China: Protection Of Merchandising Rights In China

Last Updated: 1 June 2016
Article by Xiaojun Guo

The merchandising rights normally refer to but not limited to the commercial interests involved in a real character such as a celebrity, or in a fictional character such as an imagery character in movies, cartoons or animations. Until today, the merchandising rights have not been defined at the legislative level in China, yet their protection has already been seen in some cases.

In Apple Corps Limited v. the TRAB, the Beijing High People's Court affirmed that the merchandising rights in the name of a well-known band, the "Beetles", are protectable.

Against the trademark application No.4375006 for "TEAM BEATLES Plus the Chinese Characters for the 'Beatles' and the figure", Apple initiated an opposition action on, inter alia, that said trademark violates its prior rights on the "Beatles". While the Trademark Office and the Trademark Review and Adjudication Board("TRAB") all denied the opposition request, the Beijing First Intermediate People's Court made a decision vacating the TRAB's decision and holding that the merchandising rights, or more accurately merchandising interests, on the name of the Beatles band shall be protected. The TRAB appealed.

On December 18, 2015, the Beijing High People's Court made the final decision, upheld the first instant decision by holding that the opposed trademark violates the merchandising rights on the Beatles band owned by Apple.

The Beijing High Court articulated that,

Literary and artistic works, names of works, names of characters, iconic names can essentially render the owners of said works or names goodwill, prestige or popularity thereby and the owners can gain economic benefits by combination of the goodwill, prestige or popularity with goods or services for commercial use. The above works or names can bring interests to their owners through commercial use, and are eligible for being protected as "prior rights". Since there is no provision of "merchandising rights" in the laws, it might be named as "merchandising interests". The name of the "Beatles" alleged by Apple can be the carrier for the merchandising interests ... The opposed trademark is designated to be used on goods "wallet, schoolbag, backpack" etc. which are everyday consumer goods, and on which well-known bands normally register their names so as to market their goods as souvenirs. The merchandising interests alleged by Apple therefore shall be extended on to those goods. Where the opposed trademark is similar to the band name the "Beatles", its application on wallet, schoolbag, backpack etc. will mislead the public to take the goods for originating from the Beatles band or being related with the Beatles, so as to damage the merchandising interests of Apple over the name of the Beatles band.

In DreamWorks Studio v. the TRAB, the Beijing High People's Court affirmed, in its decision of August 20, 2015, that the merchandising rights on the movie name and movie character's name are also protectable, and supported DreamWorks' opposition against a trademark application No. 6806482 for "KUNGFUPANDA" on its merchandising rights on the movie name and movie character's name KungFu Panda.

According to the TRAB's decision, the merchandising rights are not statutory rights or interests stipulated in laws and DreamWorks failed to define the subjects and boundary of protection for said rights. Since the Beijing First Intermediate People's Court upheld the TRAB's decision on almost the same grounds, DreamWorks appealed.

In appeal, the Beijing High Court held that the prior rights against the registration of a trademark in Article 31 of the Trademark Law (2001) include not only those statutory rights clearly defined in existing laws, but also other legitimate interests that should be protected under the General Principles of Civil Law and other laws. When a movie name, a movie character or a movie character's name is so well-known that it is not restricted to the movie itself any more but that, when it is used with certain goods or services, the audiences would extend the recognition of and emotion to the movie to the movie name or the movie character's name and transplant those onto the goods or services on which they are applied, and thus bestow on the right owner additional commercial value and transaction opportunities than distribution of the movie, the movie name, the movie character or the movie character's name constitute the "merchandising rights" subject to protection as "prior rights" under Article 31 of the Trademark Law. Should the well-known movie name, movie character or movie character's name be excluded from the civil rights and interests subject to protection by laws, while be registrable as trademark for goods or services of a business entity freely, I twill not only encourage free-riding but also cause damage to normal order of competition in the market, which is obviously contradictory to the purpose of the Trademark Law.

The Beijing High Court found that KungFu Panda, as the movie name and the movie character's name, has been of high popularity among the relevant public, which is brought by the creative investment of DreamWorks, and that the business value and opportunities brought thereby are also attributable to the intensive investment of labor and capital. KungFu Panda shall be protected as the merchandising rights.

