Aria Tian, Lusheng Law Firm
On January 1, 2018, the newly revised "Anti-Unfair Competition Law" (hereinafter referred to as the new ACL) came into effect.
This is the first revision in 24 years and adjusts the order of competition in the market given the new economic and technological backdrop of modern China. The content involved is very detailed. This article selects only the first two paragraphs of Article 6 for analysis.
The Law of the People's Republic of China against Unfair Competition [1993 version] (hereinafter referred to as the old ACL)
Article 5.
(2) to use, without prior permission, the same or similar names, packages, decorations of well-known brand name products so as to mislead buyers;
(3) to use, without prior permission, the names of other enterprises so as to mislead buyers;
New ACL
Article 6 A business operator shall not perform any of the following confusing conduct that may lead people to mistake its products for another business operator's products or to believe certain relations exist between its products and another business operator's products:
1. unauthorized use of a mark that is identical or similar to the name, packaging or decoration of another business operator's commodity, which enjoys influence to some extent;
2. unauthorized use of another business operator's corporate name (including its shortened name, trade name, etc.), the name of a social organization (including its shortened name, etc.), or the name of an individual (including his/her pen name, stage name, translated name, etc.), which enjoys influence to some extent;
Compared with the original clauses, the new clauses have the following characteristics: First, the names of products, packaging and decoration, business names and person’s name which were clearly protected by the new ACL are limited to "having a certain influence"; secondly, explicit protection not only includes "direct confusion" ("misleading as someone else's goods") but also "indirect confusion" ("having a specific connection with others"). The following will discuss the legal application of these two issues separately.
Product’s name, packaging or decoration
As we all know, trademarks can obtain exclusive rights through registration. But a lot of goods have a certain uniqueness in the market after long-term marketing on logos, labels, names, packaging and so on. These logos, Labels, names and packaging have accumulated goodwill, and consumers will gradually use them as identifying labels that determine the source of the goods. These unregistered identifiers, which are essentially unregistered trademarks, play a guiding role in consumer shopping and must be protected. This is the basic legal principle for the protection of the packaging and decorating of goods by the ACL.
"Well-known" to "a certain influence", the standard has not changed
Article 5 (2) of the old ACL, "Name, Package and Decoration Peculiar to Well-known Goods" is replaced with "name, package and decoration with certain influence". By using "certain influence" and removing “famous", expands the scope of commercial identification. "Well-known goods" is modified to “certain influence" at the same time.
Judging from China's previous judicial decisions, such as the Ferrero case, or the ACL and related judicial interpretations, the specific recognition and protection of well-known goods are all based on the recognition and protection of trademarks.
The expression "certain influence" first appeared in trademark law and was subsequently elaborated in the judicial interpretation.
Opinions of the Supreme People's Court on Several Issues Relating to Trial of Administrative Cases Pertaining to Licensing of Trademark and Authentic Right defines a "trademark with certain influence" as stipulated in Article 31 of the Trademark Law as "a trademark known to a certain public body of a certain scope". It stipulates that there is "evidence of a certain duration of continuous use, region, sales or advertising, etc., and can be identified as having a certain influence back then." Article 2, Paragraph 2 of the Provisions of the Supreme People's Court on Several Issues Concerning the Trial of Cases of Confirming Power in Conforming to Trademark Authorities (December 12, 2016) has similar provisions.
As mentioned earlier, the fact that the packaging and decorating of goods is essentially an unregistered trademark, and is of the same nature as the "trademark with certain influence" in Article 32 of the Trademark Law, it is necessary to maintain the same expression. Therefore, the newly revised law adopts the word "certain influence", and for the recognition of “certain influence”, it should be the same standards with that for previous “well-known” trademarks.
Whether the standard has changed due to the disappearance of "uniqueness”?
Another change to this rule is the deletion of the "uniqueness" requirement of the old AML.
In the past legal practice, the recognition of the protection of the packaging and decorating of goods generally needs to consider both the popularity and the uniqueness. According to Several Issues Concerning the Applicable Laws in the Trial of Unfair Competition Civil Cases Interpretation by Supreme People's Court (Hereinafter referred to as "anti-unfair competition interpretation)", "distinctiveness" refers to the name of a commodity that has distinctive characteristics that distinguish the source of the goods.
