A Scary Trademark Story - Protecting Well Known TM in China

An interesting case came out of Zhejiang High People’s Court earlier this year that addresses trademark protection in China.  Since I’m a trademark attorney, and apparently think this is fun, I looked into the Chinese laws that govern the issue.   It’s also Halloween, and this story is a scary trademark story.  Boo.

The case started because a Chinese company filed a trademark in ‘Dsquared’ in 2003, and apparently obtained a registration in the mark in 2007.  The mark Dsquared2 (a fashion brand present in many countries around the world, and worn by various celebrities) was first filed in China in March of 2004 via the Madrid Protocol, and was rejected because of the prior filing of ‘Dsquared.’

When in late 2011, the owners of Dsquared2 started receiving cease and desist letters from the owner of Dsquared (who, incidentally, did not start using it until Dsquared2 started breaking into the Chinese market), Dsquared2 decided to file suit.  The Chinese lower court issued a win in Dsquared2’s favor by finding that there was no likelihood of confusion between the two marks.  On appeal, however, Dsquared2 lost – the court found the marks to be similar.

China’s Trademark laws are based on time – not usage - , therefore the first party to register a mark in China is granted trademark protection. This can lead to complications for foreign companies with existing domestic marks that have not been registered in China; complications arise most often when Chinese locals beat foreign companies to China and register the same mark -- or even worse, the Chinese company registers the Chinese character version of the foreign companies’ marks.

When a local company in China is the first to register a foreign company’s mark in China, there are two options for the foreign company:

1.      Proceed to register the mark and prove that the mark does not create a likelihood of confusion to the local company’s mark.  However, the drawback of proceeding with this option is that the foreign company has only a slight chance of overcoming the local company and prevailing in the legal battle against counterfeiting activities by the local company.

 

2.      Prove their mark is a well-known mark, which forces the local company to cease their use of the similar mark and any counterfeiting activities.

In the latter situation, a company can try to protect their mark by establishing that it is a “well-known trademark.” A “well-known trademark” is defined under the Chinese Trademark Law (CTML), which reads as follows (translated – there is an English version available):

-          Article 13

o   A holder of a trademark that is well known by the relevant public may request protection of the trademark as a well-known trademark in accordance with this law if the holder is of the opinion that its rights have been infringed upon.

o   In the event of an application for registration of a trademark that is a reproduction, imitation, or translation of another’s well-known trademark not registered in China on same or similar goods, and consequentially likely to create confusion, the application shall be rejected and the trademark shall be prohibited from use.

-          Article 14

o   Upon request by the party concerned, a well-known trademark shall be recognized as a fact that needs to be ascertained in the handling of a trademark –related case. The following factors shall be taken into consideration in the recognition of a well-known trademark:

(1) The degree of awareness of the trademark among the relevant public;

(2)The duration of the use of the trademark;

(3) The duration, extent and geographical scope of all publicity operations carried out of the trademark;

(4) Records of protection provided for the trademark as a well-known trademark; and

(5) Other factors relating to the trademark’s well-known status.

These factors mirror the International Trademark Association’s recommendation that “[t]he determination of whether a mark is well-known is conducted on a jurisdiction by jurisdiction basis, and the factors reviewed are similar to those for famous marks.”  In its Joint Recommendation Concerning Provisions on the Protection of Well-Known Marks, the World Intellectual Property Organization recommends using the following factors to determine whether a mark is well-known: “the degree of knowledge or recognition of the mark in the relevant sector of the public; the duration, extent and geographical area of any use or promotion of the mark; the value of the mark; and the record of successful enforcement of the mark.”

The factors set out under Article 14 are the product of the latest Amendment of the CTML in 2013.   Before last year, “well-known marks” did not receive any elevated status or protectability under CTML.  However, even with the newfound protection of “well-known marks,” protection is still limited.  Chinese courts are generally only looking at the Chinese markets when evaluating these well-known factors.   What can result is an artificial segmentation of the market where a famous mark -  deemed not “well-known” in China - will not be able to secure trademark rights in China because someone else already beat them to it.  And the only reason someone would rush to file is out of bad faith to capitalize on the strength of the mark outside of the Chinese market.  

You can read comments from Dsquared2’s attorneys here.

Thanks to Phil Ruipu Chen and Alexandra Goldstein for their research and contribution to this posting.