Use of trade name shall not infringe trademark rights

By Wang Zhengzhi Globe-Law Law Firm/ Focus IP Consulting, LLC

In July 2006, ABC (China) Investment Co., Ltd. and ABC, Inc. (Switzerland) (collectively known as “the Applicants”) filed an application for dispute resolution to the Beijing Municipal Administration for Industry and Commerce Bureau, Haidian Branch against ABC (Beijing) Biological Chemical Co., Ltd. for the violation of their trademark rights.

The matter of the application is as follows:

To revoke or rectify the ABC (Beijing) Biological Chemical Co., Ltd. trade name in accordance with relevant laws.

The facts and reasons are as follows:

The Applicants

At the end of 2000, the entity ABC, Inc. (Switzerland) (hereafter known as “ABC Group”), a company specializing in high-tech agriculture, was incorporated. The company is headquartered in Switzerland, and is a leading producer of agricultural fertilizer and is one of the top three seed companies in the world, enjoying a strong reputation in the international arena.

ABC Group has business operations in 135 countries and regions, and has manufacturing and R&D bases in over 20 countries, including China. At present, ABC Group’s total investment in China is over 1.5 billion USD. It is also the biggest foreign investor in the Chinese agrochemical industry.

In 2001 and 2002, ABC Group applied and successful registered the trademark "ABC" at the Chinese Trademark Office. The trademark was registered under Class 1 and Class 5, with the products primarily used as pesticides and similar agricultural products.

ABC (China) Investment Co., Ltd. (hereafter known as “ABC (China)”) is a wholly owned Chinese subsidiary of ABC Group and is authorized to use the “ABC” trademark in Mainland China.

Pesticide products have been an integral area of business to both the Applicants. In recent years, through sales of the Applicant’s pesticide and similar agricultural products in China, the Applicant’s trademark "ABC" has been made well known to the general public in China.

The Defendant

The defendant, ABC (Beijing) Biological Chemical Co., Ltd., (hereafter known as “the Defendant”) was founded at the end of 2005. It then registered “ABC (Beijing) Biological Chemical Co. Ltd” as its trade name and subsequently used "ABC" as its trade name. After it was established, the Defendant had also business dealings in the pesticides and related products market, and prominently displayed its trade name on its pesticide and similar agricultural products.

The Applicants alleged that its use of the trade name “ABC” misled consumers and caused market confusion about the products source or origin and as such, the Defendant’s conduct resulted in unfair competition and constitutes a serious violation of the Applicants’ trademark rights.

The Applicants also alleges that the Defendant is aware of the Applicant’s trademark as the Defendant and the Applicant, ABC (China) both operate within the same agricultural industry in the same jurisdiction.

Determination:

After investigations, in July 2007, the Beijing Municipal Administration of Industry and Commerce, Haidian Branch, issued a trade name dispute determination and held that "ABC (Beijing) Biological Chemical Co. Ltd." was an inappropriate trade name, and that the Defendant, within 30 days of receipt of the notice, needed to register for a name change at the Beijing Municipal Administration for Industry and Commerce Bureau, Haidian Branch.

Analysis:

In this present case, the “dispute of rights” is essentially caused by a conflict between two different types of identity badges (trademark and trade name) that are used to distinguish the commercial source or origin of products and services. This conflict usually occurs in two types of situations:

1. Registering and using a trade name identical or similar to another entity’s registered trademark, and consequently, enjoying the considerable reputation of that entity’s trademark within the same industry; and

2. Registering and using a trademark identical or similar to another entity’s well-known trade name.

Regardless of the form of the dispute, those who infringed the rights of prior registered trademarks or trade names and subsequently confuse the consumer’s judgment by selling their product with identical or similar identity badges, bring about unjust enrichment.

In this present case, in year 2001 and 2002, the Applicant, ABC (Switzerland) successfully registered with the China Trademark Office, the trademark “ABC” in classes 1 and 5, with the products primarily used as pesticides and similar agricultural products. The Defendant was only established in late 2005 and “ABC” then became an integral part of its trade name. In this present case, the chronological grant of rights is evident.

