Precious Lessons Learned From Hermès' Unregistered Trademark In China

Love for horses, Love for gems
Although Hermès registered its trademark in China since 1977, it had not yet registered its Chinese name 爱马仕 (Ài mǎ shì) as a trademark the Legal Evening News wrote, according to Shanghai Daily, see here.

In 1995 Dafeng Garment Factory registered a trademark 爱玛仕 (Ài mǎ shì), which is, indeed, pronounced exactly the same as the Chinese name of Hermès. 

In that year Hermès filed an objection at the Trademark Review and Adjudication Board (TRAB) of the State Administration for Industry and Commerce (SAIC). However TRAB approved Dafeng Garment Factory's registration in 2001. After that Hermès appealed at a Chinese court. 

In 2009,  Hermès again appealed to the board, saying its Chinese name enjoyed a high reputation around the world and demanding the board cancel the disputed trademark. However,  Hermès' application was rejected for a second time May 2011.

Lessons to be learned:

• Protect your trademark name together with the Chinese version of your trademark, otherwise either the public will come up with a, possibly not so positive Chinese name, or worse a competitor will take unfair advantage of your reputation and/or will confuse the public into believing that your company is the origin of the products of your competitor.
• Unregistered trademarks can be protected only if they are famous/well-known. That is famous in China, not in other countries, and not even in Hong Kong or Macau which are special administrative regions with their own jurisdiction. 
• You have to proof that your trademark is famous, before the trademark dispute. Because otherwise it is hard to proof that the public knows your trademark or that of your competitor who is using an identical or similar trademark.

Unfortunately for Hermès, the luxury good company could not convince the court that the Chinese version of its name 爱马仕 was unregistered but a famous name for some time before Dafeng Garment Factory even started using their registered trademark 爱玛仕. They used evidence that originated from the period after the dispute and they used evidence that showed that their trademark was famous to consumers in Hong Kong instead of the mainland. 

Spot the Difference In The Chinese version of the Hermès Trademark And Its Clone

爱马仕

爱玛仕

Top row: 

Hermès' unregistered trademark: 爱马仕 (Ài mǎ shì = love horse officials = officials who love horses)

Bottom row: 

Dafeng Garment Factory registered trademark: 爱玛仕 (Ài mǎ shì = love agate officials = officials who love agate). The difference is indeed, the second character which is 王 wáng (king) + 马 mǎ (horse)= 玛 mǎ (agate), a kind of gem.

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Chinese Trademarks Visible, But Have By Far Not Met Their Potential

In absolute numbers China might be in almost all aspects a giant. But in relative sense this does not need to be the case. Example: China has 5 million registered trademarks. But only one out of 10 market entities owns a registered trademark and the number is 40 percent for companies, Yuan Qi, an official with the Trademark Department of the State Administration for Industry and Commerce (SAIC), was quoted by Zhang Zhao of the China Daily.
Ms Zhang Yumin, an intellectual property (IP) rights researcher with Southwest University of Political Science and Law (Chongqing municipality) said, according to Zhang Zhao, that every company should have a IP management department, directly under the leadership of the decision makers and that the government should encourage companies to register trademarks, internationally and domestically. Read more here.

Then quantity does not say much about quality (although some say quantity has a quality of its own). Where are the strong Chinese brands. Millward Brown has made a list of the Top 50 of Chinese brands:
1. Chinese Mobile;
2. ICBC;
3. Bank of China;
4. China Construction Bank;
5. China Life;
6. Agricultural Bank of China;
7. PetroChina;
8. Tencent;
9. Baidu;
10. PingAn.

Read the other 40 Chinese brands here.

Of these China Mobile (57,326 million US dollar), ICBC (44,440 million US dollar), China Construction Bank (25,524 million US dollar), Baidu (22,555 million US dollar), China Life (19,542 million US dollar), Bank of China (17,530 million US dollar), Agricultural Bank of China (16,909 million US dollar), Tencent (15,131 million US dollar), PetroChina (11,291 million US dollar), PingAn (10,540 million US dollar), China Telecom (9,587 million US dollar), China Merchants Bank (8,668 million US dollar) are within the Top 100 most valuable brands.

UPDATE: China had 2.3 times the trademark filing activity in the second highest country, the United States. Read a compilation of WIPO statistics here.

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What Can A Famous Food Brand Do Against Footwear Using Its Mark?

As a vegetarian I do not frequent the many McDonald's fastfood joints that can be found in China and which turn the slim people obese, just as they did with the American and European populations. I am not really certain what is on sale inside a McDonald's, but when I was in Shenzhen near the beach I was surprised to see that McDonald's has been diversifying into toe slippers. You could say, well that is not really diversifying, because toes could be considered meat too, although not dead meat. Then again, maybe it was not the fast food chain's idea to put its trademark on the slippers. Let's assume that they did not. What could a(n) (in)famous company such as McDonald's do against such unauthorised use of their mark?

