Positive Steps For Trademark Protection In China
Two successive decisions out of IP Courts in China from late 2018 have paved new ground for protecting unregistered well-known trademarks throughout the nation. As Australia’s top destination for international trademark filings, these developments are critical for businesses operating throughout Asia.
The first case was handed down by the Shanghai IP Court, assessing whether a domestic importer had infringed upon the trademark of a French winery “Lafite”. The French company had applied for a trade mark over their name in Chinese characters. However, an opposition action was lodged against their application. It took several years before it was approved. Meanwhile, a domestic company commenced importing wine under the “Lafite” name and sold those goods with a significant mark-up. While the IP Court acknowledged that approved trade mark registration did not protect the mark from previous infringement, the Court nevertheless recognised that the trademark was an unregistered well-known mark and held the importer liable for RMB 2 million yuan.
Why is this important?
Trade mark applications can be notoriously challenging in China, given their trade mark system utilises the first-to-file rule. For this reason, it is crucial for businesses considering entering the Chinese market to register any relevant marks as soon as possible.
Entities often can successfully register a well-known trade mark prior to an international entity investing in the region. This process, known as trademark squatting, has become prevalent throughout China and can be problematic for market entrants. Unless the international entity can prove that the mark was registered in bad faith, it can be an incredibly long and costly legal process to obtain ownership in the mark.
This makes the decision significant as it serves as precedent for the protection of submitted marks which have yet to be approved due to the long registration process. It gives recourse for affected entities holding well-known marks to seek an injunction and compensation from businesses who seek to exploit the registration process. Penalties may also be significant, given the court’s ability to grant punitive damages also.
Will the trend continue?
The next day the Beijing IP Court confirmed the new direction taken by Chinese courts in managing trade mark infringement by handing down another similar decision. This concerned an unregistered mark used by The Commercial Press (TCP), which published dictionaries using their well-known mark reading Xinhua Dictionary in Chinese characters. Unfortunately, TCP lamented to register their mark altogether. Another publisher, Sinolingua Corporation, sold a similar product baring TCP’s well-known Xinhua Dictionary mark. The court granted an injunction and damages in favour of TCP, recognising Xinhua Dictionary as an unregistered well-known mark, despite TCP failing to successfully register the mark previously.
Further, the court recognised that the design and colours used on the cover of TCP’s publication were peculiar and functioned as a source identifier for the text. Sinolingua’s imitation of the text’s design also infringed upon TCP’s unregistered well-known mark and was factored into the court’s RMB 3 million Yuan penalty.
The cases, read together, demonstrate an incremental improvement in China’s IP laws. Attempts made to ensure the nation is hospitable to international parties seeking to operate within China is a significant development, given the structural challenges in place as a result of the first-to-file rule. This extends not only to pending trademarks, which lack retrospective protection, but also failure to register a mark entirely. Through constructing these marks as unregistered well-known marks, the courts have established a significant line of precedent aiding international business entering and operating in China