China’s Supreme People’s Court (the Supreme Court) has now promulgated an Interpretation on Hearing Civil Dispute with Respect to a Well-Known Trademark (the Interpretation) effective as of May 1, 2009. The Interpretation states that judicial recognition of well-known trademarks will be strictly examined and cross-category protection of well-known trademarks must be analyzed as to whether category expansion is appropriate. In other words, even famous marks may not be automatically expanded into full-category protection. Going forward, foreign trademark holders may find it more difficult to challenge the use of similar trademarks on dissimilar goods or services in China.

Courts should only recognize trade marks as “well-known” or “famous” when absolutely necessary.

In China, obtaining well-known trademark status in a court case confers on a trademark owner broad areas of legitimacy—vastly helping the proprietor of the mark market its products to customers and differentiate itself from its competitors. The Supreme Court Interpretation stems from a concern that a large number of companies will flood the courts attempting to claim this coveted status.

Under the Interpretation, competent courts will only examine whether a claimed mark is well-known when “absolutely necessary” to adjudicate a dispute. In general, an “absolutely necessary” circumstance occurs only when the well-known status of a trademark is the only way to determine infringement. Thus, the Interpretation will restrict a trademark proprietor from even attempting to gain well-known trademark status for its mark except in limited situations.

Only a limited number of courts will have jurisdiction regarding recognition of well-known trademark status.

The Interpretation also imposes procedural regulations requiring judges to examine evidence supporting well-known trademarks status. For example, prior to the promulgation of the Interpretation, the Supreme Court issued a notice limiting jurisdiction of civil cases involving examination of well-known trademarks to only the intermediate courts of a limited number of cities. Also, the Supreme Court will supervise these courts by requiring, whenever there is an exercise of such jurisdiction, and that the court must immediately report it to and record the decision at the Supreme Court once the court has granted well-known trademark status to a mark. The Interpretation specifically points out that courts must follow the strict procedural requirements of the notice.

Cross-category protection of trademarks should not be expanded when necessary. Under the Interpretation, granting cross-category protection for well-known trademarks in connection with dissimilar goods or services is to be carefully examined. In other words, even famous marks are not automatically entitled to expanded or full-category protection. Under the Interpretation, only where there is a substantial relationship between the well-known trademark and the offending trademark—in which the distinctiveness or reputation of the well-known trademark is being diluted or damaged—should cross-category protection be afforded.

According to the Interpretation, when the rightful owner of a registered well-known trademark requests that a court prohibit another party from using its trademark on dissimilar goods or service, the court must consider the following factors: the distinctiveness of the well-known trademark, the relevance between the goods or service of the parties, and the extent to which the relevant public purchasing or using the dissimilar goods or services would be aware of the well-known trademark.

Clearly the Interpretation significantly tightens the rules in connection with cross-category protection.

For cross-category protection, the plaintiff’s trademark must be recognized as well-known before the date the defendant uses the trademark in an offending manner.

According to the Interpretation, the courts may only grant a plaintiff’s request to enjoin a defendant’s use of trademark on dissimilar goods or services if the plaintiff’s trademark was recognized as well-known prior to the defendant’s use of the offending trademark.

In other words, if the trademark owner had filed and registered its trademark and later, another party files for use of the trademark in an offending manner, the mark owner can only enforce its trademark and stop the new entrant from using the trademark on dissimilar goods or services if the mark owner attained well-known status before the date the defendant files for its offending trademark. Hence, even where a plaintiff properly filed and registered its mark before the defendant, if the plaintiff did not acquire well-known status before the defendant filed, the plaintiff cannot request cross-category enforcement of its trademark.

Practice Note: This development may affect certain overseas companies which have established good reputations in their local markets for their products or services but have not yet established a well-known status in China. In this scenario, others in China may try to take advantage of this fact and file to register an “offending” trademark, thereby usurping valuable foreign trademarks.

As recognition of a mark as a well-known trademark is a precondition to seek cross-category protection, with the increasing strict threshold for well-known trademark status and limits on the scope of protection by Chinese courts, foreign trademark holders may find it increasingly more difficult to challenge offending trademarks in China. Therefore, it is advisable for foreign companies that own valuable famous marks to periodically review their global trademark portfolios with a view toward taking steps to pre-emptively foreclose others from registering offending trademarks on dissimilar goods or services.