failed to prove that any association between the Kelly bag shape and Hermès had been created in the minds of the relevant sector of consumers. Instead, the report exhibited only consumers’ interest in the three-dimensional shape of the bag itself. It remained unclear whether consumers considered the three-dimensional mark to have acquired a source-identifying function.

Based on its analysis of the distinctiveness requirement under Chinese trademark law, the Supreme Court ruled out the possibility of the three-dimensional shape of the Kelly bag being registered as a trademark. However, that ruling does not necessarily mean that it is exceedingly difficult, or even impossible, to prove the distinctiveness of a three-dimensional mark to the satisfaction of the Chinese Trademark Office or the Chinese courts. After all, recent years have seen an increasing number of registrations of three-dimensional trademarks in China, including, for example, the Coca-Cola bottle, Zippo lighter, Toblerone chocolate bar, Rolls Royce’s Spirit of Ecstasy hood ornament,14 and Ferrero Rocher’s golden paper-wrapped chocolate packaging.15

(p.190) As long as a non-traditional mark meets the requirements for registration (the distinctiveness requirement in particular), it can be registered in China and will be protected. For example, the Chinese Court ruled that Ferrero Rocher’s mark consisting of the three-dimensional shape of a ball-shaped praline wrapped in gold-colored creased paper set in a brown and gold base with ripple patterns was sufficiently distinctive for trademark registration. Because those colors and the layout of the mark are not commonly used in the industry for chocolates, the unique creativity of the mark makes it a symbolic design for Ferrero Rocher’s chocolates. In this context, consumers could associate chocolates bearing such a mark with Ferrero Rocher.16

III. The First-to-File Rule

The Chinese Trademark Office closely adheres to the “first-to-file” rule in assessing the registrability of a trademark.17 Under this procedural rule, a trademark registration will be granted to the first person or company to file the mark with the Chinese Trademark Office, provided that it meets the substantive requirements for registration. Although the first-to-file rule seems a simple procedure on its face, it actually poses an enormous challenge for transnational companies looking to register and protect non-traditional marks in China.18 Trademark squatters may come up with words or logos that sound or look similar in Chinese in ways that transnational companies could not foresee owing to cultural gaps and their limited Chinese-language ability. Many such squatters attempt to register those words or logos as trademarks without any intention of using them commercially but simply to be able to demand payouts and threaten litigation against companies using similar—very often legitimate—marks in China.

The legal battle between Hermès and Chinese company Dafeng epitomizes the urgency for transnational companies to take the first-to-file rule seriously and adopt proper registration strategies for their non-traditional trademarks. Hermès registered the Hermès mark and its logo in China in 1977, but did not register any Chinese transliteration of “Hermès” as a trademark. In 1995, Dafeng applied to the Chinese Trademark Office to register a Chinese word mark reading “Ai Ma Shi” for its clothing products. The application passed the preliminary review. Then, in 1997, Hermès brought an action to the Chinese Trademark Office opposing the preliminary approval of Dafeng’s trademark registration. The company (p.191) contended that Dafeng’s trademark was too similar to the Chinese transliteration of its own registered trademark (also pronounced “Ai Ma Shi” in Chinese). The Trademark Office rejected Hermès’ appeal and officially approved Dafeng’s registration in 2001, prompting Hermès to take its appeal to the Beijing First Intermediate Court.19

Hermès’ grounds for appeal were twofold. First, it asserted that the Chinese transliteration of “Hermès” did not have a fixed Chinese translation, and it was naturally first developed and utilized by Hermès itself. Further, the Hermès trademark and its Chinese transliteration were highly reputable within China. Thanks to the considerable amount it had spent on advertising, the company argued, the Hermès trademark and its Chinese transliteration were strongly and clearly differentiated in the minds of Chinese consumers. Second, Hermès alleged that Dafeng had acted in bad faith in registering its mark, because it obviously knew that its mark would cause confusion among consumers. Hermès provided evidence regarding the fame and recognition of its trademark, as well as evidence suggesting that Dafeng’s registered trademark constituted an imitation of the Hermès trademark for exploitative purposes. However, the Beijing First Intermediate Court upheld the Trademark Office’s decision, prompting Hermès to further appeal to the Beijing High Court in 2012.20

The Beijing High Court, too, ruled against Hermès, determining that Dafeng had legally registered its Chinese trademark. It held that allowing Hermès to register Dafeng’s Chinese trademark would run counter to Article 28 of the 2010 Trademark Law on several grounds: (1) Dafeng had registered its mark prior to Hermès; (2) both marks come under the “clothing” category; (3) the two marks bear striking similarities; and (4) Hermès could not satisfactorily prove that its mark would not sow public confusion. Central to the High Court’s decision was its adherence to the first-to-file rule. Because Hermès had not attempted to register the Chinese transliteration of its mark before Dafeng, it was not entitled to that transliteration despite having registered the Hermès mark in China and having an international reputation.

