China: Is The Fair Use "Fair"?

Last Updated: 2 September 2015
Article by Samiko Sun

The fair use of trademarks became a hot topic in the field of intellectual property as early as 2007, and it has also become the first grounds for trademark infringement defense. In many cases in the trademark administrative law enforcement and judicial practice, no infringement was constituted based on the fair use of trademarks. The new Trademark Law promulgated on May 1, 2014 has also perfected the defense of the fair use of trademarks and added the "prior use" as defense grounds.

Whether all the fair use is "fair" or no fair use constitutes an infringement of the exclusive right to use trademark should be judged based on individual cases.

Descriptive use:

Relevant legal basis:

Trademark Law

Article 59 The exclusive right owner of a registered trademark may not prohibit others from fair use of the generic names, designs or models of the goods, or direct reference to the quality, main raw materials, function, use, weight, quantity or other features of the goods, or geographical names as included in the registered trademark.

The exclusive right owner of a registered trademark of 3D symbols may not prohibit others from fair use of the shapes generated from the nature of the goods in respect of which the trademark is used, or shapes of the goods to realize certain technical effects, or shapes to provide the goods with substantive values.

Answers of the Beijing High People's Court to Several Issues concerning the Hearing of Trademark Civil Cases

Article 26: What are the integral factors of fair use of trademark logos? The following factors shall be satisfied for fair use of trademark logos:

1) out of good faith;
2) not as trademark of its own commodities; and
3) only for showing or describing its own commodities.

Descriptive fair use of trademark:

Descriptive use of trademark refers to the circumstance under which the content or meaning of the trademark expresses the content of the trademark-designated goods or their composition, properties, use, function, characteristics, quality, weight, quantity, or other features.

Reasonable descriptive use of trademark is mainly to protect the operators' free description of their goods. The trademarks so used are usually those with "secondary meaning" and weak distinctiveness composed of generic names, or designs or geographical names. Under normal conditions, logos without distinctiveness, such as the generic names, designs, and models of the goods, or logos that only directly indicate the quality, main raw materials, function, use, weight, quantity, or other features of the goods, shall not be registered as trademarks. When such logos, after being used for a long time, acquire distinctiveness, by which the sources and origins of goods and services can be differentiated from others, they can be registered as trademarks. These are the so-called logos acquiring "secondary meaning" during use which can be registered as trademarks. While these common words acquire "secondary meaning" and are registered as a trademark, if the non-owner of the trademark only descriptively uses the words under the first implication, and the use will not lead to consumers' misidentification or confusion of the source of goods or services, such kind of use is deemed as the descriptive fair use of the trademark.

Therefore, if non-owners of a trademark, which was successfully registered because of acquiring the "secondary meaning" as aforesaid, use the trademark on their own goods, just for indicating in good faith the name, type, or location of the goods, such kind of use will not be judged as infringement of the exclusive right to use the registered trademark. However, not all descriptive use can be deemed as a "fair use." Only the descriptive use meeting the three factors as described in the Answers of the Beijing High People's Court to Several Issues concerning the Hearing of Trademark Civil Cases mentioned above can be regarded as a "fair use." Accordingly, the court did not affirm "fair use" defenses in the following cases:

- Qiliangye case

The plaintiff, Wuliangye Yibin Co., Ltd., is the owner of a famous liquor brand "Wuliangye." The defendant to the case is Beijing Yinwubao Liquor Co., Ltd. The plaintiff alleged that the defendant had produced and sold in mass the 53-degree liquor with the name of "Qiliangye" and used "Zhongyuan Qiliangye" on its products, with the "Qiliangye" prominently used as its goods' name. Thus, the defendant infringed the plaintiff's ownership of the trademark "Wuliangye."

The defendant pleaded that "Qiliangye" and "Zhongyuan Qiliangye" are just a kind of descriptive use and used in the goods' name rather than the trademark; therefore, it should be reasonable use. Moreover, the defendant pleaded that its use of "Qiliangye" was in good faith, without any intention of "free-riding of famous brands."

Then Beijing Second Intermediate People's Court tried the case and held that: the reasonable descriptive use the defendant so claimed shall: 1) only aim at describing the products thereof; 2) be in good faith and reasonable; and 3) be applied to description rather than to trademark. In this case, the defendant claimed that its products are made from seven kinds of grain but failed to provide sufficient evidence to prove it. In addition, even if the defendant used "Qiliangye" for the purpose of introducing, promoting or explaining to the consumers the coverage of seven kinds of grain in the liquor produced, the defendant should have been sufficiently able to achieve it by describing its products' composition through other ways, such as marking it on the ingredients list or explaining it in advertising or publicity. However, the defendant's use of "Qiliangye" was an act of prominent use of the word "Qiliangye," which was beyond the reasonable scope of using the "Qiliangye" as the goods' name to describe the raw materials of products. Therefore, the defendant's descriptive use of the word "Qiliangye" should be limited within a reasonable and fair scope; otherwise, the defendant could not defend itself against the plaintiff's claim the on grounds of fair use.

In the end, the court ruled that the defendant's use of the "Qiliangye" had infringed the exclusive right to use the registered trademark "Wuliangye" and ordered the defendant to stop producing and selling "Qiliangye" liquor products and pay the plaintiff CNY50,000 in compensation for the plaintiff's economic losses.

Nominative fair use of trademark:

Nominative use of trademark refers to the circumstance under which the products owner has to inevitably mention another's registered trademark to describe the products thereof clearly; otherwise, the descriptions of the products will be ambiguous. For this purpose, the use of a registered trademark can be deemed as a fair use, and will not constitute an infringement of the exclusive right to use a registered trademark.

For the nominative fair use of trademark, there is no explicit provision in the Trademark Law. However, in the determination of actual cases, the above listed three factors extracted from the Answers of the Beijing High People's Court to Several Issues concerning the Hearing of Trademark Civil Cases should still be the main basis for trial and ruling.

- VOLVO case

The plaintiff, Volvo Trademark Holding AB, is the owner of the registered trademark "VOLVO." When the defendant Zhejiang Ruian Changsheng Oil Filter Co., Ltd declared to the customs its filters exporting to Syria, marked with the striking and large-sized English words "FOR VOLVO" followed by a small-sized word "REPLACE" underneath, and no explicit manufacturer's name or name of defendant's client was found on the products or the outside packing boxes.

The People's Court of Pudong New Area, Shanghai Municipality held that: the defendant's conduct did not constitute the reasonable use of a registered trademark. Since the defendant, without the consent of the plaintiff, prominently used the words "FOR VOLVO" of ambiguous meaning in large font size on its filter products and no text was represented on the products to identify the products source including the manufacturer, objectively making the consumers easily associate the source of the goods with the trademark registrant of "VOLVO," the defendant's conduct was not the reasonable use of registered trademark, and had already constituted an infringement of the plaintiff's exclusive right to use registered trademark.

Conclusion:

The boundary to distinguish the fair use of trademark from infringing use of trademark still lies with whether this kind of use will result in the relevant public's confusion and misidentification of the goods sources. It can be judged from the subjective attitude of the user, the objective performance and results of the conduct thereof, and the distinctiveness and recognition of the trademark used per se. Thus, the defense of "fair use" is a remedy for users in good faith and should not be abused by users in bad faith.

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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