Yellow Cranes, Will You Return? (Republish)

 

The Yellow Crane Tower

Forefathers departed on yellow cranes,

leaving this spectacular tower empty.

Yellow cranes will not return,

leaving the white clouds for millennia without companion.

–by Cui Hao (704-754 A.D.), Tang Dynasty

This poem has remained one of my favorites, throughout my education in China. In college in the city of Wuhan, I passed by the truly spectacular Yellow Crane Tower hundreds of times while commuting to and fro Hankou, marveling at its beauty and historical significance. It looks beautiful when you observe it on the First Bridge over theYangtze River (Chang Jiang, for Chinese readers), as it sits on the Snake Hill, stretching into the clouds over the ever grand Wuhan stretch of the Yangtze. Before I get carried away with nostalgia and poetry, I’d better move on to Chinese business law.Luckily, I get to return to the “Yellow CraneTower” for this post on cybersquatting law inChina.

As reported,Yellow Crane Tower Tobacco Company (“TCTTC”) is one of the most famed tobacco companies in Wuhan and throughoutHubei Province. And when it sought to register the www.YellowCraneTowerTobacco.cndomain name in Chinese (Huanghelou) in June 2005, it found, to its dismay, that domain name had been registered by a certain Mr. Deng, a restaurant owner in Jiangxi Province.TCTTC further found that Mr. Deng also had registered a slew of domain names using the core words “Yellow Crane Towner,” such aswww.YellowCraneTowerCigrette.cn,www.YellowCraneTowerTrade.cn, etc.

Naturally, TCTTC took Mr. Deng to court, in the Wuhan Intermediate People’s Court.

TCTTC sued Deng for trademark infringement in the form of cybersquatting. Since the central issue here is whether Deng’s registration of the domain names using the TCTTC’s registeredword mark constitutes trademark infringement, the 2001 Several Explanations on Domain Name Civil Disputes (“Domain Name Explanations”) issued by the China Supreme People’s Court apply in this instance. The Domain Name Explanations expressly provide that a mark owner can ask a court of competent jurisdiction to determine whether its mark is famous, and the court may order the cancellation of the infringing domain name if it finds unfair competition, and monetary damages are also available to the victorious plaintiff. Upon request, the Court may also order the transfer of such infringing domain name to the plaintiff. See Arts. 4-8.

To prevail, TCTTC must prove that its marks were infringed and they were famous prior to Defendant’s use. The Court found TCTTC’s marks well known, the “Yellow Crane Tower” word mark and the “Yellow Crane Tower” design mark, both of which were used by Defendant in his website. In finding these marks well-known, the Court looked to the scope and expenses of advertisement for the marks, and it cited the reputation of products bearing the marks.

Upon finding the marks in question well-known, which is the prerequisite to prevail in a domain name cancellation dispute, the Court also found infringement in Defendant’s unauthorized use of the marks in question. It reasoned that both domain names and trademarks have the quality to help consumers relate to the source of goods and services.Given that shared quality of trademarks and domain names, Defendant’s use of TCTTC’s word mark could confuse consumers, despite the unrelated nature of the parties’ trades, one in restaurant while the other in tobacco.Further, the Court disagreed with Defendant’s argument that he did not have the intent to ride on TCTTC’s trademarks to gain economic advantages, because, as the Court stated it is obvious that Defendant’s use of a well-known mark as the core for his domain names was to obtain more economic opportunities, and such use was marked with commercial intentions.

This is easy win for TCTTC here. Of course, Plaintiff had an obvious home court advantage. The “Yellow Crane Tower” brand is very well-known in Wuhan, because it is a local trademark. Even though I am not a smoker, I knew that brand while I lived inWuhan. There was advertisement everywhere in the city. Though the Court may be suspected of local protectionism, I still think it just applied the black letter law. I do not see the Court straining to protect a local player while “screwing” an outsider. Another thing noteworthy here is that Plaintiff can get either the infringing domain names canceled or transferred. I would want a transfer.

So, with a win for the local player, the “Yellow Cranes” should be able to return toWuhan upon a transfer. And that should make TCTTC happy.

But, will the “real” yellow cranes return after millennia of absence? Poets wait on…

“Wahaha” Ain’t French, and It Belongs to China. (Republish)

Major news came out of the Danone v. Wahaha lawsuit saga, and it is again bad for Danone.

On July 30, 2008, the Hangzhou Intermediate People’s Court ruled that the “Wahaha” trademark belongs to the Wahaha Co. , not the joint venture between Danone and Wahaha, of which Danone is the majority shareholder.