April 23, 2009, China's Supreme People's Court promulgated the 'Interpretation on the Application of the Law Concerning Several Issuels Regarding the Trials of Civil Disputes Relating to the Protection of Famous Trademarks' (Judicial Interpretation on Famous Trademarks judicial interpretation).

So since that time the judicial interpretation clarifies that a famous trademarks registered in certain product/service classes is protected against a mark that is identical or similar but on products/services that are dissimilar.

See Article 10 Judicial Interpretation on Trademarks:

"If the plaintiff files a motion to enjoin the defendant from using a trademark, which is identical with or similar to its famous registered trademark, or enterprise name on dissimilar commodities, the people's court shall, in light of the concrete circumstance of the case, make a ruling after comprehensively taking into account the following factors:

1. the distinctiveness of the said famous trademark;

2. how well the famous trademark is known by the relevant general public that use the commodities using the trademark against which the lawsuit is filed or using the enterprise name;

3. the connection between the commodities using the famous trademark and the commodities using the trademark against which the lawsuit is filed or using the enterprise name;

4. other relevant factors."

This is based on China's WTO obligations to comply to TRIPs.

See Article 16 (3) TRIPs:

"Article 6bis of the Paris Convention (1967) shall apply, mutatus mutandis, to goods or services which ar not similar to those in respect of which a trademark is registered, provided that use of that trademark in relation to those goods or services would indicate a connection between those goods or services and the owner of the registered trademark and provided that the interests of the owner of the registered trademark are likeley to be damaged by such use."

This goes further than article 6bis of the Paris Convention of which China is a member since 1985.

See 6bis Paris Convention:

(1) "The countries of the Union undertake, ex officio if their legislation so permits, or at the request of an interested party, to refuse or to cancel the registration, and to prohibitthe use, of a trademark which constitutes a reproduction, an imitation, or a translation, liable to create confusion of a mark considered by the competent authority of the country of registration or use to be well known in that country as being already the mark of a person entitled to the benefits of this Convention and used for identical or similar goods. These provisions shall also apply when the essential partof the mark constitutes a reproduction of any such well-known mark or an imitation liable to create confusion therewith.

(2) A period of at least five years from the date of registration shall be allowed for requesting the cancellation of such a mark. The countries of the Union may provide for a period within which the prohibition of use must be requested.

(3) No time limit shall be fixed for requesting the cancellation or the prohibition of the use of marks registered or used in bad faith."

So if we apply article 10 Judicial Interpretation on Famous Trademarks.

(1) I think we can come to the conclusion that McDonald's is a distinctive mark;

(2) And that it is well known to the relevant general public (because of its ubiquitous existence); (3) So what exactly is the connection between the commodoties of the famous mark and the dissimilar commodities of the mark that might infringe upon it? What is the connection between food and footwear? McDonald's could argue that the association with toe slippers is not conducive for fueling an appetite for its food, save for some foot fetishists. And this could dilute the brand.

(4) Other relevant factors, could be perhaps the popularity of the McDonald's toe slippers. Are they sold all over China, or just at the beach of Shenzhen. In other words the extend of the (potential) damage for the fast food chain.

Photo/text Danny Friedmann

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Uncreative Brand, Creative Brand in China

Uncreative Brand

In Yangshuo, next to Guilin, Guangxi province, you can see one of the most characteristic mountains of China. But if you bike through the village, you will notice some interesting shops as well. Almost next to each other you can see a shop that embodies the old copycat mentality and one that characterises the new creative brandbuilding mentality.

adivon, easily recognised as a blatant adidas clone, has some remarkable things to say on its corporate website about branding and trademarks:

"The company has always adhered to the marketing philosophy of human-oriented and loyalty-led and been upright and creditable. We are competing for first place in the industry and targeting for gold medal in the market as we are to create it into a Chinese famous trademark and international famous brand." See here.

It even has a webpage dedicated to "brand honor" which shows eight certificates including

- From 2008 the annual message trust the quality of the top ten brands";

- 500 Chinese brands

- Top Ten China Industry Brand Campaign

- Famous brand products in Fujian

Talented IP student at CUHK, Brian Chen, illuminated me about the meaning of the Chinese characters of Adivon (阿迪王 pronounced as "a di wang"): "Chinese consumers use 阿 (a) 迪 (di) short for adidas. The brand is taking advantage of the association with adidas and by adding 王 (wang), which means king, it even implies it is better."

Creative Brand

But only a few shops to the right one will find one of the most creative and esthetical Chinese brands I have ever seen: Mulinsen, a shoe brand, that wants to have a green image (the question is whether this is justified, since the shoe industry is a rather polluting industry with a big water footprint, read here) is of course because of the characters used. Mu 木 means tree; lin 林 means forest and sen 森 means many trees. So all characters amplify each other, sort of alliteration with Chinese characters, and then the logo with four times the character 木 (or two times 林) is a very distinctive mark.

