UK: Judicial Interpretation Clarifying Conflict Settlement Between Existing IP Rights

Last Updated: 7 July 2008
Article by Jonathan Selvadoray

On March 1, 2008, PRC courts put forward a clear approach on how to settle conflicts between different IP rights. The Supreme People's Court promulgated a judicial interpretation relating to the judgment of cases involving conflicts between registered trademarks, company names and other IP rights ("Interpretation").

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On March 1, 2008, PRC courts put forward a clear approach on how to settle conflicts between different IP rights. The Supreme People's Court promulgated a judicial interpretation relating to the judgment of cases involving conflicts between registered trademarks, company names and other IP rights ("Interpretation").

Although this Interpretation contains only four articles, the significance of this Interpretation cannot be underestimated. In this instance, this Interpretation is as important as an independent administrative regulation on IP, because it has clarified some ambiguous issues which have been puzzling courts for many years, namely: (1) should a case involving conflicting IP rights be accepted; and (2) what decision should be rendered in such a case?

Foreign companies should take the following measures to protect their IP rights and to avoid any potential risk of IP conflicts arising (and therefore possible court action), when establishing their companies in China:

  1. keep marketing materials, exhibition materials, sales contracts and other documents showing the company name to prove commercial existence in China;

  2. apart from trademarks, make use of other existing IP rights to enhance the protection of the existing IP rights in China (such as copyright and design patent); and

  3. ensure that the Chinese company name to be registered is not similar or identical to that of any other company, even if they are not located in the same city.

Nowadays, IP rights conflicts in China largely involve the following:

  1. conflict between two registered trademarks;

  2. conflict between a registered trademark and a company name;

  3. conflict between a registered trademark and a copyright;

  4. conflict between a registered trademark and a design patent; or

  5. conflict between two company names.

collectively the "IP Conflicts".

The question of how to resolve conflicts between existing IP rights is not a new one in China. Articles 9 and 31 of the Trademark Law stipulate these rules by reflecting the principle stipulated in Article 16 of TRIPS. However, in practice, the majority of the cases were only handled through administrative procedures. There are no clear regulations on whether or not courts can pass judgment on IP Conflicts.

This Interpretation clarifies two important issues contained in articles 1 and 2: (1) which cases can be accepted by the courts (Jurisdiction); and (2) which decisions should be rendered in such cases (Decision-making)

1. Jurisdiction

a. Article 1

Article 1 of the Interpretation provides that if a trademark registered by a party infringes the existing rights of another party (such as copyright, design patent and company name), courts can accept the case.

This article recognises therefore that courts are also competent to accept cases to protect existing IP rights, a position which was not formerly evident.

It should be noted however that this article is not applicable to an infringement of a registered trademark through the registration by another party of a copyright, design patent or company name similar to the registered trademark. The absence of such an article does not automatically infer that these cases are not acceptable. However whether these cases can be accepted should be considered on a case-by-case basis according to PRC laws and regulations.

If a registered trademark infringes a foreign company name which was used in China prior to the registration of the trademark, such a case shall also be accepted, despite the fact that the company name was not registered in China. Therefore, foreign companies without any establishment in China should ensure at least that their company name has appeared on the Chinese market, by any means (such as through exhibitions, sales contracts or marketing materials), so as to protect against any potential fraudulent registration of its name by a third party in China.

b. Article 2

Article 2 of the Interpretation provides that if a company name is identical or similar to an existing company name, causing public confusion over the origin of products in violation of Anti-Unfair Competition Law, courts can accept the case.

This article is considered to reflect a big step forward for PRC law. Distinct from trademark administration which is controlled centrally by the Trademark Office, company name registration is governed independently by each local administration of industry and commerce ("AIC"). Therefore, identical or similar company names are often registered in different cities. This article now allows a company in one city to sue a company in another city if the infringing company name is identical or similar to the name first registered, provided that such identical or similar name has resulted in public confusion over the origin of products. In the past, it was only possible to use a well-known trademark to request the change of a company name in another city.

c. Trademark conflicts

Note that this Interpretation does not provide that courts can accept cases involving conflicts between two registered trademarks. These conflicts shall still be governed by the Trademark Office, unless the use of a trademark exceeds the scope of products for which it was registered or the said trademark was not used in the form it was registered in, which causes infringement to another trademark.

2. Decision-making

Article 4 of the Interpretation provides the following decisions which can be taken by courts:

  1. cessation of use of the infringement trademark or company name; and

  2. formalising the use of the trademark or company name.

The Interpretation does not provide an exhaustive list of types of decisions. Therefore courts can render other decisions if necessary.

In practice, it remains difficult for a court to sanction the illegitimate use of a company name, as it can only ask the infringing company or person to cease the use, but cannot take proactive measures to ask the local AIC to unregister the company name. It is hoped and expected that in time, coordination between the courts and the competent AICs will be taken to facilitate the enforcement of this type of decision. For instance, currently in Shanghai, the AIC may take the following measures to force the infringing company or person to change its company name: the confiscation of its business licence, printing on the business licence the words "this company has been ordered to change its name", refusal to handle other AIC modification formalities, or refusal to pass AIC annual examination.

3. Cause of actions

Article 3 of the Interpretation provides guideline to the courts for the classification of the cause of action for IP Conflicts. This is largely relevant to the judicial system and is of minor concern to individuals or companies.

This article was written for Law-Now, CMS Cameron McKenna's free online information service. To register for Law-Now, please go to www.law-now.com/law-now/mondaq

Law-Now information is for general purposes and guidance only. The information and opinions expressed in all Law-Now articles are not necessarily comprehensive and do not purport to give professional or legal advice. All Law-Now information relates to circumstances prevailing at the date of its original publication and may not have been updated to reflect subsequent developments.

The original publication date for this article was 04/07/2008.

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