China: "Duck King In Chinese" Retrial As China Courts 2013 Top 10 Innovative IP Case

Last Updated: 16 September 2014
Article by Jason Wang

I. Key Issues of the Case

In April 2014, the Supreme People's Court (SPC) announced the list for China Courts 2013 Top 10 Innovative IP Cases. These Top 10 Innovative IP Cases were selected from over one hundred thousand (100,000) decisions of nationwide courts in China rendered in 2013, which have significant and innovative contribution to application of the laws and regulations. The "Duck King in Chinese" trademark retrial case [Beijing Duck King Roast Duck Restaurant Co., Ltd. (Beijing Duck King) vs. Shanghai Huaihai Duck King Roast Duck Restaurant Co., Ltd. (Shanghai Duck King) vs. the Trademark Review and Adjudication Board (TRAB), the SPC Administrative Ruling (2012) Zhi Xing Zi No. 9] was on the list. Only two trademark cases were selected as Top 10 Innovative IP cases, both of which were trademark administrative retrials before the SPC.

The "Duck King in Chinese" case involves the following three highlights:

(1) Innovation significance in application of law: This case has established the standard of "two elements," namely, "the knowledge standard" (knew or should have known) and "riding the goodwill standard" (with intention to free ride or invade other's goodwill) of defining bad faith filing.

(2) Unique feature in procedure: This case has gone through all the procedures for trademark registrations prescribed by law, including protest of the Supreme People's Procuratorate (SPP) and two retrials, especially the second retrial before the SPC after the first retrial decision.

(3) Prolonged time frame: It took more than eleven years for Shanghai Duck King to secure the trademark registration in the end from trademark filing to registration.

As a typical trademark case, the following experience, tips, and lessons may deserve much attention:

(1) Be prudent of abandoning the rights and remedies;

(2) Be proactive in preserving and fighting for the rights;

(3) Secure trademark applications / registrations before the market promotion; and

(4) Work out a creative and comprehensive strategy.

Ⅱ. Case Brief

1. Beijing Duck King: trademark application (2000) and rejection (2001)

In December 2000, Beijing Duck King filed a trademark application for "Duck King in Chinese" designating services of "Canteens, etc." in Class 43. In July 2001, the trademark application was rejected by the Chinese Trademark Office (CTMO) for the lack of distinctiveness. Beijing Duck King failed to appeal for review before the Trademark Review and Adjudication Board (TRAB). According to the claim of Beijing Duck King in the later opposition against Shanghai Duck King, Beijing Duck King started to use the "Duck King in Chinese" trademark as of 1997. However, according to the Chinese Trademark Law 1993 applicable then, marks lacking distinctiveness cannot obtain registration via use and acquire secondary meaning. According to the Chinese Trademark Law 2001 which came into effect as of December 1, 2001, marks lacking distinctiveness may obtain registration via use and acquire secondary meaning. The reason why Beijing Duck King did not appeal to the TRAB may probably reflect Beijing Duck King has in fact agreed that the "Duck King in Chinese" trademark did lack distinctiveness.

2. Shanghai Duck King: trademark application (2002) and rejection appeal (2002-2005)

In January 2002, Shanghai Duck King filed the trademark application for "Duck King in Chinese" (Application No. 3083416) designating services of "Restaurant, etc." in Class 43, which was rejected by the CTMO for the lack of distinctiveness as well. Shanghai Duck King appealed for review of the rejection before the TRAB. In 2005, the TRAB held as follows: While the "Duck King in Chinese" trademark designating services of "Restaurant, etc." in Class 43 was descriptive to a certain extent, it did not constitute as a generic term in the service industry of this category. Besides, the "Duck King in Chinese" trademark of Shanghai Duck King had intensified the distinctiveness through the use and publicity over the past years (as of 2002), therefore the "Duck King in Chinese" trademark of Shanghai Duck King did not constitute the trademark that shall not be registered as prescribed in Item (2), Paragraph 1, Article 11 of the Chinese Trademark Law 2001. Subsequently, the "Duck King in Chinese" trademark of Shanghai Duck King is preliminarily approved for registration and published for opposition by the CTMO.

