The Supreme People's Court proactively interprets laws. It does so through exhaustive and detailed documents published under various titles, and at various levels, which serve as guidance for the lower courts. 'Interpretations' and 'provisions' are the highest level of guidance and lower courts are required to follow them. 'Explanations' or 'opinions' are of lesser importance and not binding, but still have a strong influence on the practice of lower courts.

Concerning the Trademark Law, the Supreme People's Court usually makes a distinction between civil litigation(1) (infringement disputes) and administrative litigation(2) (oppositions, invalidation and revocation of trademarks). However, the court also addresses IP issues in general.(3)

On December 12 2016 the Supreme People's Court adopted the Provisions on Several Issues Concerning the Hearing of Administrative Cases Involving the Granting and Affirmation of Trademark Rights, which became effective on March 1 2017. These long-awaited provisions concern the revised Trademark Law (entered into force on May 1 2014) which opens up new horizons and settles old divergences.

Likelihood of confusion wider than similarity

The likelihood of confusion between a prior trademark and a junior trademark, when it is established, is the main cause for refusal or invalidation of such a mark.

Before the last revision of 2014, the Trademark Law was almost silent about the likelihood of confusion concept. The only exception was Article 13.1 (13.2 in the revised law) which prohibits the registration of:

"a trademark applied in respect of identical or similar goods (which) is a duplication, imitation or translation of another person's well-known trademark not registered in China, and the applied trademark is likely to cause confusion."

Apart from the above, no reference was made to the likelihood of confusion. The following articles have not been changed:

  • Article 28 – refusal to register an identical or similar trademark on identical or similar goods;
  • Article 31 – refusal to register a preemptive application by unfair means of a trademark already used and having a certain influence; and
  • Article 41.2 and 3 – invalidation of a trademark registered in violation of the above Articles 13, 28 and 31.

The above articles were respectively re-numbered 30, 32 and 45.1 under the new law of 2014.

These articles provide for the following two criteria only:

  • the similarity between the signs; and
  • the similarity between the goods or services.

The examiner or judge decides whether the trademarks are similar by making a comparison between the signs and assessing whether the goods are similar, usually by checking a pre-established list of similar goods and services.

The concept of likelihood of confusion was introduced in the 2014 revision of the law, but only in Article 57.2, which defines the act of trademark infringement. Article 57 concerns civil disputes, not administrative disputes.

Article 57.2 distinguishes:

  • the use of an identical or similar trademark on similar goods; and
  • the use of a similar trademark on identical goods, "where such use is likely to cause confusion" (quote taken from the revision of the law).

This means that it is conceivable that an objectively similar trademark could, in actual use, not be confusing.

The Supreme People's Court has not yet issued any interpretation of the law concerning civil cases and Article 57. The latest interpretation concerning civil cases was issued on October 12 2002.(4)

In its recent provisions, the Supreme People's Court introduces the concept of likelihood of confusion in administrative litigation.

In Article 12 the Supreme People's Court explains how to assess the likelihood of confusion under Article 13.2. It states that the judge should assess not only:

"the degree of similarity of the trademarks and goods, but also the degree of distinctiveness and reputation of the 'older' trademark, the general attention of the public and 'other pertinent factors'. The Supreme People's Court even adds that it will be possible to take into consideration the intention of the junior trademark applicant and the possible evidence of actual confusion."

The range of admissible evidence is wide and the courts are encouraged to look at the global picture.

From a rather restricted scope of examination (similarity or no similarity between signs and goods), judges are now asked to determine a concept – the likelihood of confusion – which can be defined as a "threshold of tolerance" beyond which a junior trademark cannot be accepted. Such a threshold could be compared to an object of indefinite form, a volume which should exceed a certain amount, but one which may take many shapes depending on its width, height and depth. For trademarks, the higher the reputation of the prior trademark, the lower the tolerance threshold regarding the degree of similarity and vice versa. However, each case must be analysed in view of all individual circumstances.

Articles 30 and 32 do not refer to the likelihood of confusion. It has not been specified whether the courts should restrict their analysis to examining whether the trademarks in conflict are objectively similar or whether they should follow the same recommendation and look at the global picture. During the public presentation of the provisions, the Supreme People's Court made it clear that the method defined for Article 13.2 should also apply to Articles 30 and 32 and to Article 57.2.

Likelihood of dilution for similar goods

Article 13.3 addresses the issue of well-known trademarks being applied or used in respect of different goods. The court should establish whether the junior trademark is likely to mislead, to "create an association" in the mind of the public that would have the consequence of harming the interests of the well-known trademark owner. This refers to the dilution of the trademark, not to confusion.

