Tencent v Chery: a sign of China’s developing brand economy

China

The long-standing legal battle between Chinese social media giant Tencent Inc and Chinese automaker Chery Automobile Co Ltd may have finally reached a conclusion, with the Beijing Higher People’s Court upholding the Trademark Review and Adjudication Board’s (TRAB) decision to cancel Tencent’s trademark QQ (Registration No 4665825) for use in relation with automobiles.

In 2005 Tencent filed a trademark application for QQ in Class 12, Sub-class 1201-1210, for automobiles, among other things. The mark was approved for registration in 2008. In 2009 Chery filed an action for the cancellation of Tencent’s QQ trademark on several grounds, including that Tencent had filed the trademark application in bad faith as it was widely known among the public that Chery had previously used the QQ mark on automobiles. As a result, Tencent should have been aware of Chery’s prior right to use the QQ mark in association with automobiles.

Based on the evidence submitted by Chery, the TRAB decided that, prior to the filing date of Tencent’s trademark, Chery had used its QQ mark on automobiles and the mark had acquired a certain influence among the relevant public. Accordingly, the TRAB decided to cancel Tencent’s trademark registration for QQ.

Tencent appealed the TRAB’s decision to cancel its trademark registration to the Beijing Number 1 Intermediate People’s Court, which upheld the TRAB’s decision.

A second instance appeal to the Beijing Higher People’s Court was also unsuccessful, with the second instance court also upholding the TRAB’s decision. In coming to its decision, the Beijing Higher People’s Court held that, when Tencent filed its trademark application for the QQ mark in relation to automobiles, it should have known that Chery’s QQ mark had already been used and enjoyed a certain influence in the automobile industry. As a result, Tencent should have taken steps to avoid encroaching on Chery’s prior rights in the QQ mark.

Even though Tencent’s QQ mark enjoys a very high reputation with respect to telecommunication services, as automobiles differ significantly from telecommunication services, the law does not prohibit the use and registration of the same or similar mark on dissimilar goods, even with respect to well-known trademarks. Thus, the decision from the Beijing Higher People’s Court is not that surprising.

Asides from the legal issues raised and dealt with in this case, what may be of greater interest to industry watchers is Tencent’s approach in its dealings with Chery.

The history of the QQ trademark dispute between Chery and Tencent has been a long and expensive affair. In 2003 Chery filed a trademark application for its QQ mark for use in association with automobiles, well before the filing date for Tencent’s QQ trademark. However, Chery’s QQ trademark application has not yet proceeded to registration, due to Tencent having filed an opposition against the application. A decision on whether to accept Chery’s QQ trademark for registration is still pending at the opposition appeal stage.

Bearing in mind consumer purchasing habits, an automobile is a costly family investment, and Chinese consumers will typically perform some research prior to committing to the purchase of their chosen car. Accordingly, it is very unlikely that Chinese consumers purchasing a QQ-branded automobile would be under the misguided belief that the automobile came from, or was otherwise connected to, the instant messaging service provider Tencent.

It is also clear that Chery had already established use of its QQ mark in China and that the mark had achieved a more than modest level of influence in China in relation to automobiles when Tencent filed its application for the QQ mark in relation to automobiles. 

In spite of the above, to those who have been watching the development of brand value amongst Chinese companies and have experience in developing their brands in China, it is not surprising to see Chinese companies resorting to trademark filing strategies to increase the scope of protection afforded to their core marks, in order to clear the path to greater brand value.

In Tencent’s case, in 2014 the QQ brand was ranked as the most valuable brand in Asia with a value of $54 billion (according to the BrandZ Global Top 100 study). This would place QQ behind only the likes of Apple, IBM, Google and Microsoft as the fifth most valuable technology brand in the world.

Thus, while the decisions from the TRAB, the Beijing Intermediate People’s Court and the Beijing Higher People’s Court may not be ground breaking, what may be learned from the long-standing battle between Tencent and Chery is that, with the growing sophistication and awareness of brand value amongst Chinese companies, Chinese brands are now becoming more aggressive in policing and protecting their core marks.

Sophie Zhao and George Chan, Simmons & Simmons LLP, Beijing

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