3. Shanghai Duck King: opposition (2005-2006) and opposition appeal (2006-2007)

In January 2005, Beijing Duck King filed an opposition against the "Duck King in Chinese" trademark of Shanghai Duck King, which triggered the conflict and confrontation between Beijing Duck King and Shanghai Duck King. The main arguments in the opposition raised by Beijing Duck King are as follows: Beijing Duck King has started to use the "Duck King in Chinese" trademark and trade name as of 1997. "Duck King in Chinese" is the trade name and the trademark with prior use and certain influence owned by Beijing Duck King, and the "Duck King in Chinese" trademark of Shanghai Duck King violated Article 31 of the Chinese Trademark Law 2001, and thus shall not obtain registration. In May 2006, the CTMO held that Beijing Duck King's opposition was justified and thus the "Duck King in Chinese" trademark of Shanghai Duck King shall not be approved for registration. Then Shanghai Duck King filed the appeal before the TRAB.

In June 2007, the TRAB rendered the decision on the opposition review, and held that the "Duck King in Chinese" trademark of Shanghai Duck King was unlikely to cause confusion with Beijing Duck King's prior trade name to the extent of damaging the interest thereof and did not constitute the "unfair means" either under Article 31 of the Chinese Trademark Law 2001. Beijing Duck King appealed to Beijing First Intermediate Court and initiated the judicial review procedure.

4. Shanghai Duck King: first instance (2007) and second instance (2008)

In October 2007, Beijing First Intermediate Court, as the first instance court, held that the "Duck King in Chinese" trademark of Shanghai Duck King damaged the prior trade name right of Beijing Duck King, and the "Duck King in Chinese" trademark of Shanghai Duck King constituted preemptive registration of a prior trademark with certain influence used by another by unfair means and thus violated the good faith principle. Accordingly, the first instance decision revoked the TRAB decision and ruled that the "Duck King in Chinese" trademark of Shanghai Duck King should not be approved for registration. Shanghai Duck King appealed to Beijing High Court. 

In October 2008, Beijing High Court, as the second instance court, affirmed the first instance court decision of revoking the TRAB decision.

5. Shanghai Duck King: first retrial (2008-2010)

After Beijing High Court rendered the first retrial decision, Shanghai Duck King filed a retrial request to Beijing High Court and the SPC respectively, and simultaneously petitioned to the SPP for a retrial protest.

In November 2009, Beijing High Court, as the retrial court, dismissed the retrial request of Shanghai Duck King. In January 2009, the SPP rendered a decision for the protest of retrial, and presented the protest of retrial to the SPC in July 2009. In November 2009, the SPC ordered Beijing High Court as the retrial court to hear the retrial. In December 2010, Beijing High Court (retrial tribunal), as the retrial court, rendered the retrial decision, revoking the decisions of both the first and second instance courts and reaffirming the TRAB decision on the opposition review. The retrial decision rendered by Beijing High Court is based on Rule 1 of the SPC Opinions on Issues regarding to the Trial of Administrative Cases of Trademark Granting and Determination (FA FA2010No. 12), which prescribes as follows: "If the disputed trademark has been used for a relatively long time and enjoyed a higher market reputation among the relevant public, the courts shall precisely master the legislative spirit of the Chinese Trademark Law regarding coordinating the protection of prior trademark right and the maintenance of market order, fully respect the fact on the market that the relevant public has objectively distinguished relevant trademarks, and impose more emphasize on maintaining the well-established and stabilized order of the market."

With respect to the retrial request filed before the SPC, the SPC issued a notice of court hearing and heard the case in December 2008. Later, as the SPP has decided to protest against the second instance court decision, this case was combined with the protest retrial in November 2009 to be held by Beijing High Court.

6. Shanghai Duck King: second retrial (2012-2013)

In December 2012, Beijing Duck King filed the retrial request before the SPC against the first retrial decision rendered by Beijing High Court. In February 2013, the SPC dismissed such retrial request. In this specific case, the SPC changed the criteria on the application of Rule 18 of the SPC Opinions on Issues regarding to the Trial of Administrative Cases of Trademark Granting and Determination (FA FA2010No. 12), which prescribes as follows: "If a trademark applicant filing a preemptive registration knows or should know that the trademark is being used and has certain influence by others, then it should be determined to have used unfair means."