Moreover, as later cases revealed, not only had the Chinese transliteration of the Hermès mark been registered as a trademark, but so too had been a wide range of surprisingly strange variations of the Hermès mark and logo, including “HermesEpitek,” “HERM,” and “Aimas.” Therefore, it is clearly not feasible for transnational companies to foretell all possible scenarios and then register every Chinese transliteration or logo that may sound and appear similar to their registered trademarks. The range of cases associated with the Hermès mark suggests that the problem of the “trademark troll” stems from the Chinese trademark system’s first-to-file rule. The French firm is not alone in suffering such a fate, with the number of trademark troll cases growing rapidly in recent years. Trademark squatters typically (p.192) target transnational companies, causing severe damage to their businesses and reputations.21 For example, in April 2012, a Chinese Court ordered Castel Freres SAS, a French wine manufacturer, to pay over US$5 million in compensation for infringing the “Ka Si Te” trademark, which is the Chinese transliteration of “Castel.”22 Moreover, in August 2014, Tesla Motors Inc. had to resolve a trademark squatting dispute with a Chinese businessman before the U.S. electric car maker could finally market its brand in China.23

As a response to the increasingly serious problem of trademark trolls, the 2013 revision of the Chinese Trademark Law was intended to prevent abusive exploitation of the first-to-file rule. First, the 2013 revision establishes the principle of good faith as the legal basis for filing trademark cancellation requests.24 The new Article 7 provides that an application for trademark registration and the use of a trademark be based on the principle of good faith and that the principle constitutes a solid ground for trademark cancellation.25 The new Article 45 also addresses the consequences of malicious registration, stipulating that trademarks so registered may be canceled even after the five-year limit. Moreover, the 2013 Trademark Law also takes into account the liability of trademark agencies, which are now required to act in good faith and abide by relevant laws and regulations,26 and are civilly liable in the case of any violation.27 The incorporation of the principle of good faith in the 2013 Trademark Law, together with the corresponding statutory provisions, requires the Chinese Trademark Office and the courts to examine trademark registration applications more rigorously. Therefore, the owners of registered non-traditional marks are now in a better position to guard against malicious attempts to register signs that look identical or similar to those marks, whether they are registered in China or elsewhere in the world.

IV. Recognition of Well-Known Trademarks

Compared with ordinary trademarks, well-known trademarks receive a higher level of protection in China. For instance, while unregistered ordinary marks are not protected at all, unregistered well-known marks are protected against unauthorized (p.193) uses that would lead to consumer confusion.28 The protection of registered well-known trademarks covers all classes of goods and services.29 Moreover, under Chinese trademark law, only well-known trademarks are entitled to anti-dilution protection, which is a form of protection divorced from the anti-confusion protection covering all kinds of registered trademarks. Hence, gaining well-known-trademark status is of critical importance to the protection of non-traditional marks. By examining the Hermès v. Dafeng ruling and a number of other cases involving Hermès, this section considers the crucial factors for determining whether a non-traditional trademark can achieve such status in China.

China operates a passive system for recognizing well-known trademarks. Only when a trademark dispute arises can a trademark owner apply to the court and administrative organs to confer well-known status upon that mark.30 Under Article 14 of the 2013 Trademark Law, there are four major factors determining whether a mark is a well-known trademark: (1) the degree of recognition of the mark among the relevant public sector in its trading areas; (2) how long the mark has been in use; (3) the duration and extent of advertising and publicity of the mark and the geographical extent of the trading areas in which it is used; and (4) the mark’s record of being protected as a well-known trademark.31

In Hermès v. Dafeng, the Beijing High Court had to decide whether Hermès and its unregistered Chinese version had achieved well-known-trademark status by the time the defendant, Dafeng, registered its trademark in 1995. The High Court’s analysis focused on the first three standards in Article 14 of the 2013 Trademark Law. First, the Court held that the first factor in Article 14 means that only when a mark is recognized by the relevant consuming public in mainland China can it potentially be regarded as a well-known trademark. Hermès submitted evidence of media coverage of its marketing efforts by such Hong Kong newspapers as Ta Kung Pao, Ming Pao, and the Hong Kong Economic Journal. In the High Court’s opinion, however, Hermès had proved wide media coverage only in Hong Kong, not, as required by Chinese trademark law, in mainland China. By the same token, the Taiwan Court’s recognition of Hermès as a well-known trademark in Taiwan would not lend support to Hermès’ case. Therefore, in terms of public recognition in mainland China, the High Court did not rule in Hermès’ favor. Second, the High Court held that the evidence submitted by Hermès did not meet the second and third factors listed in Article 14 of the 2013 Trademark Law. Although the company submitted media coverage by such mainland Chinese magazines as the Shopping Guide to Quality Goods, the High Court pointed out that it did not show the total number (p.194) of magazines circulated to the public, the geographic scope of magazine circulation, or the duration of media coverage.32

