China: When Images Encounter Trademarks - A Discussion About Merchandising Right

Last Updated: 23 December 2015
Article by Fiona Cui

Most Read Contributor in China, September 2016

In recent years, disputes over famous images have been gradually increasing. Some people register celebrities or cartoon characters as trademarks, and copyright owners safeguard their legal right by virtue of the merchandising right. Thus, the merchandising right has gradually come into public's view and caused widespread concern. However, in existing legal provisions, the merchandising right has not been recognized yet and still falls within the doctrinal scope currently in China. Based on existing legal provisions, and in combination with relevant cases, this article attempts to conduct brief analysis of merchandising right.

Merchandising right originated in the U.S. from the right of privacy under the traditional right of personality. The term "right of publicity" was clearly coined by Judge Frank in the case of "Haelan" in 1953. Later, the U.S. Supreme Court also recognized the right of publicity in its cases. Hence, the right of publicity was separated from the right of privacy and became a new kind of intellectual property right.

The famous cartoon characters created by Walt Disney Company boosted the merchandising of images. Driven by the huge commercial interests of merchandising of images, some manufacturers made use of images without the permission of rights owners or even registered images as trademarks, resulting in lots of disputes. So far, the merchandising right has become a new intellectual property right dispute.

In China, when merchandising right is talked about, it is worth mentioning the image dispute case of "San Mao", which can be deemed as a classic case causing hot discussion about merchandising right. In that case, the plaintiff is the inheritor of the cartoonist who created the cartoon character "San Mao"; and the defendant is a corporate, who registered the character of "San Mao" as a trademark and widely used the same without the permission of the copyright owner. The plaintiff believed that the defendant's conduct infringed upon his copyright and therefore sued to a court. After hearing the case, the court held that: 1) The plaintiff, as the inheritor, enjoys the right of using the work and getting guerdon within the term of copyright protection; and 2) The defendant's conduct constituted an infringement of the property rights in a work. Thus, the court finally ruled that the defendant should stop using the cartoon character on their products and corporate image and bear the corresponding liability for compensation.

So what is merchandising right? Through the above discussion, we can learn that it is a right when we put famous images (including the images of real persons, fictional characters and human body images) as well as names of famous works into commercial use. If anyone merchandizes works' names or images that are already in use by their owners and enjoy substantial influences and such kind of conduct is enough to cause consumers' confusion and misidentification of the sources of goods, the goods/services are considered to be created by or associated with the copyright owner. Therefore, the owner is eligible to safeguard his legal rights in the name of merchandising right.

What if someone registers famous images as trademarks? If so, how should the rights owners safeguard their rights and eliminate the trademark registration?

Article 32 of the Trademark Law of the People's Republic of China (hereinafter referred to as the "Trademark Law") provides that, "the trademark application shall neither infringe upon another party's prior existing rights, nor be an improper means to register a trademark that is already in use by another party and enjoys substantial influence."As there is no specific provision about merchandising right in the law, can the copyright owner claim his prior rights according to the merchandising right?

According to Article 5 of the General Principles of Civil Law of the People's Republic of China (herein after referred to as the "General Principles"), the lawful civil rights and interests of citizens and legal persons shall be protected by law; no organization or individual may infringe upon them. According to the General Principles and provisions of other laws, the merchandising right clearly belongs to those legitimate rights and interests which should be protected, though there is no special provision on merchandising right in China's Trademark Law. As a result, the prior rights stated in Article 32 of the Trademark Law should be interpreted broadly as including both statutory rights and other civil rights and interests that are protected by law.

Meanwhile, Article 17 of the Provisions on Several Issues concerning the Trial of Administrative Cases Involving the Granting and Determination of Trademark Rights (Draft for Comments) issued by the Supreme People's Court in 2014 stipulates that: Where a party claims that the trademark in dispute infringes upon the copyright of its role image and thus violates the provisions in Article 32 of the Trademark Law, the people's court shall examine whether such role image constitutes a work in the sense of copyright law. Where the name of the work or the name of a role in the work does not constitute a work but is of high awareness, and the use of such name as trademark on related categories of goods can easily mislead relevant public into believing that it has been approved by the work's original right-owner or has other specific relations therewith, the people's court shall support the party to accordingly claim its prior rights and interests as provided by Article 32 of the Trademark Law. It is thus clear that the merchandising right is expected to be officially confirmed in the judicial level.