7. Shanghai Duck King: cycle action (2008-2010)

As Beijing Duck King has filed new trademark applications of "DUCK KING in Chinese" (Application No. 4170888 and 4170887) in 2004, it is important for Shanghai Duck King to keep its earlier trademark application alive, for strategy purpose of blocking the registration of said new trademark applications filed by Beijing Duck King. Due to this exact reason, Shanghai Duck King initiated the cycle action, after the TRAB reissued its decision in October 2008 based on the second instance court decision. After Beijing First Intermediate Court rendered the decision again in March 2009, Shanghai Duck King appealed to Beijing High Court. After the SPP decided to present the protest to the SPC in July 2009 against the second instance court, Beijing High Court decided to stay the the case of cycle action in August 2009.

8. Shanghai Duck King: trademark registration (2011)

After Beijing High Court (retrial tribunal) as the retrial court rendered the first retrial decision in December 2011 as well as Beijing High Court (IP tribunal) rendered the decision on the case of cycle action, the TRAB reissued the decision, approving the registration of the "Duck King in Chinese" trademark of Shanghai Duck King. In 2011, the CTMO issued the trademark registration certificate.

9. Beijing Duck King: new trademark applications (2004), oppositions (2009-2011), and opposition appeals (2011-2014)

As for the new trademark applications filed in 2004 by Beijing Duck King, Shanghai Duck King filed oppositions in June 2009. In December 2011, the CTMO rendered the decisions on the oppositions, rejecting the registration thereof after Beijing High Court as the retrial court granted the trademark registration of Shanghai Duck King in October 2010. In April 2014, the TRAB rendered the decisions on opposition appeal, rejecting the registrations of Beijing Duck King on restaurant services.

Key Points and Analysis

1. Innovation significance in application of law: This case has established the standard of "two elements," namely, "the knowledge standard" (knew or should have known) and "riding the goodwill standard" (with intention to free ride or invade other's goodwill) of defining bad faith filing.

This case involves the issue of interpreting the provision of "unfair means shall not be used to preemptively register the prior trademark with certain influence another person has used" prescribed by Article 31 of the Chinese Trademark Law 2001. In this specific case, the SPC expressly clarified that "unfair means" refers to the situation that the applicant of the later trademark knows or should have known the prior trademark, AND the trademark applicant has the bad faith of obtaining benefits from the reputation of such prior trademark. Generally, if the prior trademark has certain influence, while the applicant of later trademark knows or should have known said prior trademark, and the applicant still files the trademark application for registration, it can be presumed that such applicant has the intention to invade the goodwill of others. That is, the above two factors generally overlap. However, the special circumstances such as this specific case are excluded. Namely, although the prior trademark has certain influence, while the applicant of later trademark does not have bad faith, it shall not constitute "unfair means" prescribed by Article 31 thereof.

In this specific case, the SPC established and affirmed for the first time the new standard of "Two Elements," that is, both of the two elements of "the knowledge standard" (knew or should have known) and "riding the goodwill standard" (with intention to free ride or invade other's goodwill) shall be cited as criteria indispensable to determine the bad faith of the trademark applicant. This is a significant supplement and improvement to Rule 18 of the SPC Opinions on Issues regarding to the Trial of Administrative Cases of Trademark Granting and Determination (FA FA2010No. 12) regarding the provision of bad faith filing prescribed under Article 31 of the Chinese Trademark Law 2001. Rule 18 of the SPC Opinions on Issues regarding to the Trial of Administrative Cases of Trademark Granting and Determination (FA FA2010No. 12) prescribes as follows: "If a trademark applicant filing a preemptive registration knows or should know that the trademark is being used and has certain influence by others, then it should be determined to have used unfair means."

2. Unique feature in procedure: This case has gone through all the procedures for trademark registrations prescribed by law, including protest of the SPP and two retrials, especially the second retrial before the SPC after the first retrial decision.

This case has exhausted all possible legal procedures prescribed under the law. It began with all the four administrative proceedings (i.e. rejection, rejection appeal, opposition, and opposition appeal), then both the two judicial proceedings (i.e. the first instance and the second instance), and then the first retrial proceeding initiated by the SPP protest, and the second retrial before the SPC after the first retrial decision.