In the case of Jia Baobao and Wang Laoji Red Cans, the Supreme People's Court held that "the packaging and decorating involved in the selection and combination of design elements such as color, text and design presents a certain uniqueness and non-functional effect of the product visual effects and salient features. By long-term and large-scale promotion and actual use by the operators, the instructional functions of the packaging sources involved in the packaging and decoration can be further strengthened. "The packaging in this case has the "uniqueness “.
It is precisely because the packaging and decorating is unique to the product, the use of the similar packaging results in confusing the public. The reason why the "certain influence" is protected is essentially that the unique name has played a role as the source of the trademark, and needs to be avoided to stop confusion among consumers. This shows that the protection of a distinctive name of well-known goods is based on the name’s function of distinguishing the source of the goods. Only with a certain distinctiveness, having a certain market visibility, and can help consumers to choose the goods, the distinctive name can be protected.
The old ACL distinguishes the distinctive names, packaging, decorating and well-known goods. In judicial practice, the plaintiffs need to prove that the commodities are well-known. This also establishes that their unique names as well as packaging and decoration have a certain influence. The decoration is not generic, and the combination with the right-holder's merchandise or trademark has created a fixed perception in the consumer's mind that serves as a source of product identification. This allows the product to be legally protected as an unregistered trademark.
Therefore, although this amendment removes the word "uniqueness", we think that in judicial practice, the requirements for names, packaging and decorating are still the same as under the previous law.
Overall, although the new ACL has been amended or deleted in writing, it is consistent with the trademark law. In our opinion, there is no change in the standards for determining the name, packaging and decorating of goods subjective to new ACL’s protection, and will still follow previous judicial practice.
Enterprise Name
As a business logo, an enterprise name can play a role in differentiating the sources of products and services, and is a valuable intangible asset. Paragraph 2 of Article 6 of new ACL adds the expression of "have a certain influence". At the same time, it clearly states that a business name includes its abbreviation, brand name and so on.
Clearly Define Enterprise Name includes the Brand Name and abbreviation
According to "Administrative Provisions on Enterprise Name Registration" (hereinafter referred to as "Registration Provisions"), the brand name is the remaining part of the enterprise name after removing the region name, industry or business nature, or organizational form. For example, “Leroy-Somer” is the brand name of "Leroy-Somer company", "Qingfeng" is the brand name of the “Beijing Qingfeng Stuffed Bun House”.
When an enterprise name is recognised by the relevant public due to its increasing popularity, its brand name used alone also has an identification function. Therefore, the brand name of the enterprise name that has a certain influence will usually be deemed as the name of the business being protected according to the ACL. The Article 6 of the Several Issues Concerning the Applicable Laws in the Trial of Unfair Competition Civil Cases Interpretation by Supreme People’s Court states “words forming part of an enterprise name that is famous in the market to a certain extent and known to the relevant public may be deemed as the "enterprise name" as specified in Article 5(3) of the old ACL”.
As for the abbreviation of the enterprise name, no specific legal or judicial interpretation has been given to the issue before the new ACL was introduced. The ACL protection of the abbreviation of the enterprise name was established for the first time by the Supreme People's Court in the case of Shandong Crane Factory Co., Ltd. v. Shandong Shanqi Heavy Industry Co., Ltd. Over in 2009. This case is about disputes over Infringement upon an enterprise's right to its name.
The Supreme Court ruled that whether the abbreviation of the enterprise can refer to the enterprise, depending on whether the company is recognized by the relevant public, and establishes a stable relationship with the business in the relevant community. The abbreviation of an enterprise or an enterprise name, which has a certain market reputation, is well known by the relevant public and actually serves as a trade name, may be deemed an enterprise name.
A particular abbreviation of an enterprise can gain the public approval, a corresponding market reputation and a steady bond with the enterprise in a specific geographical area, and can play the role of a commercial sign in the identification of the operating entity. Any other person's subsequent unauthorized use of this well-known abbreviation will cause market confusion. The subsequent user may infringe on the legal rights and interests of the first user by inappropriately taking advantage of the reputation of the first user. Under these circumstances, Article 5(3) of the old ACL on the protection of enterprise name may apply to the protection of an enterprise's specific abbreviation.
