An important revision of the current PRC Trademark Law (2013) is to add a prohibitive provision concerning business use of the term “well-known trademark” into Article 14: “No manufacturers and business operators may indicate the words “well-known trademark” upon the goods, the packaging or the containers of the goods, nor may they use the same for advertising, exhibition or other commercial activities“. In order to understand this new prohibitive provision of the law, we review the original intention of the establishment of “well-known trademarks” and the deviations of the Chinese practice in the past.

1. “Well-known trademark” is a legal concept established to expand trademark protection

In order to prevent consumers from confusion of similar commodities from different sources and encourage competition among dissimilar commodities at the same time, the registration of trademarks in China as in the rest of the world is categorized. The class, in which a trademark is registered, is the scope of right to prohibit other parties from using the same or a similar registered trademark. Beyond this scope, a registered trademark is not protected by law. In other words, if the use of a same or similar trademark on a different commodity does not cause confusion, the right of the prior registered trademark on that different commodity is not protected.

However, not every country has the same trademark protection system, incl. as relates to the classification of similar products. In order to resolve the differences in the classification of legislation in each country, and to obtain the necessary protection for well-known trademarks in other countries, the protection system for well-known trademarks was incorporated into the Paris Convention. After the establishment of the World Trade Organization, the “Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS)” signed by member countries put further requirements for the protection of well-known trademarks. In order to break through the bottleneck of trademark law protection traditionally based on confusion, and to prevent dilution, the scope of protection of well-known trademarks was expanded to non-similar products and services, in other words “cross-class protection”. The above-mentioned sources of law indicate that the well-known trademark system is part of the international rules for the protection of trademark rights, and not intended as a title of honor to any trademark and brand name.

Many people think that a well-known trademark is an honor, indicating that the branded product’s quality, reputation, and image have been officially recognized by the government. However, the determination of well-known status is not appraisal of qualification or honor, but only a means of legal protection. It is only when the rights and interests of a trademark owner are infringed and there is a need for expanded protection, a trademark’s well-known status will be determined by a competent authority for protection.

In Chinese practice, the purpose of the determination is to apply the provision of Article 13 of the PRC Trademark Law, seeking to justify 1. the protection of well-known but unregistered trademarks on the same or similar goods, and 2. the extension of protection of registered well-known trademarks to dissimilar goods or services.

Thus, the purpose of the establishment of well-known trademark protection is mainly to remedy the inadequacies of the traditional trademark registration system. Understanding the purpose of “well-known trademarks” will help to understand the limitations of applying “well-known trademarks” in practice.

2. Well-known status is “starts in a case and ends in the case”

Whether a brand is well-known or not should be up to the market to decide. From a legal perspective (trademark administrative affirmation and civil infringement litigation), the determination of whether a trademark is well-known and granting extended protection is based on legal facts, which are different from objective status of the brand’s reputation.

Trademark cases often involve different situations and evidences, which explain that the recognition of well-known trademarks, as legal facts, can only be valid in specific cases and cannot be certainly valid for other cases. If legal facts of well-known trademark recognition are used in daily advertising, it will transfer a legal fact into an objective fact, which in turn makes the determination of well-known trademark in an individual case effective outside the case. This goes against the legislative purpose of the well-known trademark protection system.

The establishment of the “well-known trademark” article is to protect brand owners with greater reputation and influence in disputes from dilution of their trademarks. The effectiveness of determining well-known status is limited in specific dispute cases, in other words, “starts in a case and ends in the case.” Judging from legal facts, in a given case, it is necessary to comprehensively consider the reputation and distinctiveness of the prior trademark, the relevance of the goods used by the two parties to the dispute, and the similarity of the two parties’ trademark signs, and then make a comprehensive judgment as to whether the second trademark constitutes “copying, imitation, translation” of the well-known trademark not registered in China; or whether it will mislead the public and could harm the prior owner’s interests of the well-known trademark already registered in China; and in turn decide whether or not to grant the protection offered to a well-known trademark. If such extended protection is considered necessary, the well-known trademark will be determined in a given case. Therefore, whether it is necessary to legally recognize well-known status of a trademark and turn it into a legal fact should consider the purpose of well-known trademark, as a legal setup, is protection. In other words, the recognition of a well-known trademark in a given case is the determination of legal factual status of whether a trademark is famous at a given time.