Because this ruling affirms that of the Hangzhou Arbitration Commission  of December 2007 regarding this matter, the decision is not appealable, according to this report (in Chinese).

I will restate the facts briefly.  In 1996, the two parties signed a trademark agreement, transferring the “Wahaha” trademark from the Wahaha Co. to the then newly formed joint venture.  However, the Trademark Office of China disapproved this transfer.  So in the eyes of Chinese law, the transfer was never consummated, and there was no deal to speak of in terms of an IP transfer.

In 1999, the parties got creative about the trademark “transfer.”  Instead of calling it a “transfer,” they signed another agreement, titling it “Trademark Use Agreement.”  And of course, this deal was done under the table, irrespective of Chinese law.  Things went along smoothly and well for seven years, until 2006 when Danone found that it was not getting all the money that it should, and that its Chinese partner was competing against the JV.  To end all the “trickery,” Danone decided to buy out the Chinese partner, Zong Qinghou, but only to be rejected.

Hence, the lawsuits, all over the world, and all over China.

Now, the final gavel has fallen against Danone, to nobody but Danone’s surprise.  In China, the 1996 trademark transfer has been referred to the “Yang” contract, while the 1999 trademark “use” agreement the “Yin” contract.  It is pretty obvious what happened there.  Danone could not resist walking away from a guy as powerful and resourceful as Zong Qinghou, and certainly could not step away from the unbelievable profits to be made from the JV.  The “Wahaha” trademark would just be another pretty flower on the beautiful wreath that came into the JV.  However, it did not think about the consequences of doing things not in accordance with Chinese law even though it knew that the transfer was illegal in 1996.  If it is illegal done on the table, it is probably still so if done under the table.  I guess Danone pretended that there would be no problem, or even if there were a problem, its Chinese partner would take care of it.

Now, that mistake has come back to haunt Danone, for a long time.

The biggest “takeaway” from this is to follow the law no matter what your Chinese partner says, and regardless of the amount at stake.

Check out my previous posts for background information if you care about this stuff:

Wahaha v. Danone: Who Will Have the Last Laugh?

Wahaha v. Danone: Partnership at Grace’s End

Wahaha & Danone Dispute: “The Good, The Bad, and The Ugly”

Microsoft Falls One Step Behind in Protecting “Windows”

China Trademark Office (CTMO) dealt another blow to American software giant Microsoft in January 2008. Reportedly (here and here), it rejected Microsoft’s opposition of the registration of a trademark “Windows”by a Ningbo eye glass company. The company successfully registered “视窗” (“Shi Chuang”, which means windows of vision) in 2001, and it later tried to register “Windows” in 2003 for glasses (Class Nine). After a search at the CTMO’s database for opposition/cancellation decisions, I was not able to find the written decision regarding "Windows," and I will have to base my post on news reports. (note, I will continue to search in the next few weeks for the decision.)

Based on the report, as soon as the owner of the Ningbo Eye Glass company filed its application for the “Windows” trademark, it received a demand letter from Microsoft. As those letters typically go, it expressed its opposition of the registration of “Windows” in China, because Microsoft used it first. Sounds great, right?

Well, not necessarily for the CTMO, apparently. Prior use in the United States may establish common law trademark rights (which is not something that a major IP owner should hang its hat on), but in China prior use does not establish any trademark rights unless the mark has been registered, or unless the mark has been deemed legally famous for particular classes of goods and services.

Without further facts or the CTMO written decision, I can only assume what went wrong on the part of Microsoft. Two possible scenarios exist here that might have led to Microsoft’s misstep in protecting “Windows” in China. First, Microsoft simply forgot to register “Windows” in China, which is unlikely given its level of legal sophistication. Second, it registered “Windows” in China but did not cover Class Nine, limiting its rights to the classes of goods or services registered for.

All is not lost though. Assuming that Microsoft registered “Windows” for certain classes of goods (say, software), it could ask either the CTMO or a People’s court to give “Windows” the famous mark status, thereby availing itself of broader protection. It is unlikely that Microsoft’s counsel has not tried that at the CTMO, but it can still try at an intermediate court in Zhejiang province where Ningbo is located. The court might find “Windows” legally famous for software (and whatever Microsoft registered it for in China), and might rule that the registration or use of “Windows” by another applicant for eye glasses is likely to dilute “Windows”, the famous mark for software.

(Too many facts are not available at this moment; so much of this post is based my assumptions and speculations. Once I get my hands on more details, I will write an update.)