According to the Beijing High Court, when deciding whether a trademark being identical with or similar to a movie name or a move character's name violates the related merchandising rights, such factors as the degree of the popularity, influence of the name, and the likelihood of confusion should be considered. The protection scope of the merchandising rights doesn't extend to all goods and services.

Elsewhere, in the Michael Jackson case decided on November 5, 2015, the Beijing Intellectual Property Court denied protection of the name right of the deceased pop star Michael Jackson in an invalidation action initiated by the trustee of Michael Jackson's estate against the trademark registration No.8647078 in Class 25 for "MICHAEL JACKSON" owned by a Chinese company "Fujian Fengshang Fashion Co., Ltd.". According to the Court, since Michael Jackson has died, i.e. the subject carrying the name right disappeared, the alleged prior name right and further the merchandising rights thereon became groundless. In spite of this, the Court overturned the TRAB's decision by finding that Fujian Fengshang has no relation with Michael Jackson and its registration of the trademark will likely to mislead the public and damage the public interests.

In an infringement litigation, the courts are inclined to protect the merchandising rights from the perspective of personality rights, including the name right and portrait right when the alleged name can be connected to a real person. When it comes to a fictional character's name, the court might render protection by directly citing the merchandising rights as in the above KungFu Panda case.

On March 29, 2011, the basketball player Yao Ming filed a lawsuit to Wuhan Intermediate People's Court, against a sportswear producer –Wuhan Yunhe Dashayu Sportswear Co Ltd, for name and portrait rights infringement. Yao alleged that, without his authorization, the defendant produced and sold "YaoMing Yidai" (YaoMing Era in English) goods and used his name and portrait for promotion activities. Yao claimed that the behavior of the defendant infringed his name and portrait rights and constituted unfair competition and should be stopped immediately.

The court found, the defendant used the name and portrait of Yao Ming during promotion activities and connected its produced and sold sport goods with Yao Ming. By taking advantages of the social image of Yao Ming and his influence, the defendant carried out misleading advertising for its products to confuse the origins of the goods. The Court held that, this behavior violated the principle of honesty and credibility, infringed the name and portrait rights of Yao Ming and also constituted unfair competition.

In appeal, Hubei High People's Court upheld the first instance decision, and held that, without authorization or permission, any entity or individual shall not take others name, portrait, signature or any other relevant personality mark for commercial use. Wuhan Yunhe, as a business entity, not only infringed the legitimate rights and interests of the right owner but also damaged those of the consumers, and seriously disturbed the social economic order, and shall be stopped immediately.

In Zhang Jinlai v. Linekong Entertainment Technology Co., Ltd., concerning the well-known character, the Monkey King, in the television drama the "Monkey's Story" in China, the actor Zhang Jinlai, who's well known by his stage name Liu Xiao Ling Tong, sued Linekong Entertainment for infringement of his portrait right and the right of reputation before the Xicheng District Court of Beijing. Since his claim was not supported by the Court, Zhang Jinlai appealed to the Beijing First Intermediate People's Court, which, although upheld the first instance decision, held that the personality rights can be extended onto the character in the television drama.

The appeal court opined that,

The Monkey King and Zhang Jinlai has a one to one correspondence, that is, there is an identifiability between the character and the actor. During a relatively stable time period, when certain audiences see the Monkey King played by Zhang Jinlai, they can recognize that its actor is Zhang Jinlai, and the answer is exclusive. In this case, protection of the character is within the extension of the portrait right. The laws acknowledge the commercial value of a character invested and deduced diligently by a person. When said character is used by others without consent, it not only infringes the personal dignity on the portrait right but also infringes the property interests of the right owner. When the image of a character mirrors the physical features of the actor and shows identifiability with the actor, protecting said character as a portrait of a natural person is a precondition for preventing others from infringing the commercialization of the personality rights.

In spite that the merchandising rights are essentially protectable both in the opposition/invalidation proceedings and in the legal proceedings, some critical issues stay unsolved yet, such as the nature of the merchandising rights, when it expires and what's the boundary of the rights.

Note: According to the character merchandising report published by WIPO in 1994 , character merchandising can be defined as the adaptation or secondary exploitation, by the creator of a fictional character or by a real person or by one or several authorized third parties, of the essential personality features ( such as the name, image or appearance) of a character in relation to various goods and/or services with a view to creating in prospective customers a desire to acquire those goods and/ or to use those services because of the customers' affinity with that character.

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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