Does the new expression "have a certain influence" raise the standard of recognition?
The ACL prohibits the illegal access to competitive advantage, not simply to protect a specific business identity.
In 2013, the Supreme Court ruled in the case Leroy-Somer Co. and Leroy-Somer Electro-Technique (Fuzhou) Co., Ltd. v. Leroy-Somer Motor (Fujian) Co., Ltd. The court decided that Leroy-Somer company had certain level of recognition in the motor industry. At the time that Leroy-Somer Motor (Fujian) Co., Ltd. changed its enterprise name, Leroy-Somer Co. and Leroy-Somer Electro-Technique (Fuzhou) Co., Ltd. had long used LEROY-SOMER as a brand name. The relevant public had established a fixed correspondence between the two sides. Under these circumstances, Leroy-Somer Motor (Fujian) Co., Ltd., as a competitor of Leroy-Somer Electro-Technique (Fuzhou) Co., Ltd. in the same industry, coexisted in the same province of Fujian Province. Leroy-Somer Motor (Fujian) Co., Ltd. used Leroy-Somer as the brand name of the enterprise name, and used a similar name “LEROYSOMMER” as foreign enterprise name. It is obvious for Leroy-Somer Motor (Fujian) Co., Ltd. to use the reputation of Leroy-Somer company in the motor area, which was likely to cause confusion and misconduct of the relevant public. The conduct of Leroy-Somer Motor (Fujian) Co., Ltd. infringed the right of enterprise name of Leroy-Somer Co. and Leroy-Somer Electro-Technique (Fuzhou) Co., Ltd., and constituted unfair competition.
Therefore, the identification of whether the conflict among the trademark uses and among the brand name uses of the enterprise names (i.e. the misunderstanding of the source of goods or services, the relationship of different operators) is sufficient or may lead to confusion by consumers, should be based on the relevant facts when the infringement occurred, and the following factors:
1) Whether the channels and ways of producing and selling goods or providing services are the same or similar;
2) Whether the goods produced or operated by both parties and the services provided by them are similar, and the degree of attention paid by consumers when purchasing them;
It is noteworthy that, once the enterprise name has a certain recognition and influence, it will naturally extend to a new area. However, the company should prove that its name or brand name has greater and wider recognition and influence than those in the same industry or in a direct competitive relationship.
3) Whether ordinary consumers will misidentify and mistake for purchase with ordinary attention;
4) The results of whether there is evidence that has caused the actual confusion;
5) Whether the infringer has the subjective intention of using or damaging the well-known goodwill of others.
To sum up, although the expression of "certain influence" is new, it is also the content of the judicial interpretation of the old ACL. This amendment is consistent with the previous judicial practice.
Effective Convergence of Enterprise Name Registration and Management System
One of the highlights of this revision is that it effectively links with the enterprise name registration management system of the administration for industry and commerce on the rectification measures of the names of enterprises that have been found to be infringing.
The new ACL, in addition to administrative penalties, regulates corrective measures against the name of a registered business company that has copied the trade mark of another person. The second paragraph of Article 18 stipulates that where the corporate name is registered by a business operator and is in violation of the provisions of Article 6, the business operator shall promptly go through formalities to change the corporate name. Prior to such a change, the original corporate registration authorities shall use the unified social credit code in lieu of its corporate name. This is also the mandatory rectification measure of unsuitable names proposed in the Opinion of the SAIC on Improving the Registration Efficiency and Promoting the Reform of the Enterprise Name Registration and Management. It requires the enterprise competent registration authorities to actively cooperate with the trademark and competition law enforcement departments to handle enterprise name disputes according to the law. In September 2017, Article 36 of the Provisions on Administration of Enterprise Name Registration (Draft for Comments) promulgated by SAIC also placed clear obligations on the procedure and measures for compulsory de-listing of inappropriate enterprise names.
It can be foreseen that after the implementation of the new ACL, the registration authority will have more legal basis and punishment and will be more operable concerning disputes over the names of various types of enterprises arising from confusion. The efficiency of the registration authority in handling disputes will also be significantly enhanced.
