Worldwide: Asia IP & TMT: Quarterly Review - 2015 Q3

Keywords: China, copyright, Hong Kong, trademark, Data Privacy, fine print, online payment,

COPYRIGHT – CHINA

China's Cloud Gate and Copyright Protection

By Rosita Li, Partner, Mayer Brown JSM, Hong Kong
Maggie Lee, Legal Assistant, Mayer Brown JSM, Hong Kong

A sculpture in Karamy, Xinjiang, China has recently caught much media attention because of its striking similarities with the famous bean-shaped sculpture in Chicago, "Cloud Gate".

Cloud Gate has been a landmark of the Chicago landscape since it was installed outside the Art Institute of Chicago and Millennium Park in 2006. With a polished silvery exterior, Cloud Gate is famous for its reflection of Chicago's skyline. A unique structure, Cloud Gate has an arc underneath large enough for visitors to walk through. In "contrast", the sculpture in China is supposed to mimic an oil bubble and is a reference to an oil well in Karamy. The Chinese installation also has a mirror-like surface and passages that lead to the under-belly of the "oil bubble".

When Anish Kapoor, the author of Cloud Gate, learned about the sculpture in China, he said: "It seems that in China today it is permissible to steal the creativity of others, I feel I must take this to the highest level and pursue those responsible in the courts."1

How is copyright in a sculpture like Cloud Gate protected internationally? How can an author pursue a claim in China?

International Copyright Protection – How does it work?

The first thing to note is that there is no right known as "international copyright", meaning there is no uniform set of laws that governs copyright in a work around the world. Copyright law is "territorial" in nature, meaning that the copyright protection afforded to a work in a certain jurisdiction depends on the national laws of the jurisdiction in which the author seeks protection, and the various copyright international conventions to which the respective country may or may not be signatory.

In Hong Kong, copyright subsists in certain types of works, including artistic works such as sculptures and paintings. It is not necessary to register copyright in Hong Kong in order to obtain protection under the Copyright Ordinance (Cap. 582). As an artistic work, copyright automatically subsists in a sculpture at the time of creation.

Through the application of international copyright conventions, a sculpture created in Hong Kong also enjoys protection in most countries around the world. The most significant international treaty that governs international protection of copyright is The Berne Convention for Protection of Literary and Artistic Works ("the Berne Convention"). Some of its key features are:

  • National treatment – Works originating in one contracting state must be given the same protection in each other contracting state as the latter grants protection to the works of its own nationals; and
  • "Automatic" protection – No formalities are required to be complied with in the other contracting states.

At present, there are 168 contracting states to the Berne Convention. As China (extending to Hong Kong) is a signatory to the Berne Convention, copyright works created in Hong Kong and in all other contracting states of the Berne Convention are also automatically protected in China, according to China's copyright law.

China 's Copyright Law

Under China's copyright law, copyright subsists in works of fine art and architecture, including a sculpture.2 Any person who copies another's work commits an act of copyright infringement and should bear civil liability.3 Any person who reproduces a work without the author's permission (the "Infringing Act") is also civilly liable.4 Furthermore, if the Infringing Act is considered to harm the public interest, the state and local copyright administration departments have the power to order the infringer to cease the Infringing Act, confiscate his illegal gains, confiscate and destroy the reproductions of the work, and impose a fine on the infringer.5

Should an author wish to pursue a copyright claim in China, he would need to collect evidence of infringement and will have a choice of pursing his claim by way of an administrative action or a civil action.

Challenges in Enforcement in China

Foreign authors often face difficulties when enforcing copyright works in China for the following reasons:

  1. Differences between China's copyright law and foreign copyright law and lack of understanding of the Berne Convention
    China maintains a system of voluntary copyright registration6 and domestic enforcement actions are often based on registered copyright rights. If the copyright in question has not been registered in China, enforcement agencies may be reluctant to assist with copyright infringement investigations as they may not understand the effects of the Berne Convention.
  2. Local protectionism
    Enforcement agencies in China may be protective of local companies and individuals. They may also be reluctant to take action due to feared impact on the local economy.
  3. Political institutions in China might have vested interests in certain industry sectors and their interests may collide with the interests of foreign investors and their copyright and other intellectual property rights
    Enforcement agencies may often face political pressure and incline to favour political institutions in enforcement actions.
  4. Limited manpower and resources dedicated to enforcement in China, especially in smaller and lower tier cities.