A Delicious Case of Moon Cakes for Hong Kong

For many westerners, moon cakes, a traditional Chinese dessert consumed during the Mid-Autumn Festival, are much like fruitcakes (if you get my drift).

For the Chinese, moon cakes, however, are an integral part of the wonderful traditions surrounding the Mid-Autumn Festival.

And for a Hong Kong moon cake maker, Wing Wah Moon Cake Co. (“WWMC” Co.), a recent victorious lawsuit in the Dong Guan Intermediate Court brought an extra measure of sweetness.

WWMC Co. has had many problematic encounters with infringers in the mainland over its trademark. It began selling its delicious moon cakes in the mainland in 1987, and established a factory in Dong Guan, Guangdong Province subsequently. Infringing moon cakes bearing WWMC Co.’s trademarks soon followed its presence in China. Unfortunately, WWMC Co. did not register its signature moon cake trademark, which significantly limited its options in term of protecting its trademark rights.

After waiting for more than a decade (and probably swallowing the dire consequences of not registering its trademark prior to entering China), WWMC Co. finally slammed its infringers with a lawsuit in Dong Guan, claiming trademark infringement and unfair competition. Notwithstanding the unregistered status of its trademark, WWMC Co. wisely predicated its request for trademark protection on the provisions regarding famous trademarks provided in the Chinese Trademark Law. Defendants in the case included many large retail supermarkets and small companies.

The Court agreed with WWMC Co. It found confusion between the infringing moon cakes and those of the plaintiff because the packaging and appearance of the alleged infringing cakes were the same as or similar to the plaintiff’s. Given the similarities, consumers, as the Court reasoned, could be easily confused as to the source of the moon cakes. (I would have liked a copy of the opinion to see how exactly the court reached this conclusion since most moon cakes do look pretty much the same to me. I guess the Court mostly focused on the packaging.)

With respect to trademark protection, the Court stated that registration of a trademark is not a necessary condition to protection in China under the Trademark Law. A trademark could gain the “famous trademark” status in a given market if its owner has conducted continuous, extended advertising and marketing, and if its owner has established brand recognition among consumers in a given market. Since WWMC Co. has met the above requirements, the Court held that its trademark is legally “famous”, thus deserving protection in spite of the fact that it is not registered.

Of course another important factor is that the infringement occurred in the same category of products—moon cakes. Had the usage of the trademark in question been in a totally unrelated industry, the result would be very different. Got to remember that protection for unregistered famous trademark is only limited to instances where illegal use occurred in the same or similar products/goods.

This case is significant for a few reasons. First, many trademark owners have an alternative way to protect their intellectual property rights if somehow their trademark is not registered in China, and I do see an increasing number of cases where plaintiffs take the “famous trademark” route for relief. In fact, that is what inspired WWMC Co. to sue in this case.

Second, the strategic choice of venue in Dong Guan Intermediate Court was a shrewd move. WWMC Co. has a factory in Dong Guan, and presumptively this factory generates good tax revenue for the city, and making this venue a friendly place, even though WWMC Co. is an outsider. Of course, the Court seemed competent in arriving at the right decision.

Third, I kept wondering whether a Hong Kong plaintiff has a distinctive advantage over its western counterparts in “famous trademark” cases. In Southern China, especially in Guangdong, certain famous marks in Hong Kong will probably gain consumer recognition easily due to the affinity in culture and language. However, western famous trademarks might not because of the huge cultural and language barriers. To overcome the barrier, western companies will have a higher bar to meet in terms of the requisite advertising, establishing consumer recognition with their brands. Therefore, I think that Hong Kong trademark owners have an edge over their western counterparts in famous mark lawsuits. (as a side note, this is purely based on my instinct and limited understanding of doing business in Southern China.)

So, your comments are welcome.

Pfizer: Testing the Potency of Chinese IP Law & a Beijing Court

Pfizer, the giant American pharmaceutical company, had its day in the Beijing 1st Intermediate People’s Court twice this year for different causes and with different results. Its experience with the Chinese legal system, to my mind, is a testament to the fact that China does have effective intellectual property laws (trademark law, at least) and competent judges, despite the many doubts and criticism out there on same.

First, let’s look at how Pfizer lost miserably in China in trying to protect its “Viagra” trademark back in February, 2007. The basic facts (in Chinese only) of the case are that a Chinese company named Weierman registered the trademark “Wei Ge” (伟哥) (meaning “Great Man”) in June 1998, and licensed to a third party to manufacture medicine using the said trademark. This manufacturer in turn sold its products to another pharmacy chain. These three companies were joined as co-defendants by Pfizer.