Mulinsen is also:

- Fujian famous brand

- Chinese famous brand

Photos/text Danny Friedmann

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Well Known and Less Known Aspects Of Well-Known Marks

In the USTR 2008 Report to Congress on China's WTO compliance on page 4, one can read the following remarkable sentence:
"...the promotion of famous Chinese brands of merchandise using what appear to be prohibited forms of financial support, ..."

So it appears to be a prohibited form of financial support, but the USTR is not totally sure about it? First China was encouraged to protect well-known marks, and now that they do...? What is happening?

The USTR alleges that China subsidises Chinese "famous brands" by

• including cash grant rewards for exporting;
• preferential loans for exporters;
• research and development funding to develop new products for export;
• and payments to lower the cost of export credit insurance.

Hui Boyang, deputy director of the quality management department of the General Administration of Quality Supervision, Inspection and Quarantine, denies the claim. Read the Xinhua article by editor Sun here. Stan Abrams of China Hearsay has a nice blog 'There Are No Coincidences - trade edition', about the coincidence of the expiration of the textile deal between the U.S. and China and this new allegation.

What are famous brands or well-known marks?

Intellectual Property Rights has two pillars

• Copyrights regulated by the Berne Convention, which come into existence without any formalities at the moment of creation of a work;
• Industrial rights (also called "registered rights"), regulated by the Paris Convention for the Protection of Industrial Property, and which, generally, need to be registered before they are protected.

Well-Known Mark Exception To Second Pillar (the European Community has another exception, the unregistered Community Design right)

However, article 6bis Paris Convention prescribes to its members "to refuse or to cancel the registration, and to prohibit the use, of a trademark which constitutes a reproduction, an imitation, or a translation, liable to create confusion, of a mark considered by the competent authority of the country of registration or use to be well known in that country as being already the mark of a person entitled to the benefits of this Convention and used for identical or similar goods." So this means that marks that are well-known in a country are protected, whether they are registrated or not. Registration of these well-known marks has its advantage, as we will see below.

In December 2008 I mentioned that I would come back to Brad Luo and Shubha Ghosh's paper 'Protection and Enforcement of Well-Known Mark Rights in China: History, Theory and Future' (74 pages PDF) after finishing reading it. As I already expected it is a great paper.

Article 13 Trademark Law 2001 PR of China stipulates:

Where a trademark in respect of which the application for registration is filed for use for identical or similar goods is a reproduction, imitation or translation of another person's trademark not registered in China and likely to cause confusion, it shall be rejected for registration and prohibited from use.

Where a trademark in respect of which the application for registration is filed fdr use for non-identical or dissimilar goods is a reproduction, imitation or translation of the well-known mark of another person that has been registered in China, misleads the pub1ic and is likely to create prejudice to the interests of the well-known mark registrant, it shall be rejected for registration and prohibited from use.

Take note that transliteration is not mentioned as ground for to oppose registration or prohibit use of a mark.

Messrs Luo and Ghosh explain the advantage of registering your mark as a well-known mark in China: "the owner of the mark can exclude others from registering or using the mark, may it be reproduction, copying or translation, in goods of all types, similar or dissimilar, identical or non-identical. If a mark is unregistered and has been deemed as well-known in china, the owner can still avail itself of the accompanying protection by preventing the use or registration in similar or identical categories of goods. Notably, the 2001 CTL gives equal treatment and protection to owners of service marks and trademarks. Furthermore, the owner of a registered mark has the right to oppose the unauthorized registration and use of the mark by its agent or representative, thus enjoying an added protection for the owner where the agency relationship goes sour."

I could add that it is always good to have a mark registered in a country, including China, so that this factor may be taken into account when you want your mark be recognised as a well-known mark in another country. See in the joint recommendation below how this works:

The Standing Committe on the Law of Trademarks, Industrial Designs and Geographical Indications (SCT) has adopted a joint recommendation pages 1-12 (pdf) concerning provisions on the protection of well-known marks (June 7-11, 1999), which on its turn was adopted at a joint session of the Assembly of the Paris Union for the Protection of Industrial Property and the General Assembly of the World Intellectual Property Organization (WIPO) (September 20-29, 1999). The provisions on the protection of well-known marks do apply to conflicting marks, business identifiers and domain names, but not to geographical indicatitions nor appellations of origin.The International Bureau of the World Intellectual Property Organisation (WIPO) made some explanatory notes pages 13-20 (pdf) about the joint recommendation. the SCT has agreed that the notes will not be submitted for adoption by the Assembly of the Paris Union and the WIPO General Assembly. In cases of conflicts between the provisions and the notes, the provisions would prevail (paragraph 17 document SCT/2/5).

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