Liuming International China Business Lawyers

Copyright a trademark?

August 22nd, 2021

Copyright can be a valuable adjunct and enhancement to China trademark protection. Copyright does not automatically apply to all trademarks. Word marks, for example lack the essential creative and original aspect that is needed to be a “work” as defined in China’s Copyright Law.

A logo (device in TM speak, but logo here) may satisfy the requirements. Fine art is not needed, just a work with original creative input. When this is satisfied, the logo may be protected as a “device” product or service mark and also by copyright.

Why would you want both? A real world example. We alerted our client, a global supplier of alcoholic beverages, that a Chinese company had applied to register its logo as a trademark for children’s toys. Although trademarked in all relevant classes, our client had no legitimate interest to cover that category with its trademark applications. We successfully opposed the Chinese company’s application on the basis of copyright infringement.

The legal grounds are in the Trademark Law – registration of a trademark shall not infringe the prior rights of others, and that includes prior copyright.

Copyright in China

China is a signatory to the Berne Convention and the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS). In general, copyright in China operates very similarly to other places.

Copyright in a work comes into existence when it is created. It is very important to note this because it has “first to file” implications.

If a logo meets the criteria to be a “work” according to China’s Copyright Law, copyright in that work came into existence at its creation. That is almost certainly before anyone successfully registered, or applied to register it, as a trademark in China! This is very important for China – a “first to file” jurisdiction.

If an application is made to register an identical logo as a trademark, it is relatively easy to apply copyright in opposition. (Assuming that you can establish that it is a “work”). Similarity is more difficult to deal with and the evidentiary burden greater, but it is also a viable option to consider and act on.

Copyright ownership

Copyright ownership must be proved in an infringement case. A logo as a “work” is not enough. Proving that you own the copyright can be more problematical than establishing a work. If you are the artist or creator of the logo, that makes life simple, but in the corporate world that is rarely the case. More usually an outside agency or studio has been engaged to provide the logo as part of the overall branding. It is important that the copyright interest is formally transferred to the brand owner.

It is now quite common for a brand owner to also register a Chinese language version of a logo as a trademark. If the only Chinese input is to add Chinese characters to an existing logo that is probably not enough to make it a work. If it is effectively a separate work then it is likely that copyright will belong to the creator. The contract for this is very important and should formally transfer copyright to the brand owner.

A Chinese court will typically want to see documents recording the formal transfer of the copyright in the work to the claimant. Unfortunately, in many cases this formal step has been omitted or the documents have been lost. China’s Copyright Law allows for works created during employment or under a contract, but the burden of proof is on the claimant. In China, these arrangements are most commonly reduced to writing and that is what a Chinese court expects to see. Attention to detail in this aspect of copyright enforcement is very important.

Copyright registration

Copyright registration is available in China, but is not a requirement for action against an infringer.

Registration, however, is accepted as prima facie evidence of the existence and ownership of copyright in a work. The registration process itself needs to be carefully done, but it can avoid the need to translate a lot of secondary material to be put before a Chinese court to commence an infringement action.

We generally recommend registration of copyright in China and this can be very important for trademark protection.

Copyright registration is also a requirement to record copyright with China Customs. Recordal (as it is known in China) allows China Customs to stop apparently infringing inbound or outbound goods at the border.

Recordal is not just for copyright. It extends to all China IP rights, including trademark. A China Trademark Registration Certificate is needed fot recordal and some brand owners will need to take additional steps before they can do this.

Benefits of Copyright in brand protection

  1. China has 45 classes for trademark registration and protection. If you register a trademark in relevant classes in China, you will be only able to stop others from registering or using the same or a similar trademark on goods or services in those classes. This is not China specific and is the usual situation with trademarks.
  2. Copyright can protect across all classes if the trademark meets the China copyright requirements for a work.
  3. Allegations of trademark infringement are commonly made against Internet sales portals. In our experience copyright can give you protection in circumstances where trademark infringement may be difficult to readily establish.

Take-aways

  • Copyright can be a valuable adjunct to trademark registration in China.
  • Not every trademark can be subject to copyright protection – it must be a work as provided in China’s Copyright Law.
  • Proving copyright ownership of a work is essential for a copyright action against an infringer.
  • Registration of copyright is not essential but has very real practical advantages.
  • As always, it is much less expensive to protect rights than it is to try to recover them from someone else.
  • Copyright is not a “one size fits all” solution. Seek advice on your specific situation before acting.