In its recent provisions, the Supreme People's Court provided a list of criteria to be considered by judges, which have some common points with the list concerning Article 13.2:

"(1) The distinctiveness and extent of reputation of the Cited trademark; (2) whether the trademarks are sufficiently similar; (3) the designated goods; (4) the extent of overlapping of the relevant public and its degree of attention; (5) whether similar signs are legitimately used by others."

However, it remained to be clarified whether it was possible to claim the status of a well-known trademark when opposing or requesting the invalidation of a trademark applied or registered on the same or similar goods.

It is frequently the case that a registered trademark owner applies to oppose or invalidate a junior trademark which has been applied or registered for the same or similar goods, and claims that, because of the high reputation of his or her registered trademark, the litigious trademark is:

  • creating a likelihood of confusion; or
  • creating a likelihood of association and dilution.

In this case the applicant cited Articles 30 and 13.3. Under Article 30, it is not necessary to recognise the well-known status of the registered trademark, but under Article 13.3, such recognition is necessary.

Whenever the issue is raised at the administrative level, the China Trademark Office and the Trademark Review and Adjudicating Board (TRAB) object because Article 13.3 of the law refers only to different goods and as a result, such a request cannot be considered. This is frustrating as well-known trademarks should have stronger protection than ordinary trademarks. If it is possible to take advantage of the high reputation of registered trademarks against a litigious trademark used on different goods, it should be possible to take advantage of this reputation when the litigious trademark is used on the same or similar goods.

In its recent provisions, the Supreme People's Court proposed an indirect – but positive – solution to this situation.

The court considered the case where the owner of a registered trademark has filed an opposition or invalidation application against a litigious trademark, claiming that it is well-known (citing Article 13.3) and the TRAB has ruled in favour of the registered trademark owner, but citing Article 30. In such a case, the Supreme People's Court held that the court may apply Article 30 if the case is within the five-year period after the registration of the litigious trademark or Article 13.3 if the litigious trademark has been registered for more than five years.

This solution means that the Supreme People's Court considers that it is possible to invoke the well-known status and request such recognition even when the litigious trademark is registered on identical or similar goods.

Indirectly, even if not expressly, this also means that if Article 13.3 can be used after the expiration of the five-year period, there is no reason why it could not also be used within this period. In other words, if the plaintiff can prove the likelihood of confusion, it is not necessary to apply Article 13.3 as Article 30 is sufficient. However, if the plaintiff can only prove a likelihood of association and dilution, Article 13.3 should be applied and the well-known status of the registered trademark should be recognised.

This solution was implemented in P&G v TRAB and Weishida (May 19 2016).

Inclusive development theory

In its two opinions published on April 20 2010(5) and December 11 2011,(6) the Supreme People's Court proposed a new way of adjudicating trademark conflicts, which was called 'the inclusive development theory' by commentators. According to this theory, deciding whether a junior trademark is similar to an older trademark can be based on the status of the market.(7)

When assessing the similarity between the marks, the courts considered the reputation of both marks, the registered trademark and also the defending trademark.(8)

This is in contrast to the solution recommended in the interpretation of 2002. If the junior trademark had reached, through use, a sufficient position in the market, the court was to declare that the junior trademark was not similar and that the two trademarks could continue to coexist.(9) Several cases, some of which were high profile (eg, Lacoste v Crocodile International and BOSS v BOSSsunwen) implemented the inclusive development theory and dismissed oppositions or invalidation actions against obviously similar trademarks. European officials believed that this theory did not comply with the Agreement on Trade-Related Aspects of IP Rights, and discussions took place on several occasions with the Supreme People's Court.

Whether the arguments exchanged between the European and the Chinese sides stimulated further reasoning, it is hard to say. In the more recent Nei Lian Sheng v Fu Lian Sheng (December 18 2015), the Supreme People's Court ruled in favour of the plaintiff and stated:

"If the court were to take into account the alleged market recognition and reputation established by use of the Fu Lian Sheng trademark, this would encourage competitors to violate the good-faith principle by ignoring the legitimate prior rights of others and expanding their business."

In the latest provisions of December 12 2016 the Supreme People's Court provided clear recommendations on how to assess the likelihood of confusion and dilution between two conflicting trademarks. No further reference was made to the reputation of the defending trademark, and it was assumed that the inclusive development theory of 2010 and 2011 had been been abandoned, even though this was not expressly mentioned in the 2017 opinion.

However, the Supreme People's Court jurisprudence does not seem to have been finalised. In a recent case LensCrafter v Liang Shi Dian (September 26 2016), the court ruled in favour of the defendant, citing its opinion of April 2010, which was made on the basis of the inclusive development theory.

This article was first published by the International Law Office, a premium online legal update service for major companies and law firms worldwide. Register for a free subscription.