Introduction

Article 10bis of the Paris Convention,(1) together with the Agreement on Trade-Related Aspects of Intellectual Property Rights, forms the cornerstone of China's legislative framework on the protection of commercial signs. This legislative framework comprises:

  • the new Anti-unfair Competition Law of 4 November 2017, which took effect on 1 January 2018 (a first revision of the original 1993 act);
  • the Trademark Law (amended in 2013);
  • the General Principles of Civil Law (enacted in 1986); and
  • the General Provisions of Civil Law (enacted in 2017).

The legislature had been planning the recent amendments to the Anti-unfair Competition Law since China's accession to the World Trade Organisation. During the four drafts that followed, substantial changes were made concerning important issues such as the theft of trade secrets. However, as regards the principles set out in Article 10bis of the Paris Convention, most of the main concepts and principles of the original 1993 text have been maintained.

This article analyses Article 59(3) of the Trademark Law and, by way of a comparison with the corresponding provisions of the new Anti-unfair Competition Law, examines how the new law will redefine the legal landscape for protecting commercial signs in China.(2)

Article 59(3) of Trademark Law

Article 59(3) of the Trademark Law reads as follows:

Where, before a trademark registrant applies for registration of a trademark, another party has used a trademark that is of certain influence and is identical with or similar to the registered trademark on the same kind of goods or similar goods, the proprietor of the registered trademark shall have no right to prohibit the said party from continued use of the trademark within the original scope of use, however, the holder may require the latter to add a proper mark for distinguishing purposes.

The promulgation of this article was a major milestone. Although it does not offer a one-size-fits-all solution to the conflict between prior use and later registration, it helps to clarify the relationship between the two. In 1993, when the first amendment to the Trademark Law introduced the concept of service marks, the legislature made sure to acknowledge the prior use of a de facto service mark before introducing the concept per se.

Prior use

Article 59(3) of the Trademark Law protects the interests of prior users that have acted in good faith and the reputation of prior-used trademarks. It may also discourage bad-faith applications to a certain extent. On the one hand, this article could be viewed as a setback for the trademark registration system, as it introduces an exception in favour of unregistered prior-used trademarks. On the other hand, it clarifies that the level of use and reputation of a prior-used mark should be judged on the application date of a later registered trademark. It therefore rules out the possibility that the use of an unregistered trademark after its application date can be intrinsically legitimate. However, it is clear that prior use remains restricted and will not extend to registration. In this context, it would be unjustified if the later user of a trademark could generate a legitimate right from its use.

If the owner of a later registered trademark used the mark prior to its application date, the use of the prior mark must pre-date that of the later registered mark in order for it to be bona fide.

In its reply to the China Trademark Office on whether 'Wing Wah Mooncake' constitutes the unique name of a famous product, the Supreme People's Court's IP Rights Tribunal expanded its position that registered trademarks prohibit, within the range of the designated goods, an identical or similar trademark from generating the rights of an unregistered trademark or the unique name of a famous product through actual use. Otherwise, the fundamental value of the trademark registration system would be undermined. This is consistent with the legislative intent of Article 59(3) of the Trademark Law.

Certain influence

The term 'certain influence' is referred to in Articles 32 and 59(3) of the Trademark Law, as well as Article 6 of the new Anti-unfair Competition Law. There have been concerns over the interpretation of this phrase and how it should be defined, particularly with regard to whether it has the same meaning under each law. Arguably, this ambiguity reflects the complexity of this issue.

Continuation of use

The continued use of a prior-used trademark may be deemed an exception to the rights conferred by a trademark, as long as this exception considers the legitimate interests of the trademark owner and any third parties (Article 17 of the Agreement on Trade-Related Aspects of Intellectual Property Rights stipulates that member states may provide limited exceptions to the rights conferred by a trademark, such as fair use of descriptive terms, provided that such exceptions consider the legitimate interests of trademark owners and third parties). Any limitation or exception to trademark rights will be interpreted rigorously to avoid creating a fundamental contradiction of the exclusive right of registered trademarks, which will deprive a mark of its basic function as a business identifier.

Original scope of use

There has been controversy over whether continuation of use is restricted geographically and how 'original scope of use' should be defined. EU trademark legislation provides that the owner of a prior-used trademark can continue to use its mark only within its original geographic area. This perspective is shared by Article 33(5) of the US Trademark Law, which states that "the defense… shall apply only for the area in which such continuous prior use is proved". In Beijing Ya Wang Roast Duck Co, Ltd v Shanghai Huaihai Ya Wang Roast Duck Co, Ltd ((2012) Zhi Xing Zi 9)), the Supreme People's Court held that the prior right generated by the prior use of the BEIJING YA WANG mark should be protected and that Beijing Ya Wang was entitled to continue using its prior-used sign within the geographic range of Beijing.

This reasoning can be explained as follows: where a prior-used trademark conflicts with a later registered trademark, the prior mark is immediately 'frozen' within the geographic region in which it has been used. If the region in which it could be used was allowed to expand, the later registered trademark would be continuously vulnerable to the challenge of the prior-used mark, which would cause confusion among consumers and jeopardise the trademark right.

Affixing distinguishable signs

Affixing distinguishable signs is the last resort for resolving the conflict between prior use and later registration. In essence, the Anti-unfair Competition Law and the Trademark Law have opposite approaches in this regard. Under the Anti-unfair Competition Law, the prior user of a sign has the right to challenge a later user and the later user bears the burden of affixing additional signs to avoid confusion. In the context of the Trademark Law, the prior user of a mark is allowed to continue using it, provided that it affixes additional signs in order to avoid confusion. The Trademark Law, by shifting this burden to the prior user, grants the later registrant certain privileges in order to encourage the filing of trademarks.

For further information on this topic please contact Hui Huang or Paul Ranjard at Wanhuida Peksung by telephone (+86 10 6892 1000) or email (huanghui@wanhuida.com or ranjard@wanhuida.com). The Wanhuida Peksung website can be accessed at www.wanhuida.com and www.peksung.com.

Endnotes

(1) Article 10bis of the Paris Convention reads as follows:

(1) The countries of the Union are bound to assure to nationals of such countries effective protection against unfair competition.

(2) Any act of competition contrary to honest practices in industrial or commercial matters constitutes an act of unfair competition.

(3) The following in particular shall be prohibited:

1. all acts of such a nature as to create confusion by any means whatever with the establishment, the goods, or the industrial or commercial activities, of a competitor;

2. false allegations in the course of trade of such a nature as to discredit the establishment, the goods, or the industrial or commercial activities, of a competitor;

3. indications or allegations the use of which in the course of trade is liable to mislead the public as to the nature, the manufacturing process, the characteristics, the suitability for their purpose, or the quantity, of the goods.

(2) This update is part of a series that examine the new Anti-unfair Competition Law in view of Article 10bis of the Paris Convention and the Trademark Law. For previous updates in the series, please see:

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