The determination of a well-known trademark is therefore not merely an appraisal of the well-known status of one prior trademark, but rather is relative to the use of the counterpart trademark in a given case. The reputation of the counterpart’s trademark, the designated goods, and the bad faith of the counterpart affect the determination of well-known status of the prior trademark as well. The significance of the well-known trademark as a legal setup lies in its protection, that is, the basis in which brand owners claim against the registration and use of others’ trademarks and seek to protect their own trademarks from damage. To evaluate the magnitude of protection of a well-known trademark in a specific case, factors such as the distinctiveness of the prior trademark, popularity and reputation, and the degree of relevance between the goods used by the two parties should be comprehensively considered. The stronger the distinctiveness, the higher the reputation, and the closer the relevance all lead to a greater probability of well-known trademark recognition and protection, which are determined case by case.

Even if we do not take the trademark law or any law into consideration, commercial practice tells us that the reputation of brands is dynamic and ever changing, and so is the degree of well-known status of trademarks. The market norms and patterns determine that a trademark cannot be “well-known for once and well-known for a life time”.

3. The determination of well-known status is the recognition of “past facts”

Since the purpose of the determination of a well-known trademark is protection, and protection is granted in a specific case, the determination of whether a trademark is well-known must be executed for a specific dispute. In a given case, such determination is a recognition based on “past” facts, rather than a determination of whether the trademark is “currently” well-known, let alone whether the well-known status can be extended to the “future”.

Take the case of an invalid declaration in trademark review as an example. Assuming that the challenged trademark was applied in 2012, and an application of invalidation based on an earlier trademark was filed in 2016. The Trademark Review and Adjudication Board (TRAB) concluded in its decision that the prior trademark was a well-known trademark, and the date of the adjudication of the protection was 1 February 2018. In this case, the TRAB usually examines the evidence of the prior trademark for the past 3 years (2009 to 2012) before the date of the application for trademark invalidation. Whether the prior trademark reached a well-known status or not is determined by past facts. This determines whether the TRAB ruling determined that the prior trademark had reached a state of well-known status before 2012, that is, it was “well-known in the past.” This determination does not mean that the prior trademark was well-known when the TRAB ruling was issued (i.e. February 2018), and it does not mean the prior trademark continues to be well-known after the ruling is made.

4. Deviations in the understanding and application of “well-known trademarks” in practice

“Past” vs. “Current”

The recognition of a “well-known trademark” does not grant the trademark current well-known status. But brand owners often took past-facts-based judicial or administrative determinations as an endorsement of their brand’s current reputation and popularity. Brand owners use “well-known trademark” in advertising to convey the message to the public that their brands are well-known “now”. If it is not prohibited, brand companies can use the word “well-known trademark” in advertising for an indefinite period after a judicial or administrative determination. Therefore, companies using “well-known trademark” in advertising go against the legislative purpose of the well-known trademark protection.

“Case-specific” vs. “Universality”

In 1996, the State Administration of Industry and Commerce (SAIC) enacted the “Provisional Regulations for the Recognition and Administration of Well-known Trademarks”, which brought two important conclusions:

1. The Trademark Office may, based on a trademark registrant’s request, grant a well-known recognition to a trademark;

2. If within three years from the Trademark Office granting well-known recognition, it is not necessary to submit a new application for recognition. In other words, once recognized, a trademark could enjoy the well-known trademark protection for a validity period of three years.

These abovementioned regulations were clearly in violation of the principle of recognition of well-known trademarks. In consequence, Article 14.1.4 of the PRC Trademark Law (revised 2014) stipulates that “the record of the protection of a trademark as a well-known trademark” is one of the references for determining whether the trademark is well-known. The effectiveness of well-known trademark recognition thus remains “starts in a case and ends in the case”, and it cannot be applied outside the case or for any latter cases.

