cwang@iprights.com
Although The Interpretation of the Supreme People’s Court on Some Issues Concerning the Application of Law in the Trial of Civil Cases Involving Unfair Competition effective from February 1 2007 defined in detail terms such as “well known commodity”, “special name, packaging or decoration”, and “unique”, look-alike cases are still the most difficult IP cases on which Chinese judges must rule.
Some judges have responded by avoiding a ruling or refusing to issue a judgement. For example, where a plaintiff/rights owner has sued for use of similar trademark and packaging, standard practice is to file an infringing trademark claim as well as an unfair competition claim. When presented with this type of double claim, the court typically has ruled only on the trademark infringement aspect.
When the same case is brought through administrative enforcement channels, officials have been uncomfortable ruling on the consumer confusion aspects and forced a strict interpretation on similarity to registered rights, ignoring similarity.
Judges and officials are reluctant to take a position that may be vulnerable to overturning because the case has been brought on the basis of unregistered rights rather than registered rights.
Build unregistered rights
Packaging rights can be recognized and protected through a single court case, or even via an administrative enforcement (whereas trademark or design patent rights need to go through an application process during which they are reviewed and approved by specialized national government administrations). In some cases, an unregistered packaging right is so strong that it can triumph against a registered design patent right without time-consuming administrative invalidation procedures.
Since this method for obtaining unregistered rights might lead to chaos if overused, there should be clear, standardized and reasonable criteria set out for the court to grant such rights.
Article 4 of a regulation issued by the State Administration for Industry and Commerce in 1995 (Certain Regulations on Prohibiting Unfair Competition Activity Concerning Imitating Specific Names, Packaging or Decoration of Well-known Commodities) specified: “In case the name, packaging or decoration of a commodity is used by others in the same or a similar way without authorization, and is enough to cause misidentification of the buyers, this commodity can be recognized as a well-known commodity.” When seen in this context, rights owners often found it easier to enforce their packaging rights via administrative enforcement. Today, that regulation appears absurd because it set very low criteria for an unregistered right. The 2007 Interpretation has made significant progress by setting clear, standardized and reasonable criteria for “well known”, “unique” and “prior use”.
In light of such criteria, the rights owner should ensure that all possible rights in their IP rights database are registered, and ensure that they understand and are aware of all possible unregistered rights, especially those in regards to packaging. This awareness is critical because unregistered rights necessitate cooperation between legal and other departments in order to establish repeated and systematic use.
Establish confusion
Assuming the rights owner has met the requirements for their unregistered packaging right, the next step in arguing unfair competition will be to establish “confusion”. Moreover, sophisticated infringers – those with a modicum of IP awareness – have chosen to use very different trademarks combined with non-registered but distinctive elements of trade dress. Infringers can then argue that no confusion exists, as consumers recognize that the brand is sufficiently different from that of the rights owner.
When this happens, judges and officials both find the defendant’s argument difficult to refute, despite the fact that the infringing packaging obviously copied the rights owner’s packaging.
In the courts, judges tend to compare the packaging in question, and take visual similarity into account without considering other factors such as the type of product, distribution channels, and the relevant consumer segment.
However, “confusion” should not be only visual similarity. Consumers were not confused by the visual similarity of Honda’s logo to Hyundai’s, since on automobiles, the public does considerable analysis before purchase. For fast-moving consumer goods where consumers might choose quickly without a thorough examination, two similar trademarks are likely to cause confusion.
Until now, there have been a few well-reasoned judgements in China in terms of determining the “confusion” in relation to trademark, but very few cases regarding look-alikes. This lack of good precedents has emboldened infringers to copy unregistered elements of packaging. In the absence of clear direction from a new interpretation, rights owners are best served by introducing, without definitive or prior acceptance by the courts, comprehensive and sophisticated techniques to prove confusion, and establishing their own standards within each jurisdiction.