The case has gone through the procedures like the following:

(1) Filing, rejection, and rejection appeal;

(2) Opposition, opposition appeal;

(3) The first instance and second instance before the courts;

(4) The first retrial, and the second retrial before the SPC which is rare;

(5) As for the first retrial, the case has gone through retrial request with Beijing High Court, retrial with the SPC, and retrial initiated by the SPP and the SPP has won the case in the end which is rare; and

(6) Cycle action against the TRAB decision reissued.

In fact, when a person intends to figure out all the processes and procedures for the trademark registration in China, he does not have to look at the provisions prescribed by the Chinese laws. Instead, he may only need to look at the "Duck King in Chinese" case and the chart flow thereof.

3. Prolonged time frame: It took more than eleven years for Shanghai Duck King to secure the trademark registration in the end from trademark filing to registration.

The case has lasted for more than eleven years, from the application date in January 2002 to February 2013 when the SPC rendered the retrial decision. When the CTMO issued the trademark registration certificate in 2011 for the "Duck King in Chinese" trademark of Shanghai Duck King, the registration date of such trademark registration certificate is 2005, and six years has already passed. 

This is one of the most important reasons why the Chinese Trademark Law 2013 has made the following two major changes: 1) the new law has stipulated the time limitation for the examination and adjudication on opposition, rejection appeal, invalidation, etc. as 9 months, 9 plus 3 months, 12 plus 6 months; and 2) the new law has streamlined the opposition procedure, and the opposed trademark will obtain registration if the opposition grounds are dismissed.

. Summary and Suggestion

As a typical trademark case, the following experience, tips, and lessons may deserve much attention.

1. Be prudent of abandoning the rights and remedies

The biggest lesson for Beijing Duck King in this case is that Beijing Duck King abandoned the rights and remedies when its trademark application is rejected. This is a very common phenomenon among the trademark applicants. There are many reasons why a trademark is rejected, among which, one important reason is that the judgment on distinctiveness is very subjective, vary from examiner to examiner. It is not rare that the same trademark is granted for registration in one Class or several Classes, while the exactly identical trademark is rejected in other Class(es) due to lacking distinctiveness. And it is also not rare that the trademark application is deemed as not similar to a prior trademark in one Class or several Classes, while the same trademark application is deemed as similar to the identical prior trademark in another Class. In addition, the judgment on inherent distinctiveness may probably involve the culture factor on English words and Chinese words. However, it is undeniable that subjective judgment is an important factor as well. For instance, the "BURGER KING" trademark on restaurant services has obtained registrations in U.S. and China without encountering any rejection. However, the "Duck King in Chinese" trademark on restaurant services filed by both Beijing Duck King and Shanghai Duck King were rejected by the CTMO successively due to the same reason of lacking inherent distinctiveness. The trademark application of "Duck King in Chinese" (Application No. 3177217, Application Date: May 2002) filed by an individual (BI Dan Long) was rejected by the CTMO based on ground of lacking distinctiveness as well.

Just imagine, if Beijing Duck King had filed the appeal to the TRAB in 2001 against the CTMO rejection decision, what would be the result? There would be no objection on the conclusion that Beijing Duck King should have made a fatal mistake by abandoning the rights and remedies of appeal to TRAB after its trademark application is rejected by the CTMO.

2. Be proactive in preserving and fighting for the rights

When we look back the history of the case, we notice that Shanghai Duck King has been fighting to the very end in the trademark battle. Specifically, Shanghai Duck King has chosen to fight at every disadvantaged stage: 1) rejection appeal before the TRAB; 2) opposition appeal before the TRAB; 3) the second instance before Beijing High Court; 4) the first retrial including all the three remedies and routes available for retrial. Prior to the first retrial, Shanghai Duck King only won two battles, compared with loosing four battles. It is the exact reason why Shanghai Duck King won the battle in the very end that Shanghai Duck King has chosen to fight to preserve its rights.

Of course, there are several advantages of being proactive in filing appeals to overcome the refusal: First, once the trademark obtains registration by overcoming the refusal, the applicant will benefit quite a lot, as it may be granted of the excusive right on the trademark. Second, the appeal may keep the rejected trademark further alive for a certain period of time, which will block the trademarks filed later by other parties. Third, the appeal may exhaust all the possibilities and find out a more accurate answer and final conclusion on the rejection or registrability, because the TRAB or court decisions, especially the second instance court decisions will usually have binding effect on the CTMO. Even if the applicant fails in the second instance court proceeding, this may still be a good reason and ground cited to prevent others from obtaining registration of the identical or similar trademarks.

