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 update analyses Article 6(1)(4) of the new law from the perspective of Article 10bis of the Paris Convention and, by way of a comparison with the corresponding provisions of the Trademark Law, examines how the new law will redefine the legal landscape for protecting commercial signs in China.(2)

Article 6(1)(4) of the Anti-unfair Competition Law

Article 6(1)(4) of the Anti-unfair Competition Law prohibits a party from performing "other confusion acts that may mislead consumers to believe that its products are those of another person, or induce a special relationship with another person".

This is a convenient fallback provision for IP rights holders which need protection in circumstances other than those explicitly listed in Article 6.

Conflict between trade names and trademarks

The Supreme People's Court has issued detailed decisions regarding conflicts between business names and registered trademarks. According to Article 1(1) of the Interpretation of the Supreme People's Court on Several Matters regarding the Application of Law in the Trial of Trademark Civil Dispute Cases (Judicial Interpretation on Trademark Civil Case), where a trademark features prominently in a trade name used on identical or similar goods, the trademark owner may take action against the offending party on the grounds of trademark infringement. However, if the trademark is not a prominent feature of the trade name, no action is possible.

If the registered trademark is well known:

  • there is no need to prove that it was a prominent feature of the trade name; and
  • the protection may extend to goods that are:
    • of different classes; or
    • in the same class, but are not usually deemed to be similar.

The Supreme Court expanded these principles in Gyoza no Ohsho Dalian Catering Ltd v Li Huiting (2010 Min Ti Zi 15, 24 June 2010). Where the registration and use of a company name is intrinsically unjustified (eg, registering another party's reputed prior registered trademark as a trade name) and the non-prominent use of such name may still create market confusion, such act will constitute unfair competition. Due to the illegality of the act of registration and use and the inevitability of market confusion, the courts may order the defendant to stop using or change its name.

Where a company name that is identical or similar to another party's registered trademark features prominently on identical or similar goods and is therefore likely to cause confusion among the relevant public, such act will constitute trademark infringement. Where only the prominent use of the trade name is considered to be an infringement, the courts will order the cessation of the defendant's prominent use, which will stop the infringement, but will not order the defendant to change its name.

Given the attempts of operators hoping to benefit from the reputation of competitors, this fallback clause is indispensable.

Indicative and comparative use

Some cases have concerned the use of trademarks in the context of the exhaustion of rights (after the trademark owner or its licensee has launched the relevant products in the market). Under EU trademark legislation, such use may be condemned if good-faith business practices have been breached. Under China's current legal framework, it would be advisable to look to the Anti-unfair Competition Law for a solution.

Pierre Fabre Dermo-Cosmetique v Changsha Hui Ji E-commerce Co, Ltd, Wuliangye Yibin Co, Ltd v Jiangxi Fabulous Life Investment Development Co, Ltd, (Sichuan High Court, 2013 Chuan Min Zhong Zi 665) and FENDI ADELE SRL v Shanghai YI LANG Trading Ltd & Capital Outlets (Shanghai IP Court, 2017 Hu 73 Min Zhong 23) are all cases in which the courts reasoned that indicative use will be confined to circumstances in which it is necessary to avoid confusion or the creation of a false association between an offending party and a trademark owner.

Reverse passing off

Reverse passing off is another possibility under Article 6(1)(4) of the Anti-unfair Competition Law. Such situation is addressed by Article 57(1)(5) of the Trademark Law, which refers to circumstances in which a producer misrepresents another party's goods as its own by replacing a registered trademark with another trademark and relaunching said goods to the market. If the trademark concerned is not registered, Article 6(1)(4) may be relied on, as the switched goods are likely to cause confusion among consumers as to the genuine source of the products or create a false association with the offender.

Merchandising rights

Merchandising rights are also a matter of concern. The World Intellectual Property Office Model Provisions on Protection against Unfair Competition, as well as the Judicial Interpretation on Trademark Administrative Litigation 2017, address the need to protect the title of a work or the name of a character in a work. Although the Anti-unfair Competition Law makes no direct reference to merchandising rights, the parameters set by the trademark judicial interpretation are similar to those of Article 6 of the Anti-unfair Competition Law. Future judicial practice is likely to shed some light on the protection of merchandising rights under the Anti-unfair Competition Law framework.

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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