The government’s misguidance

The various deviations in relation to use of “well-known trademark” mentioned above come from the public’s misunderstanding of what is a “well-known trademark”. In the 1990s, the recognition of a well-known trademark could be applied for and appraised. In 1990, the first “China Consumers’ Well-known Trademark Awards Campaign” sponsored by three media including China Central Television (CCTV), 10 trademarks including “Moutai” (liquor brand) and “Phoenix” (bicycle brand) were awarded the title “China Well-known Trademarks” and the Trademark Office even issued a “China Well-known Trademark certificate” to their owners. In 1996, the SAIC enacted the “Provisional Regulations for the Recognition and Administration of Well-known Trademarks” and made it clear that the Trademark Office could determine a well-known trademark upon request of a trademark registrant, that is, allowing the recognition of a well-known trademark without a dispute in the first place. In practice, the recognition of well-known trademarks was once regularly and massively announced in the 90s. This practice is called “batch recognition, active protection. However, the purpose of Paris Convention and the TRIPs to stipulate well-known trademarks is to prevent already well-known trademarks from being infringed, instead of using the well-known recognition as a marketing tool.

On the local level, some local governments regarded the number of recognized well-known trademarks as their political achievements. For example, in Beijing, the local government of Haidian District provided CNY 500,000 for a company that has obtained well-known trademark recognition. Such awards have reinforced the public concept of “well-known trademarks are a kind of credit” and have deviated from the original legal intention to establish a well-known trademark protection system. Moreover, in the brand assessment market, “whether or not it is officially recognized as a well-known trademark” is a key consideration for the evaluation agent to calculate the market value of one brand; in commercial loans, enterprises owning “well-known trademarks” can obtain more loans from banks; when ordinary consumers are making a purchase choice, priority will be given to goods or services that are printed with “well-known trademark”. So, in practice, the recognition of “well-known trademarks” has become the company’s important brand image and intangible assets.

In light of this, the new PRC Trademark Law (amended 2014) explicitly prohibits the use of “well-known trademark” for advertising. Article 4 of the “Regulations on the Recognition and Protection of Well-known Trademarks” enacted by SAIC in 2014 further stipulates that “the recognition of well-known trademarks follows the principle of case by case recognition and passive protection” (corresponding to the “batch recognition, active protection” in the past).

In summary

Under the revised PRC Trademark Law, the well-known trademark system has changed from “recognition” to “protection”. I expect this change will be reflected in the decisions made by the relevant authorities to change the expression from “recognizing XYZ as a well-known mark to a well-known mark” to “ruling that XYZ trademark meets the protection conditions of Article 13.2 or 13.3 of the PRC Trademark Law”, providing a further impetus for rectification well-known trademarks from the concept of “an honor and commercial promotion” to “the legal concept of trademark protection”.

Zhang Mao, director of SAIC, issued several articles in 2016-2018, emphasizing “Well-known trademark is legal concept for trademark protection, not a sign of honor or a way of commercial promotion. Whether a brand is well-known or not shall be left to consumers to decide in the marketplace“. The irony is even if there is a market recognized well-known trademark, its owner is still NOT entitled to use the words “well-known trademarks” on goods, packaging or containers, or for advertisements. Because there is no exception for the prohibitive provision concerning the use of well-known trademarks in Article 14 of the revised PRC Trademark Law.

For brand owners, even if they disagree with the new regulations and Zhang Mao’s comments, the use of expression like “well-known trademarks” should be avoided in advertising and any promotional activity of their brands. And in the absence of local government incentives for recognition of well-known trademarks, brand owners should reconsider the value of well-known trademark recognition for the its operations and understand the correct ways to have their brands recognized as well-known trademarks. It is necessary to make full use of the rights granted by the current laws, and to understand the applicable boundaries of such rights as well, optimizing the allocation of resources, and maximize the value of their brands.

 

As a full-service firm, R&P assists with corporate/M&A, litigation, arbitration, IP, employment, tax, compliance, and commercial matters. R&P China Lawyers has a thriving retail practice, supporting numerous international companies on selling to Chinese consumers through e-commerce, cross-border e-commerce, and brick-and-mortar stores in China.

To discuss this article, please contact luozongjun@rplawyers.com