WEI Xin & PENG Wei

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Posted in Articles, Copyright, Intellectual Property Rights, Trademark, Trademark infringement, Trademark litigation, Uncategorized | No Comments »

AWS? Not for Amazon in China

August 1st, 2021

Introduction

AWS is Amazon’s brand for its dominant cloud services. A series of administrative and court decisions have confirmed that a Chinese company has the legal rights to the “AWS” trademark in China.

China is a “first to file” trademark jurisdiction. Use or intended use is not part of registration. This is very different from many other jurisdictions and not paying attention to this has cost many companies the loss of the right to use their “outside” brand in China.

Chinese company Yanhuang Yingdong Technology and Development Co Ltd (“Yanhuang Yingdong”) owns several China trademarks. Between February 7, 2008 and April 14, 2012 it registered “AWS” as its trademark in computer and technology related categories in classes 42 (TM 4249189), 9 (TM 8967031) , and 35 (TM 8967030 ).

An Amazon affiliate, Amazon AWS Technology Services (Beijing) Co Ltd (“Amazon Beijing”) together with Beijing Guanghuan Xinwang Technology Company Limited (“Guanghuan Xinwang”) provide cloud computing services in China, using “AWS” branding. Despite trying, they were not successful in getting a China trademark for “AWS”. They continued with their use of the “AWS” branding anyway.

Amazon Technologies Inc AWS Trademark Applications

On October 9, 2012, Amazon Technologies Inc. (“Amazon Tech”) applied to register “AWS MARKETPLACE” as a trademark in Class 42 (TM No.11577355). This was rejected by the China Trademark Office in September 2013 because it was similar to Yanhuang Yingdong’s “AWS” trademark.

On September 13, 2017, Amazon Tech applied to register an “AWS and device” trademark in Class 42 (TM No.26377486). This was also rejected. Amazon Tech applied for re-examination of the rejection but this failed. The ruling was that the distinctive part of the trademark applied for was “AWS” and this was similar to Yanhuang Yingdong’s trademarks. Pressing on, Amazon Tech applied to the Beijing Intellectual Property Court for review of the re-examination decision, but also lost that case.

Yanhuang Yingdong High Court Proceedings for AWS Trademark Infringement

Yanhuang Yingdong commenced trademark infringement proceedings against Amazon Beijing and Guanghuan Xinwang as co defendants (together the “Defendants”) in the Beijing High Court, seeking orders to cease the use of “AWS” and for damages. The Beijing High Court was the appropriate venue because of the amount of damages sought.

The case was accepted on July 12, 2018. Pre trial, the Court ordered the parties to exchange and review evidence three times: June 10, 2019; June 13, 2019; and June 27, 2019.

Remedies sought by Yanhuang Yingdong

  1. Guanghuan Xinwang should immediately stop its infringing activities including any use of “AWS” and “AWS and device”: on its website; as key words for Internet search; on the website amazonaws.cn; and stop use of these and other similar marks in commercial activities.
  2. Amazon Beijing should immediately stop its infringing activities including any use of “AWS”, “AWS and device” and other marks similar to them in marketing and promotion for cloud computing services at its official wechat account.
  3. The Defendants should compensate Yanhuang Yingdong with RMB 300,000,000 (approx *USD 46,438,190).
  4. The Defendants should also compensate Yanhuang Yingdong with RMB 260,000 (approx *USD 40,246) for its expenses incurred in stopping their infringement; and
  5. The Defendants should make an announcement on China Intellectual Property News to mitigate the effects of their infringement.

Beijing High Court Decision

The Beijing High Court rendered its final decision on May 6, 2020

The Court stated that there were two issues before it: whether the Defendants have infringed the trademark rights of the Plaintiff; and, if infringement can be established, what liabilities should be assumed by them?

The Court held that the Defendants had infringed the trademark rights of Yanhuang Yingdong.

The uses of “AWS” and “AWS and device” by the Defendants have the function of identifying or showing the source of goods or services. This is trademark use.

Guanghuan Xinwang had argued that its use of AWS was merely referring to the technology it had adopted for its services but the court held that on the evidence this argument could not stand.

The Court reviewed the evidence and held that Guanghuan Xinwang had used “AWS” and “AWS and device” with the intention to indicate the provider and sources of its products and services.

The Court further held that the evidence showed that in its official wechat account “awschina”, Amazon Beijing used “AWS” and “AWS and device”. Similarly on its website “amazonaws-china.com”, Amazon Beijing used the “AWS” logo and also put up statements like “AWS products, services and prices”, “how to pay for AWS”, “AWS free package”.

