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Legal Update

A New Opinion of the PRC Supreme People's Court Concerning the Adjudication of IP Disputes

13 May 2009
Mayer Brown JSM Legal Update

Summary

On 21 April 2009, the Supreme People's Court issued an opinion on certain issues concerning the adjudication of intellectual property cases under the current economic environment (the "Opinion").

Full Update

In June last year, the PRC government announced its National IP Strategy which was interpreted as the blueprint for the development of IP rights in China. One of the strategic goals is to make China a country with a comparatively high level of creation, utilisation, protection and administration of IP rights by 2020. To achieve that, the government will focus on:

a) improving its intellectual property laws,
b) promoting the creation and utilisation of IP,
c) strengthening the protection of IP rights,
d) preventing abuses of IP rights, and
e) fostering a culture of IP rights.

Whilst such declaration was welcomed, many considered the Strategy to be theoretical and hoped for the adoption of more pragmatic measures. During the National Committee of the Chinese People's Political Consultation Conference and the National People's Congress in March 2009 (the "Meetings"), the government emphasised again its recognition of the importance of encouraging the creation of intellectual properties and protecting them.

The Opinion is issued to the courts for reference. The aim is to manifest the ideal expressed at the Meetings and to implement the Strategy in order to "ensure economic growth, individual and enterprise well-being, and stability" to face the challenges of the financial crisis so as to develop the economy at a steady but relatively faster pace. Intellectual property is recognised as a strategic asset and a key to enhance competitiveness at the international level. China recognises the strong need to promote and encourage technological invention and reform.

The Opinion covers certain aspects of enforcement concerning patents, trademarks and unfair competition. Whilst the patent section may be more theoretical, the section covering trademark gives relatively precise guidelines to courts on how they should approach various issues. This article focuses on the trade mark section (the "Section"), the title of which neatly summarises what it intends to cover: "Enhance Trademark Protection, Actively Promote Brand Development, Regulate Market Condition and Maintain Fair Competition".

The following is a summary of the Section:

  • In deciding on infringement, if the infringing mark is identical to a registered trademark and is used on the same type of goods, there is no need to consider confusion.
  • If the infringing mark is similar to a registered trademark and is used in respect of similar goods, the court should consider the distinctiveness and market reputation of the registered mark. The stronger the registered mark is in distinctiveness and market reputation, the wider and stronger the protection it should enjoy. The Opinion explains that this is to incite and reward market leaders and discourage traders from imitating and riding on other's success.
  • If a registered mark is not in use, although an injunction will be granted against unauthorised use, the court may not award damages (apart from compensating reasonable fees for taking enforcement action) if the mark owner cannot prove damage. If it can be shown that the owner has no actual intention to use the registered mark and uses the registration only to extort infringement compensation, no damages may be awarded. Further, if a registered mark has not been used for three years (and is vulnerable to a non-use cancellation), a court may not support a claim for damages. The Opinion explains that this is to avoid a registered mark being improperly used by an opportunist.
  • The government is determined to ensure the exclusivity of well-known marks. To achieve this, it is important to strengthen the manner in which well-known marks are recognised and enforced. On the question of recognising a well-known mark, this must be done carefully and objectively. It is directed that if the question whether a trade mark is or is not well-known is not a necessary issue in an infringement action, no determination should be made. If the infringement falls under similar goods of a registered trademark, again, it will not be necessary to determine if the mark is well-known. (Reference is made to A Notice from the Supreme People's Court on the Question of Jurisdiction Concerning Well-Known Marks in Civil Suits (No. 1 of 2009) which identifies the courts which shall have jurisdiction to accept and hear cases concerning well-known marks. On April 21, the State Administration of Industry & Commerce also issued Regulations to Determine Well-Known Marks (No. 81 of 2009) which involves the setting up of a Well-Known Mark Adjudication Board.) On enforcement, the Opinion specifies that the derogation or dilution of a well-known mark must be stopped and all courts must implement and standardise the recognition and protection of well-known marks.
  • On revocation of registered marks, the Opinion suggests a distinction between private and public reasons to avoid a cursory revocation. If the registered mark has a relatively long history of use, enjoys a relatively high market reputation and public association, the court should carefully consider whether a revocation may cause substantial operational difficulty to the proprietor.
  • If a registered trademark conflicts with copyright, a company name or other prior rights, but the period of revocation has passed, the prior right owner may still commence a civil suit within the limitation period but the court will not adjudicate on the civil liability which may follow from use of the registered mark.
  • The court will discourage an attempt to ride on another's registered trademark by way of an enterprise name. The court should accept a complaint about a mark reproducing or copying a well-known mark or translating a well-known mark even if that mark is already a registered mark.
  • If an enterprise name constitutes trademark infringement or unfair competition, the court may accept a complaint and the complainant shall not be required to go through any administrative process. Even if the enterprise name is registered overseas, this may still constitute trademark infringement and/or unfair competition in China and the court can handle the matter accordingly.
  • If, for historic reasons, there is a dispute between a registered trademark and an enterprise name, providing no bad faith was involved, the court shall fairly resolve the dispute taking into account the history and the respective use of the name/mark. For old trade names whose ownership rights are clear, in resolving any dispute, the court should respect the history of use and the prevailing laws.
  • Where a trade or corporate name or its acronym or abbreviation has attained certain market reputation and public recognition in trade use, this should be protected by the law against unfair competition.
  • If the use of an enterprise name constitutes trade mark infringement, the court should grant an injunction or restrict the manner or scope in which the enterprise name may be used. If the registered name enjoys a relatively high level of fame, and the use of the enterprise name will cause confusion, the court should order an injunction or change of name. If the infringer fails to comply with an injunctive order, the court should effect compulsory enforcement and increase the compensatory damages.

For more information, please contact:

Kenny Wong ( )

Learn more about our PRC offices and Intellectual Property practice.

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