By contrast, the Beijing High Court did recognize Hermès as a well-known trademark in Hermès v. HermèsEpitek, a case it decided in 2013, just one year after the Hermès v. Dafeng decision. Judging from the evidence submitted by Hermès in the 2013 case, the High Court held that the company had extensively and persistently promoted its brand and goods in China for a relatively long time and with a wide geographic reach before the date on which HermesEpitek submitted its trademark registration to the Chinese Trademark Office in 2004. For example, Hermès advertisements had featured prominently in mainland Chinese newspapers, magazines, and websites, and the company had opened stores in Beijing, Guangzhou, Shanghai, and elsewhere in China. Therefore, the High Court ruled that Hermès’ promotional efforts had brought it sufficient fame among the relevant consuming public in mainland China.33

Why did the High Court reach two entirely different decisions regarding Hermès’ well-known-trademark status in China? First and foremost among its reasons was the date on which Hermès was claiming recognition as a well-known trademark in China. As noted at the beginning of this section, under Chinese trademark law, the procedure for recognizing a trademark as well-known is triggered only in the event of a trademark dispute. If a senior mark owner wishes to have its mark recognized as a well-known mark and to rely on that status in a request to cancel the registration of a junior mark, then its application for well-known mark recognition must be evaluated before the junior mark’s owner filed the registration of its mark. Put differently, the senior mark owner must prove that its mark had acquired well-known-trademark status before the date on which the junior mark owner submitted its trademark registration to the Trademark Office.

Therefore, to understand the two contrasting court decisions, it is necessary to examine the timing of the well-known-trademark recognition requests Hermès submitted to the Beijing High Court. In Hermès v. Dafeng, Dafeng filed its registration (p.195) application on September 5, 1995, which means that Hermès had to prove that its mark had achieved well-known-trademark status before that date.34 Similarly, as HermesEpitek had filed for trademark registration on April 22, 2004, Hermès had to prove that such status had been achieved before that date.35 Therefore, the dividing line between the two cases was a matter of two different dates, and hence Hermès bore a different burden of proof in each. In September 5, 1995, China’s luxury goods market was barely functional. There was little, if any, demand for luxury goods (such as very expensive Hermès handbags) because very few people could afford them. It is thus entirely understandable that Hermès would not have actively advertised its brand and goods in China in those early years. Without effective promotional efforts, however, it was not possible for Hermès to have been recognized as a well-known trademark before September 5, 1995, the date on which Dafeng filed for trademark registration. From this perspective, the Court ruled correctly in Hermès v. Dafeng, holding that neither the registered Hermès trademark nor its unregistered Chinese version were well-known trademarks before that date.

The situation since 1995 has been entirely different. China’s economy has boomed, and increasing numbers of people have acquired wealth and the desire to change their lifestyles in accordance with it. Consequently, the luxury goods market has grown rapidly in response to increased demand.36 Therefore, it is no surprise that Hermès began more actively promoting its brand and products in a wealthier China. As Hermès v. HermesEpitek revealed, Hermès had actually launched substantive advertising efforts and opened stores in mainland China before 2004, the year in which HermesEpitek filed its trademark registration.

In addition to the issue of timing, the two cases also demonstrate that the legal standards for conferring well-known-trademark status require applicants to furnish evidence sufficient to convince the courts. In determining whether a mark is deserving of such status, the courts focus primarily on its degree of public recognition and the duration and extent of the advertising and publicity surrounding it. The courts place emphasis on the strength of the trademark owner’s evidence in the form of advertisements, media coverage, and consumer surveys to assess whether those efforts were effective in achieving fame for its trademark in mainland China.37 As discussed previously, in Hermès v. HermesEpitek, Hermès’ reliance on evidence showing that it had carried out extensive promotional activities in the country proved successful in demonstrating its well-known-trademark status to the Court’s satisfaction.

(p.196) The foregoing discussion of these two important Hermès cases shows that companies must be proactive in designing and implementing marketing and advertising plans if they wish to have their non-traditional trademarks recognized as well known in China. The mere act of registering trademarks in China is far from sufficient to achieve effective branding strategies. As shown by Hermès v. Dafeng, the near absence of promotional efforts in mainland China in the relevant period made it impossible for Hermès’ mark to be recognized as a well-known trademark by the Chinese courts. Hence, Hermès lost the case to Dafeng, legally allowing Dafeng to continue using the Chinese transliteration of “Hermès” as a trademark for its clothing products.