As a result of these challenges, many foreign authors and innovators have been put off from enforcing their rights in China.

Final Remarks

In recent years, the Chinese government has made tremendous efforts to address intellectual property rights problems and improve enforcement efficiency, such as by updating its laws and establishing specialised IP courts. It is hoped that China will continue to increase the transparency and certainty of enforcement actions, so that intellectual property right owners will not hesitate to enforce their rights and China will become a more innovation-friendly country for both authors and innovators domestically and internationally. Meanwhile, please watch this space to see if Kapoor will really take the "China's Cloud Gate" case to the courts in China.

TRADE MARKS – HONG KONG

Your Mooncake or Mine: An Exploration of the Defence of Honest Concurrent Use in Trademark Invalidation

By Benjamin Choi, Partner, Mayer Brown JSM, Hong Kong
Nicola Kung, Associate, Mayer Brown JSM, Hong Kong

Lin Heung Tea House & Bakery v Guangzhou Catering Services Enterprises Group Co Ltd [2015] 4 HKC 333 is a recent Court of Appeal ("CA") case involving a trademark dispute between two mooncake companies. Both companies sold mooncakes under the mark "莲香" (translation: lotus fragrance). The CA upheld the decision of the Court of First Instance ("CFI") to invalidate Guangzhou Catering Services Enterprises Group Co Ltd's (the "Appellant's") registered trademark "莲香" (the "Suit Mark") based on the other side's unregistered marks. Although both the CA and CFI concluded that the Suit Mark should be invalidated, the Appellant's defence of honest concurrent use was treated and analysed quite differently by the two Courts.

Background

When a party applies to register a trademark at the TM registry, the Registrar will assess the application and decide whether the mark meets the requirements for registration. There are two grounds on which a trademark application may be refused:

  • Absolute grounds: the mark will be assessed on its own to see whether it contravenes any of the basic requirements of a trademark. For example, the mark cannot be registered if it is devoid of distinctive character, or if the mark is solely descriptive of any characteristics of the goods or services for which it will be used. These are known as absolute grounds of refusal.
  • Relative grounds: the mark will be assessed in relation to existing marks. If the applied-for mark is too similar to a trademark that has already been registered, or if it is too similar to an earlier mark which is protected by the law of passing off, then it will also be rejected. These are known as relative grounds of refusal.

Likewise, an existing trademark registration can be challenged on both absolute grounds and relative grounds. If the challenge is successful, then the trademark will be invalidated.

In both trademark applications and invalidations, a relative ground of refusal can be overcome by proof of honest concurrent use.

Facts

In 2006, Lin Heung Tea House & Bakery (莲香茶楼及饼家) ("LH Bakery") applied to register the marks "莲香" and "莲香楼" in Hong Kong. However LH Bakery's applications were rejected by the Registrar of Trade Marks because the Suit Mark, also consisting of the characters "莲香", had already been registered in Hong Kong in 1996. The Suit Mark was originally registered by Guangzhou Lianxiang Lou ("GLX"). GLX assigned the Suit Mark to the Appellant in 2006. The two companies used the same name "莲香" because they shared a common origin. Both LH Bakery and the Appellant can be traced back to GLX, which was founded in 1910. For historical reasons, the two companies used almost identical mooncake packaging designs.

Court of First Instance decision (HCMP 133/2008)

In an effort to stop the Suit Mark citation from blocking its trademark applications, LH Bakery commenced a Court action to have the Suit Mark invalidated. LH Bakery succeeded in its invalidation action based on two relative grounds :

  • Passing off: at the time the Suit Mark was registered, LH Bakery had earlier unregistered trademarks, "莲香" and "莲香楼", and could seek protection based on the common law tort of passing off. LH Bakery was therefore entitled to prevent the use and registration of the Suit Mark.
  • Well-known mark: the Suit Mark is identical to LH Bakery's earlier trademark which, at the time of registration, was already protected as a well-known mark. The use of the Suit Mark would take unfair advantage, or be detrimental to the distinctive character or repute of the earlier mark.

