Beer, Reform, and Policy: A Pint of Chinese Trade-mark Law

Beer, Reform, and Policy: A Pint of Chinese Trade-mark Law

If you want to order a Heineken in China, just ask the bartender for a “喜力啤酒” (pronounced “see lee pee jow”). The second word-pair, “啤酒”(“pee jow”), simply means “beer” and can be ubiquitously used to order beer in China. But the first word-pair, “喜力” (“see lee”), is the trade name chosen by Heineken to represent their brew in the Chinese market. The literal translation of “喜力” is “happiness strength” and appears to fit nicely with the international image that Heineken has been cultivating these last few years.

The problem? In 2001, Wujian Xili Textile Co Ltd, a small Chinese sewing machine company in Jiangsu province, registered “喜力” with the Changan Trademark office in association with “sewing needles and stitches”. Last month Heineken accused Wujian Xili Textile Co. of pirating its trade-mark. The action was allegedly triggered by Wujian Xili's use of the name at an industry trade show in Shanghai. Cai Fuwei, Wujian Xili Textile Co.'s legal officer, has stated that he has never heard of Heineken beer and had never seen their branding before.

It is not yet clear whether this suit will be heard by the Trademark Review and Adjudication Board.

A. China’s Recent Trademark Reform: Good News for Rights-Holders?

Heineken's law suit comes at an interesting time in the Chinese legal landscape because on August 30, 2013, the National People’s Congress Standing Committee revised the People Republic of China (PRC)’s Trademark Law (PRC Trademark Law). While most of the revisions were procedural, there were a number of substantive changes and clarifications that may be relevant to the Heineken suit. An English summary of the revisions can be found here.

Applications Made in Bad Faith: Of particular interest to foreign rights holders may be the appearance of a broad new principle that “all trademarks must be applied and used in accordance with the principles of honesty and integrity” (Article 7, Article 17, Article 19, Article 68).

It specifically provides that if the applicant is aware of another party’s mark through a prior contractual relationship, business dealings or other prior relationship, the applicant’s application to register a trade-mark identical/similar to that party’s mark for the same/similar goods or services will be rejected if it is opposed by the party with prior use.

Recognition of Prior Use: A registered trade-mark owner who is “squatting” on a famous but as-of-yet unregistered trade-mark is no longer allowed to prohibit a prior user from continuing to use an identical/similar mark within the original scope of his or her use. However, the registrant may request the prior user add appropriate markings to distinguish the marks (Article 15).

“Use” under Chinese trade-mark law has been defined to appearance on products, packaging, containers and business papers, or use in advertisements, at exhibitions and for other business activities to designate the origin of the products (Article 48).

Clarification of China’s Protection of Well-Known Marks: The new law expressly confirms the “case-by-case” recognition principle for well-known marks and the channels of seeking well-known mark recognition (Article 13). Basically, it states that the recognition of well-known trade-marks shall be conducted by competent authorities at the request of the trade-mark holder.

Additionally, use of the phrase “well-known trademark” (“驰名商标”) is now expressly prohibited from use on goods, packaging or containers, in advertisements, exhibitions or other commercial activities. (Article 14). Any violation may be subject to injunction and a fine of 100,000 RMB (~ $16,000 USD).

Increase in Damage Awards: Before this revision, statutory damages were only about 500,000 RMB (~ $81,000 USD). This amendment has increased it to 3 million RMB (~ $490,000 USD) (Article 62). Punitive damages, up to three times the amount in other damages, are also now available when an infringement occurs in bad faith (Article 63).

The changes are scheduled to come into effect on May 1, 2014.

B.  Good News for Heineken’s Case? 

How might these amendments affect Heineken’s suit against Wujian Xili? Certainly the protection of well-known marks and the recognition of prior use of the mark appear to weigh in Heineken’s favor, given that Heineken entered the Chinese market before Wujian Xili registered for the mark. Moreover, some blogs have reported that Wujian Xili has been censured for acting in bad faith in the past by SAIC - suggesting an opposition from Heineken may receive sympathy by the Trademark Review and Application Board.

Silence on Dilution: There is, however, one nagging problem for Heineken - the continued absence of the explicit codification of the dilution principle in Chinese law.  Protection against “brand dilution,” is the protection from a third party who seeks to use a registered trade-mark for an unrelated product. The existence of this principle in China's civil law regime has been a matter of some debate among academics and practitioners.

To help shed some light on these developments, I sat down with Dr. Yahong Li of Hong Kong University who teaches "International Comparative Intellectual Property Law" at HKU. The following is a transcript of that interview.

C.      Policy Discussion with Dr. Yahong Li

Beatrice Sze: Thanks for sitting down with me today, Dr. Li.

Dr. Li: My pleasure.

Beatrice Sze: Having lived and worked in the Beijing, the United States, and Hong Kong, in your opinion, why do you think China is revising its IP laws now after so many years of being the world’s “Copycat Center”?

Dr. Li: Well first, I think the PRC recognizes that many of its laws are outdated and in need of revision, if only to clean up some of the procedural inefficiencies involved in application and objection. So there is a large practical consideration here. [Editor’s note: The last time there was a major overhaul of the Trademark Act was in 2001.]

Secondly, the impression I get from these amendments is that the PRC is serious about answering the call from the international community to strengthen its protection of IPRs. To me the increase of the damage awards available to rights holders and the inclusion of punitive damages is the strongest indicator of this.

Beatrice Sze: What makes you say that? What makes these revisions substantive as opposed to empty gestures?

Dr. Li: What most people need to understand about China is that, while it has been a member of WIPO for nearly 30 years, its status as a formidable global economy is a relatively recent development. For the last 30 years it has largely been a developing country. Ten years ago, when these laws were drafted, an $81,000 USD award seemed like a low award to most American and European businesses. However, the reality is that kind of award would have crippled many Chinese businesses. The fact that the PRC is revising its laws to reflect the country’s economic growth indicates to me that it is serious about meeting the WTO obligations and the bilateral treaties it recently signed with other countries in Asia.

Beatrice Sze: What do you think of Heineken’s case? Does the beer company have a shot given the difference between the products and wares in question?

Dr. Li: Yes, as you mentioned in your analysis, to me this case raises the question of whether or not the dilution doctrine is alive in Chinese jurisprudence. Heineken is claiming infringement of its trademark with respect to beer and Textile Co. has been using it with respect to sewing machines.  It is worth noting that there have been some decisions in which Chinese courts have adopted the American approach [Editor's note: which protects against dilution as a matter of law].  However, because China operates under a civil law regime, these decisions are not binding upon future courts or tribunals.

Beatrice Sze: So it seems like Chinese law has a ways to go in its growth before rights-holders can be assured of the same kind of protection they are used to receiving in the United States and EU.

Dr. Li: Yes, I'd agree with that statement. Although I would suggest that this is certainly a step in the right direction.

Beatrice Sze: It seems like it's an exciting time to be in this field - particularly in this part of the world.  Cheers!

Dr. Li: It is indeed.  干杯! [Translation: "Cheers!" Pronounced:"Gan bei!"]

Dr. Yahong Li is an Associate Professor and Deputy Head at the Department of Law at HKU. She is also an Associate Director at HKU Technology Transfer Office.   Read more of Dr. Li 's research in her book “Imitation to Innovation in China: the Role of Patents in Biotechnology and Pharmaceutical Industries” (Edward Elgar, 2010).

Beatrice Sze is an IPilogue Editor and a JD Candidate at Osgoode Hall Law School. She is currently on exchange at Hong Kong University studying international law and the intellectual property and commercial laws of China.