Dreyfus

The Asian giant – hitherto invisible – has become one of the countries where most patent and trademark applications are filed. It is not surprising that companies from all over the world want to have a presence in China. However, several factors must be taken into account when setting up these companies’ such as the features that must be contained in their corporate names.

One of the first steps for foreign companies is to decide on a suitable name for the Chinese market. The main pieces of legislation governing this issue are the Regulations on Registration and Management of Enterprises Name and the Implementation Measures on Registration and Administration of Enterprise Names, which detail how the name of Chinese companies should be structured and what information should be included.

In China, company names must be composed, according to these regulations in a specific format, and must be composed of i) Administrative Division, ii) Trade name, iii) Industry and iv) Organizational form, except as otherwise provided by law

Other regulations restrict the content of names, prohibiting the use of content that could mislead consumers or jeopardize free competition, or injure or contradict national unity, politics, social ethics, culture, or religion. Special characters, such as Arabic numerals, foreign symbols or alphabets, are not allowed, and certain words such as “China,” “Chinese,” “national,” “State,” or “international” may only be used on rare occasions.

In certain circumstances, a company could use an enterprise name without including the administrative division. This may be by the approval by the State Council, or when the share capital value is at least CNY 50 million. Such authorization can be granted by the State Administration for Market Regulation.

It seems clear that the strongest feature in choosing a company name in China is the trade name. Similar company names can co-exist, unless exactly the same trademark has previously been registered, in which case a trade name challenge could be attempted by the trademark’s proprietor.

The JINGKE Case illustrates the conflicts that may arise between trade names and trademarks.

On November 29th, 2010, Shanghai Precision & Scientific Instrument Co., Ltd. (PI) sued Shanghai Jingxue Scientific Instrument Co., Ltd. (Jingxue) and Chengdu Kexi Complete Sets of Instruments Co., Ltd. (Kexi) in Shanghai Pudong New Area People’s Court.

Shanghai Precision & Scientific Instrument Co., Ltd. complained that the defendant maliciously registered and used plaintiff’s business name in the abbreviated form of “精科” (JINGKE in Chinese).

They said that because it is well known in the industry, as a trademark; its use by the defendants constituted acts of unfair competition causing serious prejudice to the plaintiff’s legitimate interests.

They therefore asked for injunctive and compensatory relief against the two defendants.

The defendants contended that Kexi is the owner of the registered trademark JINGKE, and that its use of the trademark is protected under the law. They also counterclaimed against plaintiff for trademark infringement in using SHANGHAI JINGKE in connection with its products and packaging.

The court found that before the mark JINGKE was applied for registration, “Shanghai Jingke” and “Jingke” had been used as abbreviated business names, attaining a degree of notoriety and becoming in effect plaintiff’s trade names, and therefore deserving protection as such.

Accordingly, the Court held:

Firstly, that the defendant Kexi,by securing the trademark registration of, and by using plaintiff’s abbreviated trade name JINGKE (already in use), and secondly, that the defendant Jingxue by using the JINGKE mark on its products via third parties by permission of defendant Kexi, both infringed plaintiff’s rights to its corporate business name, and were thus guilty of unfair competition.

The court then granted an injunction against the defendants for unfair competition, and awarded damages.

Both defendants appealed to Shanghai No.1 Intermediate People’s Court. The Court of Appeal held that abbreviated business names can be considered to be corporate names if they have gained some notoriety in the marketplace, become well-known to the relevant sectors of the public, and have in fact been used as trade names.

When others later use such well-known abbreviated business names without permission in such a way as to be likely to cause confusion in the market among relevant sections of the public Art.5, Cl. 3 of the Unfair Competition Law governing the legal protection of the corporate names shall apply. For this reason, the appeal was rejected and the judgment of the court below was confirmed.

A more recent case, which also dealt with such conflicts, arose between Chengdu Huamei and Shanghai Huamei. In 2017, Chengdu Huamei sued Shanghai Huamei, on the grounds that: (1) Shanghai Huamei had been using the trade name ‘Huamei’ without Chengdu Huamei’s authorisation, thus committing acts of unfair competition; and (2) Shanghai Huamei had infringed Chengdu Huamei’s exclusive trade mark rights by frequently and prominently using phrases such as ‘Huamei’, ‘Shanghai Huamei’, ‘Huamei Dental’ and ‘Huamei Plastics’ in their business premises. In this case, however, he decision of first instance, subsequently upheld on appeal was that:

“Merely having an identical trade name would not lead to the conclusion that Shanghai Huamei committed unfair competition or acted as a free rider. Secondly, most of the uses of ‘Huamei’ or ‘Shanghai Huamei’ for publicity purposes fell within the scope of fair use of Shanghai Huamei’s own trade name. However, when it came to the use of the signs containing ‘Huamei Dental’ ‘Huamei Plastics’ and ‘Shanghai Huamei’ that were similar to the trade marks at issue, the court found that it could easily cause confusion among members of the public and thus amounted to trade mark infringement”

Dreyfus can assist you in the management of your trademarks portfolios in all countries of the world. Do not hesitate to contact us.