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)(a) 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)(a) of Anti-unfair Competition Law

Article 6(1)(a) of the Anti-unfair Competition Law provides that "business operators shall not commit any of the following confusion acts that may mislead consumers to believe that its products are those of another person, or induce a special relationship with another person".

Deletion of reference to trademark counterfeiting

During the act's revision, Article 6 was one of the most discussed provisions. In the original 1993 text, Article 5 (now Article 6) addressed "counterfeiting others' registered trademarks" (Article 5(1)(1)). This clearly overlapped with the Trademark Law and has now been deleted from the revised Anti-unfair Competition Law. Removing this overlap has helped to draw legal boundaries between the Anti-unfair Competition Law (a general statute) and the Trademark Law (a special statute).

The Trademark Law grants protection to trademarks that have been registered. Apart from the risk of a mark being revoked if it is not used within three years, whether it is actually used is irrelevant: the trademark owner still has the right to prevent others from using its protected mark. Conversely, the protection that the Anti-unfair Competition Law provides to business operators is based on their use of the distinguishing marks concerned. No use means no competition and thus no case.

More specifically, it is the scope of such use that matters. In order to challenge copycats nationwide, a trademark owner must establish the existence of its mark's influence in each city and region. On the other hand, a trademark registration grants its owner a nationwide right. Within three years from a trademark's date of registration, even if it has not been used or has been used only within a certain geographic region, its registrant can exclusively use such mark and prohibit others from using it.

Confusion

Notably, "misleading the public (or consumers)", which is the prerequisite to Article 58 of the Trademark Law, is generally deemed to be semantically equivalent to "misleading consumers to believe that its products are those of another person or induce a special relationship with another person" (an act of confusion under Article 6 of the Anti-unfair Competition Law). However, on further examination, "misleading the public" is not equal to "confusion". The concept of likelihood of confusion was introduced in Article 57(1)(2) of the Trademark Law, which distinguishes the use of:

  • "an identical or similar trademark on similar goods"; and
  • "a similar trademark on identical goods… where such use is likely to cause confusion".

Under Article 10bis(3)(1) of the Paris Convention, 'confusion' has a wide scope and includes "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".

In Article 5(2) of the previous Anti-unfair Competiton Law, the prohibited act was:

Using a name, package etc… for a product, similar to the famous product of another person, thereby confusing the product with that famous product and therefore leading the purchasers to mistake the former for the latter.

In an Interpretation on Some Matters about the Application of Law in the Trial of Civil Cases Involving Unfair Competition of 2007 (Judicial Interpretation on Unfair Competition), the Supreme Court interpreted the meaning of 'confusion' in Article 5(1)(2) of the previous Anti-unfair Competition Law as follows:

Any confusion arising over the source of a commodity among the relevant public, including misconstruing the offender having a special relationship as licensed use or affiliation with the business operator of a famous commodity.

Under the previous law, a question had been raised concerning the confusion over products and, specifically, whether the protection of one product could be extended to a completely different type of product.

In an extreme case of cross-category confusion over products, a consumer accidentally consumed shampoo branded Great Lakes, mistaking it for Great Lakes juice. There was obviously no confusion as to the manufacturer, but rather the products. The case was handled by the Administration for Industry and Commerce, which held that giving the same name to shampoo and juice was an act of unfair competition. A subsequent circular confirmed this cross-category protection of products under the Anti-unfair Competition Law. This decision, which established a parallel with the Trademark Law (ie, cross-category protection for well-known trademarks), has sparked controversy.

It is worth examining the different circumstances in which confusion may arise, as provided in the successive drafts of the Anti-unfair Competition Law. In the 2016 draft, 'confusion' referred to the situation in which the public:

  • mistakes one manufacturer or operator of certain products for another; or
  • mistakenly believes that a manufacturer and an operator have a specific connection.

Thus, the object of confusion was the operators that make products. The second 2017 draft and the final text use the broad term 'confusion acts' and reset the parameters to include "acts that may mislead consumers to believe that its products are those of another person, or induce a special relationship with another person". Now, the object of confusion is the products themselves. However, products are not the only possible object of confusion: company names, names of natural persons, website names and domain names are all listed in Article 6 of the law.

Conflict with prior rights

As regards the conflict between a sign protected by the Anti-unfair Competition Law against confusion acts and a later similar sign that is registered as a trademark, one notable question is whether the later trademark registrant can dispute the prior mark.

Both the Paris Convention (Article 6quinquies) and the Agreement on Trade-Related Aspects of Intellectual Property Rights provide that the rights conferred by a trademark registration will not prejudice any existing prior rights or affect the possibility of making rights available on the basis of use. Both reflect the principle that trademark registration does not alter the existing facts.

This parallel protection is confirmed by Article 138 of the EU Trademark Regulation, which states that:

The proprietor of an earlier right which only applies to a particular locality may oppose the use of the EU trade mark in the territory where his right is protected in so far as the law of the Member State concerned so permits.

Thus, a prior mark owner must be able to not only continue using its mark within the area where it has certain influence, but also stop others (including the registrant of a later mark) from using it.

China follows the same principle, but there is a contradiction between the solution established by the Anti-unfair Competition Law, as interpreted by the Supreme People's Court, and the Trademark Law. According to Article 1(2) of the Supreme People's Court's interpretation, where a later trademark owner expands its geographical area so as to cause confusion, the user of the prior mark has the right to request the later user to affix other signs to distinguish the source of its goods. However, Article 59(3) of the Trademark Law stipulates the opposite, stating that "the prior user is allowed to continue to use its mark within the original scope but may be requested to affix signs for distinguishing purposes".

Deletion of word 'unique'

During the revision process, the first sub-paragraph of Article 6 sparked intense debate. The original 1993 text included the following prohibition:

Using, without authorization, the names, packaging or decoration unique (or specific) to a famous product, or names, packaging or decoration similar to famous goods, so that their goods are confused with the famous goods of others, causing buyers to be mistaken.

The final text no longer features the words "unique (or specific)", which has wrongly been interpreted by some as meaning that it is no longer necessary to prove that the name, packaging or decoration of products are distinctive or unique (akin to removing the pre-condition in the Trademark Law that a trademark must be distinctive so as to be identifiable) in order to invoke protection. This is, of course, incorrect. In the absence of a mark's distinctiveness or uniqueness, there cannot be confusion. The parameters set by Article 2 of the Judicial Interpretation on Unfair Competition for uniqueness, the criteria for finding distinctiveness listed in Article 11 of the Trademark Law and the fair use defence of non-distinctive marks provided by Article 59(1) of the Trademark Law all continue to apply.

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 "Relationship between new Anti-unfair Competition Law and Paris Convention: general principles".

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