V. Anti-Confusion Protection

One of the core functions of trademark law is to prohibit the unauthorized use of a trademark, which could mislead the relevant sector of consumers. Thus, such unauthorized use causing likely confusion over the source of goods or services amounts to an infringement of the exclusive right to use a trademark. The cases that Hermès has litigated have profound implications for whether the owners of non-traditional marks can effectively secure anti-confusion protection in China.

Article 57.2 of the 2013 Trademark Law constitutes the primary provision conferring such protection upon all registered marks. It provides that the following act infringes the exclusive right to use a registered trademark:

Using a trademark that is similar to a registered trademark in connection with the same goods, or that is identical with or similar to a registered trademark in connection with the same or similar goods, without the authorization of the owner of the registered trademark, which may cause public confusion.

In addition to the above anti-confusion provision, the Trademark Law also extends the scope of anti-confusion protection for well-known trademarks. Article 13.3 of the 2013 Trademark Law stipulates that the registration and use of marks in all classes of goods or services are prohibited if they would “mislead the public so that the interests of the owner of the registered well-known trademark are likely to be impaired.”38 Similarly, Article 1 of the Chinese Supreme Court’s Well-Known Trademark Interpretation states that “copying, imitating or translating the registered well-known trademark … for the purpose of misleading the general public” constitutes trademark infringement.

Most of the cases that Hermès has litigated in China have concerned anti-confusion protection, but the outcomes of their judicial rulings have varied. First, in some cases, it seems that the class of the goods or services concerned was the leading factor in determining the case outcome. In Hermès v. France Ai Ma Shi, for example, the defendant, a Chinese company called France Ai Ma Shi Limited, had applied for registration of the “Aimas” mark in Class 12, which includes automobile (p.197) and luggage racks. Hermès opposed the registration on the grounds that “Aimas” sounds confusingly similar to the pronunciation of the Chinese transliteration of “Hermès.” Although the Beijing First Intermediate Court held that the Hermès mark had obtained high repute, it did not address the question of whether that mark should be recognized as a well-known trademark. The Court further ruled that the “Aimas” mark was unlikely to cause confusion, as Hermès had registered its trademark in the class of “apparel, luggage and leather products, and scarves,” a class of goods quite different from Class 12 in terms of function, place of production, and distribution channels. As a result, the relevant public was unlikely to connect the two marks in terms of the goods’ sources.

Second, well-known-trademark status has also affected the outcome of confusion-based cases. In Hermès v. HermesEpitek, the defendant had registered the HermesEpitek mark for Class 9, which covers semiconductor goods. As discussed in Section III, the Beijing High Court recognized the Hermès mark as a well-known trademark. It also noted that Class 9 goods obviously differed from the class of goods (i.e., “apparel, luggage and leather products, and scarves”) for which the Hermès mark was registered. According to Article 13.3 of the Trademark Law, the well-known Hermès mark should enjoy anti-confusion protection over all classes of goods and services, and the Court therefore emphasized that well-known trademarks are subject to broader protection in China. Given that “Epitek” was an unknown word and that the two marks shared the word “Hermes,” the Court held that the use of the HermesEpitek mark would likely cause confusion.39

Third, several other cases demonstrate that the way in which trademarks under dispute are similar in terms of their visual effect can also be a key factor in determining whether confusion-based trademark infringement has occurred. In 2010 litigation, for example, Hermès lost its case to the registrant of the HERM trademark, even though the two marks were registered in a similar class of goods, because the “visual effects” of the two marks are sufficiently distinct that consumers were unlikely to be confused (the Court did not discuss the strong similarity between the sounds of the two brands, with “HERM” pronounced the same as the first syllable of “Hermès”). Two years later, Hermès sued the Chinese stationery brand LOYAL-DINO. The defendant in the 2012 case was using a logo that was very similar to the Hermès horse logo, featuring a man and a horse-pulled cart. However, the Court ruled that the two logos were not similar enough to cause the likelihood of confusion.40

It seems that the courts in the foregoing cases adopted a subjective approach to evaluating various elements of the trademarks concerned, including spelling, level of fame, visual effects and design, and/or classes of goods, in determining the (p.198) likelihood of confusion. However, the use of subjective judgment in the decision-making process means that court rulings may not reflect the true view of the relevant public, possibly resulting in unfairness to trademarks that are moderately similar to disputed marks. Hence, it would be better for the courts to use objective judgment based on expert and survey evidence in deciding confusion-based cases.

VI. Anti-Dilution Protection

Last but not least, the cases that Hermès has litigated in China also suggest that companies doing business in the country should seek not only anti-confusion protection but also anti-dilution protection for their non-traditional trademarks. Although Hermès did not claim anti-dilution protection in Hermès v. Dafeng, it asserted that its trademark had been diluted in several other cases.