3. Secure trademark applications / registrations before the market promotion

China adopts the first file system as the basic principle for trademark registration and protection. Thus, it is very crucial to secure the trademark applications / registrations first before the market campaign has been launched. Without the trademark application or registration beforehand, the company could be at huge potential risks. The typical case is the "IPAD" trademark of Apple Inc. in 2012. Apple Inc. has the very good idea and practice of trying to secure the trademark registration by purchasing them from the registrant before launching the market campaign in China. Of course, a problem occurred during the due diligence on the ownership of the trademark registration, which has caused the disputes and lawsuits in China.

In addition, foreign companies may need to file trademark application of their Chinese equivalents or Chinese names commonly referred by Chinese media beforehand, at least for defensive filing purpose. "Sony Ericsson in Chinese" and "VIAGRA in Chinese" may be two examples for lessons. In these two cases, Chinese media and public has used the term "SUO AI in Chinese" to refer to products of Sony Ericsson (SUO NI AI LI XIN in Chinese), and "WEI GE in Chinese" to refer to products of VIAGRA. However, the two foreign manufacturers failed to file the trademark applications of the above Chinese names in China in a timely and proactive manner. When the third parties files the trademark applications, the two foreign manufacturers filed the oppositions but the oppositions were dismissed, and those two trademarks were registered and owned by third parties in the end.

4. Work out a creative and comprehensive strategy

Under the circumstances Shanghai Duck King encounters, the applicants and attorneys may need to work out a creative and comprehensive strategy to protect the applicant's rights and interests. In the "Duck King in Chinese" case, Shanghai Duck King as the applicant has proceeded with all the three remedies for the retrial, and has proceeded with the following unique procedures and complicated legal issues: (1) the request for the SPP protest, (2) cycle action, (3) distinctiveness issue, (4) relationship between Rule 1 and Rule 18 of the SPC Opinions on Issues regarding to the Trial of Administrative Cases of Trademark Granting and Determination, and (5) "two elements" standard of defining the bad faith filing.

All the above creative and comprehensive strategy requires in-depth researches and professional knowledge, which may be the key to the success of the applicant in the trademark disputes. Take the SPP protest for example, for many reasons, the public is not quite clear about the process for protest of retrial and retrial initiated by a protest from the SPP. In fact, according to Chinese laws, the Procuratorate does have the power to protest against the effective court decisions based on determination of facts, application of law, or statutory procedures. For a retrial request directly filed by an interested party before the retrial court, there will be two steps: As a first step, the retrial court will examine the case and then decide whether to docket the case with two possibilities: dismiss the retrial request, or docket the retrial case. Only when the case is docketed by the retrial court, the retrial is initiated as a second step, and there will be two outcomes as well: reverse the second instance court, or affirm the second instance court and dismiss the retrial request. Different from the retrial request directly presented by an interested party, the protest of retrial by the Procuratorate directly initiates the retrial proceeding. Once the Procuratorate decides to protest against the second instance court, the retrial court has to docket the case, and the retrial case moves to the second step directly.

Of course, Beijing Duck King initiated the second retrial, which is somewhat creative. In fact, in the trade name dispute between Google Information Technology (China) Co., Ltd. (Chinese affiliate of Google Inc.) and Beijing Gu Ge Technology Ltd. (a third party registered the trade name of "GOOGLE in Chinese" as "Gu Ge in Chinese" in the enterprise name) as early as in 2011, according to the usual practice and regulations regarding jurisdiction, the losing party Beijing Gu Ge Technology Ltd. may only file the retrial request before Beijing High Court and the retrial request cannot be filed to the SPC directly. However, in that case, after the retrial request was dismissed by Beijing High Court, the loosing party further filed a second retrial request before the SPC, based on the ground that its second retrial request is aiming at the first retrial decision rendered by Beijing High Court, and thus the SPC should have the jurisdiction on the second retrial. Although the second retrial request was dismissed by the SPC in the end due to the issues of the merits, Beijing Gu Ge Technology Ltd. did work out a creative way to seek potential opportunity to get this case heard by the SPC in term of procedures.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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Authors
Jason Wang
 
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