Continuing, the Court held that the distinctive part of the trademarks “AWS” and “AWS and device” used by the Defendants is “AWS” and this is the same as the trademarks relied on by Yanhuang Yingdong. They were used in categories of service that were also similar to those covered by Yanhuang Yingdong’s “AWS” trademarks.

Having established infringement as pleaded, the Court turned to the question of damages.

Relying on evidence of profits in Guanghuan Xinwang’s accounts, the length of the infringing period, and other relevant facts disclosed by the evidence, the Court held that the basis for calculating infringement compensation was RMB 38,231,500 (Approx *USD 5,918,006).

Turning to Amazon Beijing, the Court held that it should have been aware of the Plaintiff’s “AWS” trademark registrations when its trademark application was rejected. Despite this it intentionally continued to infringe by using the “AWS” mark. This made it a very serious infringement.

Further, the Court noted that the Defendants had increased the negative impact of their infringement by objecting to the jurisdiction of the Court and delaying proceedings by 8 months.

Because of this the Court decided that punitive damages were warranted: the Defendants should compensate the Plaintiffs at twice the basis for compensation – an amount of RMB 76,463,000 (Approx *USD 11,836,012).

The Court also supported the Plaintiff’s compensation claim for the reasonable expenses incurred in this case – RMB 260,000 (Approx *USD 40,246).

Commentary

China is an IPR jurisdiction with its own characteristics that must be understood and taken account of.

Unfortunately, this is yet another trademark case where a large company has apparently failed to understand, at its cost, that China is a “first to file” trademark jurisdiction, not “first to use” as in some other jurisdictions. We have previously reported on aspects of this, including the importance of a Chinese language version. Examples  here, here, and here.

Another China characteristic is the weight given to words and letters in a “device” mark when considering distinctiveness. They are very important!

It seems that Amazon Beijing was formed on April 13 2012. Yanhuang Yingdong’s first AWS trademark, its registration in Class 42 covering services like computer programming was applied for registration on September 1, 2004 and approved for registration on February 7, 2008.

Amazon Tech applied for its “AWS MARKETPLACE” trademark in September 2012, five months after the formation of Amazon Beijing.

In this case, as in many others, the true cost is not only measured in money. It is the loss of branding in a major world market.

There is no China trademark action that is more cost effective than getting experienced on the ground advice and direct filing in China.

An appeal?

After the decision a Wall Street Journal report quoted an Amazon representative as saying: “Amazon was the first to use the “AWS” logo in China to sell cloud services by many years. We strongly disagree with the court’s ruling and have appealed the case to the Supreme People’s Court.”

At the China Supreme Court level it can take a long time for an appeal to be listed for hearing. We have not yet seen any relevant information about the appeal referred to in the WSJ quotation.

Take-aways

  • The individual characteristics of China’s IPR regime should not be ignored.
  • Navigating China’s IPR regime is all about detail and on the ground advice is important.
  • China is a first to file jurisdiction and this is an important difference from many other jurisdictions.
  • Prior use of a trademark outside China carries little, if any weight in China.
  • Any business planning to invest in, appoint an agent or distributor for, or sell product into China, should, before anything else, register their trademarks in China. They should also register and control the Chinese language version of their trademark. Almost every product and service in China is known by its Chinese brand name.
  • Remember that filing a trademark directly in China is almost always the least expensive trademark related action that can be taken. Using the Madrid Protocol may not be the most cost effective China trademark solution for your needs. 

 

Graham BROWN and PENG Wei

 

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Madrid Protocol – More Needed for China Enforcement

July 18th, 2021

Introduction

The Madrid Protocol, associated with but separate from the Madrid Agreement, is an international agreement about trademark registration. Registration of a trademark in a member jurisdiction can be extended to other member jurisdictions. It is very convenient and cost effective to register in multiple jurisdictions. It does not always work perfectly, however, because the detail of the registration process is not identical in every member jurisdiction. Using the Madrid Protocol does not change that. Unfortunately, despite being such an important trademark jurisdiction, China is one where the operation of the Madrid Protocol can be problematical. Our general recommendation is that if China is an important business jurisdiction, direct filing in China is preferable.

The China Trademark Registration Certificate

The China Trademark Registration Certificate is evidence of registration of a China trademark. It is an important document for enforcement and use of a trademark in China. Unfortunately, it is not routinely issued when a trademark is filed using the Madrid Protocol. China trademarks filed that way receive a Statement of Grant of Protection, which is not the same thing.

Without the China Trademark Registration Certificate, many remedies and enforcement tools are not available in China.

