China: China Court Recognises Merchandising Rights In Kung Fu Panda Case

Last Updated: 20 November 2015
Article by Xuefang Huang

A recent decision by the Beijing Higher People’s Court signals official recognition of merchandising rights. In DreamWorks Animation L.L.C vs Trademark Review and Adjudication Board (TRAB), the Higher Court recognised the right of DreamWorks to exploit its merchandising rights in the title of its popular Hollywood film Kung Fu Panda and ordered the TRAB to re-examine a trade mark opposition on the basis of these rights.
Merchandising rights allow the rights holder to commercialise a specific name or image often associated with a work of literary fiction, a motion picture film, a sportsman or some other real or fictional character. While such rights have been recognised and afforded protection in other jurisdictions, they have not until now been officially recognised in Chinese jurisprudence. In past cases involving the imitation of names or images in China, the rights holder has found it difficult to prevent third party misappropriation.
In 2008, shortly after the release in China of the successful Kung Fu Panda film by DreamWorks, a Chinese individual applied to register Kung Fu Panda as a trade mark for goods such as steering wheel covers, vehicle seat covers and car seats for infants. DreamWorks opposed the application claiming, inter alia, that the published mark was identical to its registered trade mark (although its registrations did not cover the same/similar goods); that it should enjoy an exclusive “merchandising” right to commercialise the title of its own movie; and that registration or use of the applied-for mark would be against the public interest. The opposition was dismissed by the China Trademark Office (CTO) and by the TRAB on appeal. The TRAB held that the goods covered by respective marks were dissimilar, coexistence would not give rise to confusion, and a “merchandising right” was not an established legal right in China.
DreamWorks appealed the case to the Beijing No. 1 Intermediate People’s Court for judicial review. It lost at first instance, but then appealed to the Beijing Higher People’s Court. This finally resulted in the groundbreaking support from the Higher Court.
The Higher Court found that once a film becomes sufficiently well-known, its title and characters are no longer confined to the specific film itself but can be associated with other business and commercial activities. The audience may transfer affection for the film and its characters to other goods and services and this generates commercial value for the film makers beyond film distribution and exhibition. Thus, it gives rise to “merchandising rights” to commercially exploit the title and characters of the film on non-film related goods and services.
The Court explained that while “merchandising rights” may not be expressly recognised by law, to exclude such rights from legal protection, and to allow others to willfully register film titles and characters as trade marks for the purpose of trading on the reputation and goodwill established by the film producers, would encourage trade mark squatting and “disturb market order” which is contrary to the legislative intent of the trade mark law. As DreamWorks had made a significant investment in producing its film, it should be allowed to enjoy the right to commercialise the film title and character names and images and, importantly, that such rights should constitute one of the “earlier rights” prescribed in the trade mark law.
The Court observed that “merchandising rights” will not automatically cover all goods and services. The scope shall be determined on a case-by-case basis and will depend to a large degree on the extent of reputation and goodwill attached to the subject of the merchandising rights. In this case the Court did not comment on whether the applied-for goods fell within the scope of the goods/services covered by DreamWorks’ merchandising rights. It left the question open for the TRAB to decide on its re-examination of the opposition.
This brave recognition of merchandising rights, and the expansive interpretation of the trade mark law, by the Beijing Higher People’s Court may have an impact on administrative and judicial practice regarding the protection of the names and images associated with well-known films, books, sporting figures and other celebrities. Although China has no common law tradition, it is hoped that the prestige of Beijing Higher People’s Court in the IP arena will mean that its decision will be followed by other courts and may persuade the CTO and TRAB to revise their examination criteria in trade mark disputes. The decision also offers encouragement to rights holders who have been waging a long and difficult battle in China to protect important trade mark rights against unauthorised third party exploitation.

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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