In the absence of consumer confusion, anti-dilution protection safeguards a well-known trademark against acts that blur its distinctiveness or tarnish its reputation. However, the Chinese Trademark Law contains no provisions that explicitly protect a trademark owner’s anti-dilution right,41 although Article 13, the well-known-mark protection provision, prescribes that the registration and use of a mark be prohibited if the mark “may mislead the public and cause injury to the interests of the registrant of the well-known trademark.”42 Further, the 2009 Judicial Interpretation Concerning the Trial of Civil Cases of Protection of Well-Known Marks issued by the Chinese Supreme Court provides some clarification concerning whether and how the anti-dilution right is protected in China. This interpretation stipulates that Article 13 of the Trademark Law ought to protect well-known-trademark owners in situations “where the relevant general public would believe that the trademark on trial is associated with the well-known trademark, and as a result detriment is caused to the distinctiveness of the well-known trademark and the market reputation of the well-known trademark is derogated or unfairly utilized.”43

Prior to the Supreme Court’s issuance of this judicial interpretation, which has binding power on the lower courts, the Chinese courts applied the concept of trademark dilution in deciding cases. A survey reviewing the one hundred trademark-related judicial decisions made by the Chinese courts up to 2009 reveals that thirty-one referred specifically to trademark dilution.44 For example, Dong Zhi Tong’s trademark registration for medicines for humans was canceled by the Trademark Office upon a request from Toshiba Corporation on the grounds that the Dong Zhi Tong mark (meaning “Toshiba Hall” in English) would dilute both the well-known Toshiba trademark and its Chinese mark “Dong Zhi.” Similarly, both the Beijing Intermediate Court and High Court invalidated the trademark (p.199) registration of Yili for bathroom sanitary devices on the grounds that it would dilute the well-known trademark Yili for dairy products.45

Hermès could not invoke the anti-dilution right in Hermès v. Dafeng because Hermès was not recognized as a well-known trademark, which is a core precondition for anti-dilution protection. However, the company did assert such protection in several other cases. In Hermès v. Hermes Epitek, for example, as we saw in Section III, the defendant had registered the HermesEpitek mark for Class 9 semiconductor goods. The Beijing High Court upheld Hermès’ anti-dilution claim, ruling that the HermesEpitek mark blurred the distinctiveness of the well-known Hermès trademark. Although the dilution component of the ruling was very brief, it still sheds light on how anti-dilution claims are dealt with by the Chinese courts.

First, the Beijing High Court conditioned anti-dilution protection upon whether a mark can be deemed a well-known trademark. In Hermès v. Hermes Epitek, it first analyzed whether the Hermès mark could be recognized as such a trademark and then, after confirming its well-known-trademark status, moved on to consider whether the defendant’s action had served to dilute the mark.46

Second, the Beijing High Court implied that to enjoy anti-dilution protection, a trademark ought to have a high degree of fame in the marketplace. In its anti-dilution protection analysis, the High Court confirmed that the Hermès mark enjoyed a very strong reputation. However, it did not delve into the issue of whether a trademark must have nationwide fame to receive anti-dilution protection, which is the fame standard adopted by U.S. anti-dilution law.47 Nor did the Court consider whether a trademark with only niche fame, that is, fame among only a certain sector of the consuming public, warranted such protection. The niche fame standard is applied under EU anti-dilution law.48 With respect to the fame requirement in China, the Provisions on the Recognition and Protection of Well-Known Trademarks have failed to clarify the issue.49 Before their revision in 2013, these provisions required that a well-known trademark be “generally known by the relevant public in China and enjoying relatively high reputation.”50 Afterward, a well-known trademark was defined as “deeply known by the relevant public in China.”51 Therefore, Chinese trademark law has kept the door open to affording well-known trademarks niche fame anti-dilution protection.

(p.200) Finally, the Beijing High Court did not elaborate upon the standards for determining whether trademark dilution had occurred in Hermès v. Hermes Epitek. It only briefly ruled that the use of “Hermes” as part of the HermesEpitek mark in Class 9 semiconductor goods had blurred the distinctiveness of the Hermès trademark. In fact, in the other Hermès cases discussed herein, the defendants could have been sued on dilution grounds if Hermès had proved that their use of the trademarks was intended to create an association with the Hermès mark. Similarly, they could also have been sued on the basis of dilution by tarnishment because their trademark use had tarnished the reputation of the Hermès mark.

VII. Conclusion

China is currently the world’s second largest consumer market, and Chinese consumers are anticipated to spend even more on goods and services at home and abroad in the years to come.52 Therefore, securing adequate legal protection for non-traditional trademarks in China is of vital importance to companies, given that those trademarks are playing an increasingly important role in the merchandizing of goods and services.