The China Trademark Registration Certificate, for example, is essential evidence for a Chinese court to enforce a China trademark. It is also required to register with the China Customs for border trademark protection. If a trademark is registered with China Customs they have the power to stop infringing goods crossing the border. A very important enforcement tool that is not used as often as it could be by foreign trademark owners.

E-commerce platforms in China also usually require the China Trademark Registration Certificate to be provided before their platform can be used.

The Madrid Protocol – getting the China Trademark Registration Certificate

Once a China trademark has been successfully registered using the Madrid Protocol, a China Trademark Registration Certificate can be applied for. As with a trademark filed directly in China, a local trademark agent must be used to get the Trademark Registration Certificate. There is a 12/18 month period dating from the date of Madrid Protocol notification which must have elapsed before applying for the China Trademark Certificate. If the applicant country is a member to the Madrid Protocol only (such as the USA), the period is 18 months. If the applicant jurisdiction is a member to both the Madrid Protocol and the Madrid Agreement (such as the Netherlands), it is 12 months. Typically, it takes 3-4 months from the date of application for the China Trademark Registration Certificate to be issued.

Commentary

China is a very important trademark jurisdiction but has its quirks that do not always mesh perfectly with the Madrid Protocol. Balancing the expediency of using the Madrid Protocol against the certainty of filing directly in China is a task that a prudent IP professional or brand owner will take seriously.

Take-aways

  • The Madrid Protocol is not equally convenient and cost effective in every jurisdiction where it can be used.
  • The detail of China’s trademark regime needs to be taken into account before a decision to use the Madrid Protocol to register a trademark there.
  • The Madrid Protocol’s Statement of Grant of Protection does not give the same benefits in China as the China Trademark Registration Certificate.
  • Price is only one of the considerations in registering a China Trademark – knowing how it all works on the ground is the key.

© WEI Xin 2021. The assistance of ZHAO Wei in the preparation of this article is gratefully acknowledged. Any errors belong to the author.

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China Trademark Law amended: bad faith indicia set out and infringement compensation increased

November 8th, 2019

Introduction & background

The China Trademark Law underwent its Fourth Amendment on April 23, 2019 (“Amendment”). The Amendment is intended to regulate filings so that bad faith trademark filing is more difficult. It also provides for increased compensation for trademark infringement. The Amendment became effective on November 1, 2019.

On October 11, 2019 the document “Several Rules in the Administration of Trademark Filing and Registration” (“Implementing Rules”) was issued by the China National Intellectual Property Administration of the State Administration for Market Regulation to implement the changes needed by the Amendment. These will become effective on December 1, 2019. Implementing Rules are very important as they set out the formal guidelines for how the law is to be practically administered.

These changes are both good and bad news for those doing business with China. The good news is that the China Trademark Law now has more specific measures to restrict “bad faith” trademark filings and statutory compensation for trademark infringement has been increased. The bad news is for the victims of rent seeking trademark opportunists that have registered foreign trademarks. They may be subject to claims for the increased statutory compensation.

The recent decision of the China Supreme Court that OEM manufacturing in China solely for export can infringe a China trademark should be of particular concern. (Our article about this is here).

The changes to the China Trademark Law

Changes to the China Trademark Law brought about by the Amendment and its Implementing Rules include guidelines for detecting bad faith registration and increased compensation for infringement:

Bad faith

Applications for a trademark with no intention to use may be regarded as a bad faith filing and rejected.

The trademark examiner is required to consider the following factors to determine whether the application is in good faith with the intention to use the applied for trademark:

  1. How many trademarks have been applied for by this applicant and/or its affiliates and in which class(es)? How many of these trademarks have been transferred by the applicant and/or its affiliates to others?
  2. The industry the applicant is engaged in and the operational status of the applicant in it.
  3. Precedents: including administrative decisions, verdicts and judgements in which the applicant was held to be filing trademarks in bad faith or infringing the trademark rights of others.
  4. Is the applied for trademark similar to any famous or well-known mark? If yes, how similar are they?
  5. Is the applied for trademark similar to any celebrity’s name, enterprise trade name, short name or other business logo? If yes, how similar are they?
  6. Other factors the trademark examiner believes to be relevant.

Trademark examiners who believe that a trademark application is not filed for use, can reject the application directly and also impose an administrative penalty on the applicant. Punitive actions can include, a warning, an administrative fine of three times the illegal income but not more than RMB 30,000. If there is no illegal income, not more than RMB 10,000.