Therefore, there will be no obstacles, in both legal theories and laws, for the copyright owner's opposing or applying for annulment of the trademark in dispute by claiming his prior merchandising right, in accordance with the first half provision of Article 32 of the Trademark Law.

In author's opinion, the application of merchandising right shall meet the following elements:

1. the publication date of prior images or works is earlier than the registration date of the trademark in dispute;
2. the prior images or works enjoy certain popularity in the relevant public in China before the application date of trademark registration;
3. the trademark in dispute has certain relations with designated goods or works (but the relevance should not be too exorbitant);
4. the registration and use of the trademark in dispute will easily lead to confusion of relevant public, thereby causing potential damage to the interests of the copyright owner.

In practice, the right owners' claim of their prior rights on trademarks in dispute according to the merchandising right has been supported by the court successively. Let us further learn it through the following two cases.

Case I: The Beetles case

Mr Lian and Mr Chen applied to the China Trademark Office for the registration of the opposed trademark " " (No.4375006) on November 22, 2004, which was specified to be used on the commodities of category 18 such as "wallet". However, Apple claimed that "THE BEATLES" is the name of the famous British band, with its music and audiovisual products very popular and prestigious in many countries and regions including China. The band members authorized Apple to develop and register a series of "BEATLES" trademarks. However, the opposed trademark contains the name of "BEATLES", and the registration and use of the trademark infringe upon Apple's prior rights to "BEATLES", which will easily mislead the public and result in adverse effects.

After trial, the court believed that: The judicial protection of intellectual property rights should be focused on the property and market resource attribute of the intellectual property rights. The commercial value and business opportunities brought by the popularity of the band name come from the wisdom input in the band music creation and advertising for a long period of time, and deserve respect. Anyone's use of the famous band name as a trademark without authorization not only damages the right owner's business opportunities and commercial value but also violates the principle of good faith, and shall thus be prohibited by law. Therefore, if the merchandising right attached to the name of the famous band is not protected just because it does not belong to the category of current statutory rights, it apparently conflicts with the original legislative intention. In this case, as the use of the opposed trademark will easily lead to the relevant public's confusion or misidentification, it is ruled that the opposition review decision of the Trademark Review and Adjudication Board (hereinafter referred to as the "TRAB" is revoked, and the TRAB should render a new decision then.

Case II: Case of Bond 007

Mr Xie applied for the registration of the opposed trademark " " (No.3121466), which was specified to be used on the commodities of category 10 such as "condom". However, Jordan company claimed that "007" and "JAMES BOND" are respectively the code name and real name of the leading role of its movie series, which are of originality and high popularity. Therefore, Jordan company enjoys the copyright, trademark right and merchandising right thereof. The opposed trademark has infringed upon its prior right, and shall not be approved for registration.

After trial, the court believed that: It can be confirmed based on evidence submitted by Jordan company that "007" and "JAMES BOND", as the role names of its move series, have enjoyed high popularity and been well-known by the relevant public prior to the registration of the opposed trademark; and the commercial value and business opportunities brought by the role names are something gained through Jordan company's investment of mass labor and capital. For this reason, the prior renowned role names in movies shall be protected as prior rights. In the end, it is ruled that the TRAB's opposition review decision is revoked, and the TRAB should render a new decision then.

It can be seen from the above discussion and cases that famous images are something created through tremendous investment of labor and capital and something containing huge commercial value and economic benefits, and should thus be protected. Others' registering them as trademarks for use will easily lead to consumer's confusion or misidentification. It should be regarded as the improper use of others' popularity, and shall be prohibited as it violates the principle of good faith and damages the fair competition order.

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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