Thursday, December 6, 2007

“China Trademark Update: Has Your Distributor (Representative, Manufacturer) in China Registered your Mark?”

Mr. Paul Jones, an international lawyer based in Toronto, recently wrote a piece on Chinese Trademark Law. Basing his analysis on a trademark registration/opposition case that went all the way to the Supreme Court of China, he posits that foreign companies that “are doing, or planning on doing, business in China, the best solution is to register lots of your early on.” Because I am in my final exams, I have obtained permission from Paul to post his writing in its entirety, without my personal comments.

Unfortunately many foreign companies do not register their trademarks in China promptly. Sometimes they do not register them even after they have commenced selling goods in China through a sales representative. More than one sales representative or distributor has noticed this and registered the mark for themselves. China is a “first-to-file” jurisdiction.

Article 15 of China’s Trademark Law (中华人民共和国商标法) provides that:“第十五条 未经授权,代理人或者代表人以自己的名义将被代理人或者被代表 的商标进行注册,被代理人或者被代表人提出异议的,不予注册并禁止使用.”

“Article 15 Where any agent or representative registers, in its or his own name, the trademark of a person for whom it or he acts as the agent or representative without authorization therefrom, and the latter raises opposition, the trademark shall be rejected for registration and prohibited from use.”

The Chinese terms 代理人 (dai li ren - agent) or 代表人 (dai biao ren -representative) have been interpreted narrowly to mean someone who has an obligation to a principal. In the case of重庆正通药业有限公司 诉国家工商行政管理总局商标评审委员会 和四川华蜀动物药业有限公司 ( Chongqing Zhengtong Pharmaceuticals Ltd. v. State Administration for Industry & Commerce Trademark Review Board and Sichuan Animal Pharmaceutical Ltd) 最高人民法院, (2007)行提字第2号, 二○○七年八月三十一日, Sichuan Animal had entered into a sales agreement with Zhengtong Pharmaceutical with respect to certain veterinary medicines. Shortly afterward it applied to register the trademark under which the goods would be sold. Two years later the agreement was terminated but Sichuan Animal continued using the mark that it had registered, presumably by obtaining its products from another source.

Zhengtong Pharmaceuticals brought an administrative action under Article 15 to have the registration of Sichuan Animal expunged. They won in the Trademarks Review Board, and in the Beijing No. 1 Intermediate People’s Court based on what was considered to be a principal-agent relationship between Zhengtong Pharmaceutical as principal and Sichuan Animal as agent.

But in the Beijing Higher People’s Court Sichuan Animal argued that there was no principal-agent relationship, rather simply a co-operative sales agreement. Therefore the exemption to the “first-to-file” rule in Article 15 did not apply. Finally Sichuan Animal won at this level.

Normally there is no appeal from the decision of a Higher People’s Court, but in this case Zhengtong Pharmaceutical managed to obtain leave to appeal to the Supreme People’s Court (“SPC”). Unlike the supreme courts in common law systems, China’s Supreme Court rarely hears cases and primarily influences the development of the law and the legal system through written interpretations. However the SPC wanted to make a statement here.

In a decision dated August 31, 2007, and released in mid-September, the SPC looked at the record of the legislative intent and the provisions of the relevant international treaties to determine the meaning. It read the wording of Article 15 as representing China’s obligations under Article 6 septies of the Paris Convention. Although this Section uses the words “agent or representative” the international practice is to interpret these words broadly to include distributors and sales agents and similar people. The SPC took note of this international practice and also took into account the growing phenomenon in China of the practice of distributors and others registering the marks of foreign companies. Finally the manufacturer, Zhengtong Pharmaceutical, prevailed.

Link to the decision in Chinese:

It should be noted however that the SPC required the relationship to be one of “special sales agent” or exclusive distributor. And there is no mention of original equipment manufacturers, who have also been known to register the trademarks associated with the company for whom they are manufacturing the export goods.

If you are doing, or planning on doing, business in China, the best solution is to register lots of your early on. In November I was part of a panel in a seminar put on by the U.S. Department of Commerce on developing a brand protection strategy in China. The case study that the Department of Commerce prepared for our discussion involved just this scenario. In was helpful to point out this recent decision by the Supreme People’s Court.

1 comment:

Todd Platek said...

Exellent post. I emphasize to clients to register trademarks well in advance of setting up shop in China, and although they listen and we do the necessary, they still are perplexed whether this isn't overkill. "We haven't even started business in China, and already we're registering i.p.?" Well, yes, that's the way to do it unless you want your mark registered by someone else after they realize you have a business worth doing, and then you either pay legalized extortion or pay lawyers to litigate your alleged rights.