This chapter has reviewed the expanded scope of registrable non-traditional trademarks under Chinese trademark law. It has also examined the core substantive standards that have been applied in considering whether a non-traditional trademark is registrable with a particular focus on Hermès v. Dafeng and the other trademark-related cases that the French luxury brand Hermès has litigated in China. These case studies illustrate the need for companies to capitalize on the first-to-file rule, well-known-trademark recognition standards, and anti-confusion and anti-dilution rules to achieve adequate protection for their non-traditional trademarks in this burgeoning market.

Notes:

(1) Jeff Walters et al., Five Profiles That Explain China’s Consumer Economy, THE BOSTON CONSULTING GROUP, June 2017, http://image-src.bcg.com/Images/BCG-Five-Profiles-That-Explain-Chinas-Consumer-Economy-June-2017_2_tcm52-162981.pdf. (“China’s consumer market, both currently and as projected for 2021, is the world’s second largest, behind only the US.”)

(2) Lian Liu, Is the Shine Gone from Luxury Goods?, CHINA DAILY ASIA, Feb. 19, 2014, http://www.chinadailyasia.com/business/2014-02/19/content_15119218.html.

(3) Tian Ying, China Ends U.S.’s Reign as Largest Auto Market, BLOOMBERG NEWS, Jan. 11, 2010, http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aE.x_r_l9NZE.

(4) LOKE-KHOON TAN, TRADEMARK LAW IN CHINA—PIRATES IN THE MIDDLE KINGDOM: THE NEW FRONTIER 21–32 (2017) (discussing how to use the Chinese version of trademarks to do business successfully in China).

(5) Shangbiao Fa (商标法‎) [Trademark Law] (promulgated by the Standing Comm. Nat’l People’s Cong., Aug. 23, 1982, effective Mar. 1, 1983), http://en.pkulaw.cn/display.aspx?cgid=44439&lib=law.

(6) Shangbiao Fa (商标法‎) [Trademark Law] (promulgated by the Standing Comm. Nat’l People’s Cong., Aug. 23, 1982, effective Mar. 1, 1983, amended by the Standing Comm. Nat’l People’s Cong., Oct. 27, 2001), http://www.wipo.int/wipolex/en/text.jsp?file_id=131395.

(7) Shangbiao Fa (商标法‎) [Trademark Law] (promulgated by the Standing Comm. Nat’l People’s Cong., Aug. 23, 1982, effective Mar. 1, 1983, amended by the Standing Comm. Nat’l People’s Cong., Aug. 30, 2013), http://www.wipo.int/wipolex/en/text.jsp?file_id=425554 [hereinafter 2013 Trademark Law].

(8) Peizhen Wu, The Colourful Challenge of Non-Traditional Trademarks in China, WORLD TRADEMARK REV., Aug.–Sep. 2011, at 104, http://www.worldtrademarkreview.com/Magazine/Issue/32/Country-correspondents/China-Kangxin-Partners-PC.

(9) See e.g., King & Wood Mallesons’ Trademark Group, Eight Key Points about the Third Amendment to the PRC Trademark Law, KING & WOOD MALLESONS, Sep. 6, 2013, http://www.chinalawinsight.com/2013/09/articles/trademark/eight-key-points-about-the-third-amendment-to-the-prc-trademark-law/.

(10) John Froemming et al., Lending Color to Trademarks: Protection and Enforcement of Color Marks in the U.S., EU, China and Japan, INTA BULLETIN (July 1, 2015), https://www.inta.org/INTABulletin/Pages/ColorMarks_in_US_EU_China_Japan_7012.aspx.

(11) Article 11 of the 2013 Trademark Law stipulates as follows:

None of the following marks may be registered as trademarks:

  1. ((1)) Where the mark bears only the generic name, design, or model number of the goods concerned; (2) Where it only directly indicates the quality, principal raw materials, function, use, weight, quantity or other features of the goods; and (3) Signs that otherwise lack any distinctive character. Any mark mentioned in the preceding paragraph may be registered as a trademark if it has acquired distinctive features through use and is readily distinguishable.

(12) Tencent QQ Sues Chinese Government for Denying Signature Sound’s Trademark, CHINA DAILY, Dec. 9, 2016, http://www.chinadaily.com.cn/china/2016-12/09/content_27620932.htm.

(13) Ai-Leen Lim, The Trademarking of Sounds—China Witnesses a Cacophony of Applications, CONVENTUS LAW, Apr. 22, 2017, http://www.conventuslaw.com/report/the-trademarking-of-sounds-china-witnesses-a/.

(14) Brandy E. Baker, The Gradual Expansion of Non-traditional Trademark Registration in China, KANGXIN PARTNERS Jan. 21, 2014, http://www.kangxin.com/en/index.php?optionid=992&auto_id=590.