In 1999, the PRC’s State Administration for Industry and Commerce introduced the "Guidelines on the Resolution of Several Questions Concerning Trademarks and Trade Names". Article 4 of the Guidelines states that: "If a trademark or a trade name are identical or similar to a prior registered trademark or trade name and will cause confusion (or likelihood of confusion) in relation to the source or origin of the products or services constitutes unfair competition. Consequently, in accordance with the law, the usage of that trademark or trade name in question ought to be stopped.”

Article 5.2 of the guidelines provides that the term “confusion” includes situations where: 

1.    The registration of a trademark that is identical or similar to another entity’s registered trade name, causing the relevant public to mistake the owner of the registered trademark as the owner of the registered trade name; and

2.    The registration of a trade name that is identical or similar to another entity’s registered trademark, causing the relevant public to mistake the owner of the registered trade name as the owner of the registered trademark.

The prevention of confusion is a fundamental traditional trademark protection objective.  The basic function of an “identity badge” is to indicate the source or origin of goods or services. In order for the trademark to effectively and reliably indicate the source or origin of the goods, it is necessary to remove usage of the same or similar trademark and also trade names by third parties that cause identification issues. National trademark laws and international agreements such as Section 52 of the Trademark Law of the People's Republic of China and Article 16 of the TRIPS Agreement hold the above objective as the fundamental tenet of trademark legislation.

At present, many countries have already adopted a general standard of confusion, including direct and indirect confusion, making it easier to protect commercial enterprises.

The Beijing People's High Court issued guidelines on the "Explanation of some issues concerning conflict between trademarks and trade names during the hearing of dispute cases " (Beijing People's High Court (2002) No. 357). In the interpretation, their view was that when determining whether the conflict on the usage of trademarks and trade names will cause consumers to be mistaken or confused, the relevant factors (but not limited to) should be considered:

1. The channel and method for the sales of goods and services;

2. The degree of similarity of goods and services between both parties and the degree to which the customers notice the similarity;

3. Whether there is any evidence that it has caused actual confusion; and

4. Whether the Defendant had the intention to exploit or damage the goodwill of others.

At present, for practitioners specializing in trademark and trade name laws, one of the most important objectives is the protection of prior rights, an objective that is important in this current case.  The protection of prior rights reflects the human rationale and thus has become every country's widely accepted and adopted method to resolve trademark and trade name rights disputes.

In accordance with a Notice made by the People’s High Court in November 2004, Article 11 states that the People's Court find that if the usage of a trade name infringes a registered trademark or cause unfair competition, in addition to bearing civil liability in accordance to law, the People's Court may also order the entity to stop using the business name. However, Article 11 will not apply in the event that the trade name has been already registered for five years or more, except in instances of malicious conduct.

Of course, fundamentally the best way to resolve trademark and trade name conflicts is through a sound trademark law legislative system and sound trade name registration legislative system.     

At present, trademark owners in China can protect their rights through the following ways:

1.    Registering the trademark in a timely manner, providing good quality products or excellent service and garnering strong media publicity in order to make the trademark well known so that the trademark owner’s interests can be better protected;

2.    Establishing a specialized department responsible for handling intellectual property matters. When registering and using trademark and trade names, it is necessary for the owners to observe and investigate other entities’ “identity badge” usages, primarily the usage of the entity’s competitors and other illegal operators, to find out whether they are infringing any trademark rights.

3.    In the event that there are conflicts between trademarks and trade names, the owners may, according to the trademark laws and relevant regulations, seek the courts’ or appropriate industrial and commercial administrative office protection and to provide appropriate remedies. In this present case, the Applicant, ABC (China) was able to safeguard their rights in a timely and effective manner by approaching the appropriate industrial and commercial administrative office.

In summary, so long as Chinese companies operates its business legitimately and at the same time, actively and legally use a variety of legal channels to defend their rights, it will lead the Chinese market economy in the direction of a healthy development.