The Appellant attempted to rely on the defence of honest concurrent use in this invalidation action. As the Appellant did not acquire the Suit Mark until 2006, the arguments put forward were centred on the use of the Suit Mark by the assignor of the mark, GLX. The Appellant's argument was that their mooncakes had been sold by GLX in boxes bearing the trade name "广 州莲香楼" and the tagline "莲香饼好月团圆" since 1984. Therefore, when the Suit Mark was registered in 1996, even if LH Bakery's marks could be protected by the common law of passing off or as well-known marks, a case of honest concurrent use of the Suit Mark could be made out. Therefore the Suit Mark should not be invalidated.

The CFI rejected this argument, considering that GLX's actual use of the Suit Mark was always in conjunction with "广州" or in the form of "广州莲香楼". As this was "not a use of the suit mark simpliciter" (i.e., not just 莲香 by itself), there was no honest concurrent use of the Suit Mark on its own.

The CFI judge gave judgment for LH Bakery, declaring the Suit Mark invalid.

Court of Appeal decision

The Appellant's appeal of the CFI decision was focused solely on the CFI's rejection of their defence of honest concurrent use.

The CA applied the two-stage test for determining whether there has been honest concurrent use, as stated in Re CSS Jewellery Co Ltd [2010] 1 HKC 563:

  • Stage 1 - whether there has been an honest concurrent use of the subject mark (i.e., the Suit Mark) and the earlier trademark (i.e., LH Bakery's marks).
  • Stage 2 - if the answer is yes, whether after considering all the relevant circumstances, including public interest, the Registrar should exercise its discretion to accept the registration of the subject mark (i.e., the Suit Mark) despite that the use of the mark is likely to cause public confusion.

Stage 1 – Honest concurrent use

  1. Use as a trademark simpliciter

    The Appellant argued that the CFI should have held that there had been use of the Suit Mark simpliciter and as a trade mark by GLX. Various examples of the use of the Suit Mark on GLX's mooncake packaging were cited: "莲香月饼" (Lianxiang Mooncake) "广州莲香老饼家" (Guangzhou Lianxiang Old Bakery) and "广州莲香楼" (Guangzhou Lianxiang House). The Appellant argued that in all these examples, "莲 香" was the only distinctive term. All the other words – "月饼" (mooncake), "月饼" (Guangzhou), "老饼家" (old bakery) and "楼" (house) were purely descriptive. Therefore, there had been use of the Suit Mark simpliciter by GLX.

    The CA accepted this argument and considered that the CFI was wrong to hold that GLX's use of the Suit Mark was not honest concurrent use because it was not use of the mark as a trade mark simpliciter. The CA clarified that the term "trade mark simpliciter" is not a legal term. All that it means is that the trade mark is not used on its own, but in connection with other marks or descriptive elements. Just because a trade mark is not used on its own does not mean that it is not being used as a trade mark.
  2. Honesty

    LH Bakery challenged the honesty of GLX's use of the Suit Mark and argued that the Stage 1 inquiry focuses on three matters (i) use; (ii) concurrent use; and (iii) honesty of the concurrent use. When considering the question of honesty in part (iii), the Court should take into account the knowledge of the party seeking to rely on the defence of honest concurrent use. The CA accepted that this was a well founded submission.

    LH Bakery argued that GLX had used the Suit Mark in conjunction with "广州" (Guangzhou) or in the form of "广州莲香楼" (Guangzhou Lianxiang House) to avoid confusion and to distinguish their mooncakes from those of LH Bakery. Accordingly, GLX's (i) knowledge of the likelihood of confusion; and (ii) their attempt to avoid confusion by using the Suit Mark in conjunction with other indicia was relevant to the question of honesty.

    The CA rejected this argument, stating that "it has to be stressed that not every knowledge of the existence of an earlier mark or the likelihood of confusion with such an earlier mark or the need to use some safeguards to avoid confusion will render the use dishonest". Further, "even if the mark is being used in combination with other words, the purpose of which is to prevent confusion, this cannot be regarded as evidence of dishonesty."

    The CA found that GLX had indeed satisfied the Stage 1 requirement of honest concurrent use.

