Dispute resolution guidelines leave many foreigners in the cold

Main provisions
Comment

The Judicial Committee of China's Supreme People's Court has issued guidelines that courts should follow when trying civil cases involving domain names.

Main provisions

Article 4 provides that a domain name has been infringed when the following circumstances exist:

• the plaintiff has made a lawful claim;
   
• the defendant's domain name reproduces or is similar to the plaintiff's well-known registered trademark, sufficient to cause public confusion;
   
• the defendant does not have any legitimate rights in, nor reason for registering or using, the domain name; and
   
• the defendant registered and used the domain name in bad faith.

The guidelines go on to provide that bad faith will be proved in three cases:

• where the defendant has registered a third party's well-known trademark as a domain name for commercial purposes and with the deliberate intent of (i) causing confusion with products or services provided by the plaintiff, or (ii) causing internet users to mistakenly visit the defendant's website;
   
• where the defendant has registered a third party's well-known trademark as a domain name in order to sell, lease or otherwise transfer the domain name for financial gain; or
   
• where the defendant has registered a third party's well-known trademark as a domain name and does not intend to use the domain name except to block registration by the legitimate rights holder.

If a court determines that the registration or use of a disputed domain name amounts to an act of unfair competition, then the defendant may be ordered to cease the infringement and cancel its registration. The court may also order that the domain name be transferred to the plaintiff(1) and, where appropriate, order the payment of compensation to the plaintiff.

Comment

The guidelines are a welcome attempt to provide Chinese courts with objective standards for the trial of domain name disputes. Also, the criteria for determining bad faith are quite broad and plaintiff-friendly.

However, the guidelines do leave some foreign intellectual property rights holders out in the cold. This is particularly so in reference to the requirement that a plaintiff must show either (i) that the disputed domain name is a reproduction or imitation of its well-known trademark, or (ii) that the domain name is likely to cause confusion among the "relevant public".

As Chinese courts determine both fame and likelihood of confusion by reference to the domestic market, foreign entities that have not yet started doing business in the country will find it difficult to satisfy this requirement. It is disappointing that the Judicial Committee did not follow the example of the Trademark Office, which frequently rejects trademark applications solely on the basis that they were applied for in bad faith.

Jon Eichelberger, Perkins Coie LLP, Beijing

Endnotes
(1) PRC law does not permit the transfer of '.com.cn' domain names registered by the China Network Information Centre (CNNIC). Therefore, a cancellation of the domain name by the defendant will be required, followed by a re-registration by the plaintiff. CNNIC is prepared to process the cancellation and re-registration applications simultaneously, reducing the risk of unauthorized third-party applications slipping in.