Consequences of infringement

The cap on statutory compensation for trademark infringement is raised to RMB 5 million. In the prior version, the cap was RMB 3 million.

Punitive damages for repetitive or serious trademark infringements are higher, and can be 1 to 5 times the compensation amount. In the prior version, punitive damages were 1 to 3 times the compensation amount.

Counterfeit products shall be destroyed if requested by the trademark owner, rather than being sold by the counterfeiter after removing the relevant trademark.

Trademark agents

Trademark agents will be under stricter supervision. Trademark agents must not facilitate bad faith trademark filings and will be punished for breach.

Commentary

These changes to the China Trademark Law are a step in the right direction. The practical context of the huge numbers of China trademark applications – 7,310,000 in 2018, cannot be ignored. Training staff to understand and implement the changes, particularly as they apply to bad faith registrations, is a challenge yet to be met. It is too soon to know how effective the guidelines for examiners will be in practice.

The changes are a direct response to two important issues in the current China trademark system: rent seeking opportunists registering foreign trademarks to extort the offshore owners; and insufficient compensation for trademark infringement.

Bad faith

China has a first to file trademark regime. An applicant for a China trademark is currently not required to prove use or intended use of the mark when the application is filed. As a result numerous rent seeking opportunists have registered foreign trademarks as their own in China. This has been a serious issue for a long time and adversely impacts China trade.

There have been many signs that the authority responsible for administering the China Trademark Law is determined to tackle “bad faith” trademark filings. For example, an official of the China National Intellectual Property Administration recently said in a public speech that in 2018, about 100,000 abnormal trademark applications were rejected by the China Trademark Office at the registration and opposition stages.

The changes to the China Trademark Law made by the Amendment and the new Implementing Rules are expected to play an important role in limiting new bad faith trademark filings. But it remains to be seen if the examiners can or will follow the steps set out in the Implementing Rules to identify bad faith filings.

How, for example, will they determine the status of an applicant in their particular industry? Or similarity to “any celebrity’s name, enterprise trade name, short name or other business logo? Training to understand the requirements and additional time to review each application thoroughly would be required.

The Amendment and Implementing Rules are prospective in operation and have no direct effect on trademarks already registered. They do however, strongly suggest the “official” indicia of bad faith filing. This will be useful in challenging a trademark registered under the previous incarnation of the China Trademark Law.

Some bad faith applications will be identified by examiners. It seems likely, however, that these “bad faith” indicia will have their greatest impact in the preparation of oppositions to registration during the gazettal period. Similarly, they can play an important role in challenges to an already registered trademark. Activity in these areas of trademark work will probably increase dramatically.

Unfortunately too many foreign applicants abandon their claims too soon. Far too many winnable cases are lost by being abandoned too soon by foreign applicants.

The present changes with their indicia of bad faith registration provide an additional path to challenge an existing China trademark by establishing that it was registered in bad faith.

Compensation

In 2013, China raised the cap for statutory compensation to RMB 3 million (from RMB 500,000). Now, only 6 years later, the cap for statutory compensation has been increased to RMB 5 million. This provides stronger trademark protection for legitimate business operators. It also substantially increases the potential costs of counterfeiters in trademark infringements.

Unfortunately, the increase in statutory compensation in the China Trademark Law may have unintended consequences. The increased compensation will be also available to rent seeking opportunists that have already registered foreign trademarks in China. If the accused infringer cannot defend itself it will face the risk of the higher compensation amount.

The 2013 version of the China Trademark Law (and continuing) provided that an alleged trademark infringer could have a defence if the trademark owner had not used the trademark in the previous three years. The court could then require the trademark owner to submit evidence of use.

If the trademark owner could not prove required use, the claim for compensation would fail.

 

Take-aways

  • Registering a trademark directly in China remains the most certain and cost effective means to protect a trademark.
  • The real force of the present changes is likely to be in founding arguments for opposition during the gazettal period and for objections to existing trademarks.
  • Examiners may identify some bad faith applications, and that will be welcome, but the sheer number of filings in China is a constraint at that level. China trademark applicants and owners should be proactive in challenging bad faith registrations and applications.
  • Increased compensation will be welcomed by trademark owners but may be a problem for victims of rent seeking opportunists.
  • The China Supreme court has ruled that OEM manufacture solely for export can infringe a China trademark. (Our article about this is here).
  • Ensure that you get advice about contested trademark matters from advisers with real court experience in trademark work. Abandoning a trademark application too soon is a costly exercise.
  • Only licensed Chinese lawyers can appear in a Chinese court.

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