Stage 2 – Registrar's discretion

Stage 2 required a balancing exercise as to whether discretion should be exercised to allow the registration despite the fact that it would cause a likelihood of confusion. In carrying out this balancing exercise, the CA gave particular weight to the following:

  • Period of use: the Suit Mark had only been used by GLX in Hong Kong between 1984 and 2006 (22 years), whereas LH Bakery has been carrying on its restaurant and mooncake business in Hong Kong under the trade mark "莲香" for over 80 years. "莲香" has since become a well-known local brand, associated with LH Bakery's restaurant and mooncakes.
  • Lack of use: by the time of the CFI trial, 5 years had elapsed since the last use of the Suit Mark in Hong Kong. Even before that, the sale of GLX's mooncakes in Hong Kong had dwindled to a very low figure, with an annual turnover of less than HK$100,000. In comparison, LH Bakery was still selling 莲香 mooncakes in Hong Kong, and reporting impressive annual sales of HK$3.6 million.
  • Prejudice: due to the lack of use of the Suit Mark, the CA decided that if discretion was exercised against the Appellant, it would suffer relatively little inconvenience. No serious prejudice would be caused to it if it were required to change its packaging as a result of the Suit Mark being declared invalid.

The CA therefore decided that discretion should not be exercised to let the Suit Mark remain registered as the Appellant could not satisfy Stage 2 of the two-stage test. As a result, the CFI's decision to invalidate the Suit Mark based on the relative grounds of refusal was upheld by the CA.

Conclusion

This case illustrates to what extent and under what circumstances the defence of honest concurrent use may work, clarifying two important points in the application of the Re CSS Jewellery Co Ltd two-stage test. First, just because a trade mark is not being used on its own (but in combination with other solely descriptive elements) does not mean that it cannot satisfy the usual trade mark use requirement. Secondly, when carrying out the balancing exercise in Stage 2 of the Re CSS Jewellery Co Ltd test, the Court will pay particular attention to the extent of actual use of the mark in question and other relevant circumstances. In this case, LH Bakery succeeded in invalidating an existing registration of an identical mark to clear the way for registering their long used but unregistered "莲香" and "莲香楼" trade marks. The Court's discretion might not have been exercised the same way if the Appellant had been selling its moon-cakes in Hong Kong continuously and extensively getting a decent revenue, or if LH Bakery's business was not as famous. This case has alerted trademark owners of the importance of making actual, genuine use of their registered trademarks. Despite the fame of LH Bakery and its abundant use of the"莲香" and "莲香楼" trade marks, it still took LH Bakery nine years to resolve this case with its competitor who had been operating in Hong Kong for a considerable period of time.

To read this Review in full, please click here.

Originally published October 2015

Footnotes

1. http://blogs.wsj.com/chinarealtime/2015/08/12/a-cloud-gate-in-china-xinjiang-sculpture-resembles-chicago-bean/

2. Article 3 of the Copyright Law of the People's Republic of China and Article 4 of the Regulation for the Implementation of the Copyright Law of the People's Republic of China

3. Article 47 of the Copyright Law of the People's Republic of China

4. Article 48 of the Copyright Law of the People's Republic of China

5. Article 48 of the Copyright Law of the People's Republic of China

6. See Temporary Measures on the Voluntary Copyright Registration of Works issued by National Copyright Administration of China

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Mayer Brown is a global legal services organization comprising legal practices that are separate entities (the Mayer Brown Practices). The Mayer Brown Practices are: Mayer Brown LLP, a limited liability partnership established in the United States; Mayer Brown International LLP, a limited liability partnership incorporated in England and Wales; Mayer Brown JSM, a Hong Kong partnership, and its associated entities in Asia; and Tauil & Chequer Advogados, a Brazilian law partnership with which Mayer Brown is associated. "Mayer Brown" and the Mayer Brown logo are the trademarks of the Mayer Brown Practices in their respective jurisdictions.

© Copyright 2015. The Mayer Brown Practices. All rights reserved.

This article provides information and comments on legal issues and developments of interest. The foregoing is not a comprehensive treatment of the subject matter covered and is not intended to provide legal advice. Readers should seek specific legal advice before taking any action with respect to the matters discussed herein. Please also read the JSM legal publications Disclaimer.

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