(15) Gang Hu, Registrability on 3D Trademark Recognized by Chinese Court, CCPIT PATENT AND TRADEMARK LAW OFFICE, Sep. 4, 2008, http://www.ccpit-patent.com.cn/node/2815.

(16) Feilieluo Youxian Gongsi Su Guojia Gongshang Xingzheng Guanli Zongju Shangbiao Pingshen Weiyuanhui (费列罗有限公司诉国家工商行政管理总局商标评审委员会‎) [Ferrero SpA v. Trademark Appeal Board of the State Administration for Industry & Commerce of the People’s Republic of China], 9 C.T.M.R. 105 (Beijing First Interm. People’s Ct. Nov. 12, 2007).

(17) Sunny Chang, Combating Trademark Squatting in China: New Developments in Chinese Trademark Law and Suggestions for the Future, 34 NW. J. INT’L L. & BUS. 337, 345 (2014) (“China follows a first-to-file system for trademark.”).

(18) Id. at 346.

(19) Hermès Int’l S.A. v. Trademark Appeal Board of the State Admin. for Indus. & Commerce of the People’s Republic of China (Third party: Dafeng Garment Factory), 2013 Gaoxingzhong No. 615 (Beijing First Intermediate Ct. Apr. 28, 2013).

(20) Id.

(22) Paolo Beconcini & Kelly Liu, $5M Case Highlights Risk From Chinese Trademark Trolls, LAW360, Oct. 17, 2012, http://www.law360.com/articles/386205/5m-case-highlights-risk-from-chinese-trademark-trolls.

(23) Stephen Edelstein, Tesla Motors Resolves Dispute with Chinese “Trademark Troll”, MONITOR, Aug. 7, 2014, http://www.csmonitor.com/Business/In-Gear/2014/0807/Tesla-Motors-resolves-dispute-with-Chinese-trademark-troll.

(24) 2013 Trademark Law, supra note 7, art. 7.

(25) Guangming Liu & Richard Yao, In Good Faith: Reflections on the Freudenberg Case and China’s Trademark Law, FUJAE PARTNERS, Sep. 18, 2014, http://fujaelaw.com/news/in-good-faith-reflections-on-the-freudenberg-case-and-chinas-trademark-law.

(26) 2013 Trademark Law, supra note 7, art. 19.

(27) Id. art. 68.

(28) Id. art. 13.2.

(29) Id. art. 13.3.

(30) Jing “Brad” Luo & Shubha Ghosh, Protection and Enforcement of Well-Known Mark Rights in China: History, Theory and Future, 7(2) NW. J. TECH. & INTELL. PROP. 119, 121–22 (2014).

(31) 2013 Trademark Law, supra note 7, art. 14.1; Kaiyu Xiao, Claus Barrett Christiansen, & Matthew J. Elsmore, The New Legal Framework for Acquiring “Well-Known” Status in China: Signalling a More Coherent Phase of Enhanced Trade Mark Protection?, 48(3) INT’L REV. INTELL. PROP & COMP. 305, 324–26 (2017).

(32) See Aiermeisi Guoji Su Guojia Gongshang Xingzheng Guanli Zongju Shangbiao Pingshen Weiyuanhui (Di San Ren Dafeng Zhi Yi Chang) (埃尔梅斯国际诉中华人民共和国国家工商行政管理总局商标评审委员会‎ (第三人达丰制衣厂‎) [Hermès International S.A. v. Trademark Appeal Board of the State Administration for Industry & Commerce of the People’s Republic of China (Third party: Dafeng Garment Factory)], 2012 Gaoxingzhong No. 705 (Beijing High People’s Ct. Dec. 20, 2013), http://www.cnipr.net/article_show.asp?article_id=23398&keyword=%B4%EF%B7%E1%D6%C6%D2%C2; Aiermeisi Guoji Su Guojia Gongshang Xingzheng Guanli Zongju Shangbiao Pingshen Weiyuanhui (Di San Ren Dafeng Zhi Yi Chang) (埃尔梅斯国际诉中华人民共和国国家工商行政管理总局商标评审委员会‎ (第三人达丰制衣厂‎) [Hermès International S.A. v. Trademark Appeal Board of the State Administration for Industry & Commerce of the People’s Republic of China (Third party: Dafeng Garment Factory)], 2012 Gaoxingzhong No. 710 (Beijing High People’s Ct. Dec. 20, 2013), http://www.cnipr.net/article_show.asp?article_id=21849&keyword=%B4%EF%B7%E1%D6%C6%D2%C2.

