Chinese courts further limit scope of protection for well-known trademark

Many foreign and local applicants are vying to have their marks recognised as well known in China. What is disappointing to many is the difficulty in achieving such recognition. In 2010 the Chinese Trademark Office (TMO) and its appeal board, the Trademark Review and Adjudication Board (TRAB), granted well-known trademark status to around 300 marks, of which only a handful are owned by foreign companies.
To local companies, well-known trademarks are simply a marketing tool. Previously, it was an open secret that some domestic applicants were faking trademark lawsuits in certain second and third-tier cities so that their trademarks could be quickly recognised as well known by judges (by comparison, it can take two to three years for the TMO or TRAB to make a determination on well-known marks). To prevent misuse of legal proceedings, the Supreme People's Court issued a judicial interpretation in 2009 which substantially raised the threshold to determine whether a mark is well known and took away the power to grant this special status from many local courts.
In recent policy guidance, the Supreme Court further reduced the scope of protection for well-known trademarks. For example, in one of the top 10 IP cases of 2010 published by the Supreme Court this year, the court explicitly applied a standard of confusion test to determine whether well-known trademarks can be used to prevent the registration of similar marks for dissimilar goods/services.
The case relates to a final decision of the Beijing Higher People’s Court, which ruled on a trademark opposition case involving famous Chinese liquor brand Xin Hua Cun (Anhui Xinhuacun Group Co Ltd v Shanxi Xinghuacun Fen Liquor Factory Co Ltd (Beijing Higher People’s Court (2010) Gao Hang Zhong Zi No 1118)). 
In 2002, Shanxi Xinghuacun Fen Liquor Factory Co (the plaintiff) filed an opposition against the trademark XIN HUA CUN in Chinese in Class 31 (trees, wheat etc), claiming that the opposed mark was similar to its mark XIN HUA CUN; XIN HUA CUN PAI in Chinese and device in Class 33, which was recognised as a well-known trademark in 1997.
In 2006 the TMO rejected the opposition and allowed registration of the opposed mark. The plaintiff appealed this decision to the TRAB, which in 2010 partially approved registration of the opposed mark against the will of the plaintiff. The plaintiff appealed to the Beijing No 1 Intermediate People’s Court, which upheld the TRAB’s decision. The plaintiff subsequently appealed again to the Beijing Higher People’s Court. 
The appellate court affirmed the lower court’s decision, refusing to give special protection to the well-known mark. The court noted that the cited mark XIN HUA CUN was taken from a famous ancient Chinese poem, written about 1,000 years ago. The court held that the plaintiff took advantage of the ancient poem to establish the reputation of its mark for liquor products, and that it would be inappropriate to extend the protection of a well-known mark in such a context. The court held that registration of the opposed mark for the designated goods (trees, wheat etc) would cause no confusion or misunderstanding; nor would it damage the reputation or dilute the distinctiveness of the well-known mark.
This decision is a clear example of the application of the standard of confusion when reviewing the scope of protection for well-known trademarks. Under Chinese trademark law, a registered well-known trademark can be used to prohibit others from registering and using similar trademarks not only for similar goods, but also for different/irrelevant goods. However, as a condition to preclude other marks, the law does require that the use of the marks would cause confusion among the relevant public as to the origin of the goods/services, such as would potentially cause damage to the rights of the well-known trademark’s owner. 
In this case, the court explicitly pointed out that the registrant of a well-known trademark can prohibit the registration of other trademarks only where the mark would cause misunderstanding as to whether a possible connection existed between such a mark and a well-known trademark, and this would negatively impact on the reputation, or dilute the distinctiveness, of the well-known mark.
When the court analysed the factors in this case, which involved sharing a common source of phrases, it concluded that no confusion was likely to exist and therefore it would be inappropriate to expand the protection of the well-known mark.
It is expected that Chinese courts will continue to apply this stricter standard when reviewing issues related to well-known trademarks. A brand with well-known status, if it is lucky to achieve such recognition in China, is free to use this for marketing purposes, but should not be overly optimistic about its real value in legal disputes. 
He Jing and Gu Ting, ZY Partners, Beijing 

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