(33) See Aiermeisi Guo, Ji Su Guojia, Gongshang Xingzheng, Guanli Zongju, Shangbiao Pingshen Weiyuanhui (Di San Ren Hanmin, Keji Gufen, Youxian Gongsi) (埃尔梅斯国际与中华人民共和国国家工商行政管理总局商标评审委员会‎(第三人汉民科技股份有限公司‎)) [Hermès Int’l S.A. v. Trademark Appeal Board of the State Admin. for Indus. & Commerce of the People’s Republic of China (Third Party: HermesEpitek Corp.)], 2013 Gaoxingzhong No. 1992 (Beijing High People’s Ct. Apr. 11, 2014), http://www.cnipr.net/article_show.asp?article_id=22941.

(34) See Hermès Int’l S.A. v. Trademark Appeal Board of the State Admin. for Indus. & Commerce of the People’s Republic of China (Third party: Dafeng Garment Factory)], 2012 Gaoxingzhong No. 705; Hermès Int’l S.A. v. Trademark Appeal Board of the State Admin. for Indus. & Commerce of the People’s Republic of China (Third party: Dafeng Garment Factory)], 2012 Gaoxingzhong No. 710.

(35) See Hermès Int’l S.A. v. Trademark Appeal Board of the State Admin. for Indus. & Commerce of the People’s Republic of China (Third Party: HermesEpitek Corp.), 2013 Gaoxingzhong No. 1992.

(36) L. Alan Winters & Shahid Yusuf, Introduction: Dancing with Giants, in DANCING WITH GIANTS: CHINA, INDIA, AND THE GLOBAL ECONOMY (L. Alan Winters & Shahid Yusuf eds., 2007), http://documents.worldbank.org/curated/en/344901468004169716/pdf/383390Dancing0with0giants01PUBLIC1.pdf (pointing out that China’s economy grew at 15.1% over 1995–2004).

(37) TAN, supra note 4, at 43.

(38) 2013 Trademark Law, supra note 7, art. 13.3.

(39) Hermès Int’l S.A. v. Trademark Appeal Board of the State Admin. for Indus. & Commerce of the People’s Republic of China (Third Party: HermesEpitek Corp.)], 2013 Gaoxingzhong No. 1992.

(40) Aiermeisi Guo, Ji Su Guo, Jia Gong, Su Xing Zheng, Guan Li Zong, Ju Shang Biao, Ping Shen, Wei Yuan Hui (Di San Ren Nanjing Youqishi Gong Si) (埃尔梅斯国际与中华人民共和国国家工商行政管理总局商标评审委员会‎(第三人南京有奇氏公司‎)) [Hermès Int’l S.A. v. Trademark Appeal Board of the State Admin. for Indus. & Commerce of the People’s Republic of China (Third Party: Nanjing Youqishi Co.)], 2012 Zhixingchu No. 1387 (Beijing First Interm. People’s Ct. Aug. 30, 2012), http://bjgy.chinacourt.org/paper/detail/2012/12/id/951584.shtml.

(41) Luo & Ghosh, supra note 30, at 155.

(42) 2013 Trademark Law, supra note 7, art. 13.

(43) Interpretation of the Supreme People’s Court on Several Issues Concerning the Application of Law to the Trial of Cases of Civil Disputes over the Protection of Well-Known Trademarks art. 9, (Adopted on Apr. 22, 2009, entered into force May 1, 2009).

(44) Luckie Hong, China’s Dilution of the Dilution Doctrine, 18 WORLD TRADEMARK REV., 24, 27 (2009).

(45) Melanie Zhu & Cecilia Zhou, Anti-Dilution: A Power Tool for Well-Known Mark Protection in China, CHINA LAW & PRACTICE, Mar. 16, 2011, http://www.niuyie.com/anti-dilution-a-powerful-tool-for-well-known-mark-protection-in-china/.

(46) Hermès Int’l S.A. v. Trademark Appeal Board of the State Admin. for Indus. & Commerce of the People’s Republic of China (Third Party: HermesEpitek Corp.)], 2013 Gaoxingzhong No. 1992.

(47) Case C-375/97, General Motors Corp. v. Yplon S.A., 1999 E.C.R. 122.

(48) Top Tobacco, L.P. v. N. Atl. Operating Co., 509 F.3d 380, 384 (7th Cir. 2007) (noting that the general public requirement “eliminated any possibility of ‘niche fame,’ which some courts had recognized before the amendment”).

(49) 2013 Trademark Law, supra note 7, art. 13.1.

(50) Recognition and Protection of Well-known Trademarks Provisions art. 2 (promulgated by the State Administration for Industry & Commerce (2009)) (before the 2013 Amendment).

(51) Id.

(52) Doing It Their Way, THE ECONOMIST, Jan. 25, 2014, http://www.economist.com/news/briefing/21595019-market-growing-furiously-getting-tougher-foreign-firms-doing-it-their-way (“Now China seems poised to become the next consumption superpower.”).