In its lawsuit, Pfizer alleged that Weierman acted in malice when it registered the “Wei Ge” trademark which had become a “famous” mark in China even though Pfizer had not registered it. To prove that the “Wei Ge” mark was a famous one belonging to Pfizer, it offered evidence of widespread media reporting about the function of the wonderful blue pill, commonly known as “Viagra” in the west, but translated into Chinese as “Wei Ge.” It further alleged that Weierman’s use of the “Wei Ge” trademark constituted both trademark infringement and unfair competition. At the same time, Pfizer petitioned the Court to declare its unregistered trademark “Wei Ge” legally famous (sounds just like the Ferrari case). For the sake of brevity, I will omit other details that Pfizer alleged and pleaded for in the lawsuit.

The Court slammed Pfizer. It ruled that evidence of media reporting did not in and of itself prove that “Wei Ge” is a famous trademark. The Court further found that Pfizer, in fact, never officially used the “Wei Ge” trademark (implying “how can you ask us to declare a trademark famous when you haven’t in fact even used it yourself?”). Of course, Pfizer could have argued for protection under the Paris Convention Art. 6bis, but the problem is that “Wei Ge” was practically unknown in the United States and other Western countries. In the West, the blue pill was known as “Viagra.” If “Wei Ge” is not even known in the U. S., Pfizer could not logically claim that “Wei Ge” is thus deserving of protection in China as an unregistered famous trademark. Therefore, “Wei Ge” as a trademark, neither first registered by Pfizer nor famous either in China or the U.S., does not belong to Pfizer. The Court definitely did a great job picking apart Pfizer’s arguments.

Despite the loss in February, Pfizer, in September, returned to the same Beijing 1st Intermediate Court for another infringement lawsuit (in Chinese only) against a Beijing copycat over the very trademark of “Pfizer” in Chinese—“辉瑞.” Same court, same plaintiff, same causes of action, but this time Pfizer came out on top.

Pfizer Products Co., based on undisputed facts, registered multiple trademarks in China beginning in 1995. Its registered trademarks include “Pfizer”, its Chinese translation “辉瑞”, “辉瑞 Products”, “辉瑞 Hui Rui”, and other related symbols and graphics. In 2004, a Beijing company registered its corporate name as “辉瑞” (this is beginning to sound more and more like Starbucks v. Shanghai Copycat). According to notarized court documents, this company later named itself the Beijing 辉瑞 (Hui Rui) Company, and on its company website, it put the Chinese characters “辉瑞” in a very prominent place. And on its website, the defendant claimed that it was an authorized agent of an American bio-medical corporation, that it possessed advanced research capability and skillful management talents, and that it was devoted to the application and promotion of bio-medical products. These claims obviously insinuated that the defendant had some kind of connection or relationship with Pfizer. The records also revealed that the defendant sold detoxification medicine, causing confusion among consumers because they found out that the products they bought were not effective as claimed by the defendant.

The Court held the defendant liable for trademark infringement and unfair competition. It stated that even though the defendant did not sell medicine under the trademark of “辉瑞”, its prominent use of “辉瑞” in its advertising in fact functioned as an identifying element, linking its products to the source. Therefore, the defendant’s use of “辉瑞” on its website and advertising was in fact trademark usage. Since the use was unauthorized, it constituted trademark infringement. In addition, the defendant’s purposeful registration of its corporate name, using someone else’s trademark “辉瑞”, constituted unfair competition because it was likely to cause consumer confusion and monetary damage to Pfizer.

Examined together, these two Pfizer cases show a great deal about the Chinese law and courts. First of all, its current trademark law and unfair competition law, in combination with the General Principles of Civil Laws, are sufficient in dealing with many complex commercial disputes involving foreign parties. As shown, Pfizer has tried to utilize the Chinese legal system to its advantage repeatedly with varying results. It did not win all the time, not because the law was inadequate or the judges were incompetent, but because of its own mistakes. Secondly, a careful read of both cases clearly demonstrate the judges’ ability to analyze the facts, to apply the law, and to reach well-reasoned and fair decisions. Of course, I have to admit a caveat that Pfizer’s cases were all decided by the same Beijing 1st Intermediate People’s Court, well known for its judicial prowess in adjudicating IP cases. (And not all venues in China are like this court.) Moreover, China’ record on IP protection and the fulfillment of international treaties is by no means perfect. Please read this for an in-depth analysis of China’s WTO-IP compliance.

While China still has a long way to go to forge a better legal system (although what constitutes “good” may still be controversial), it is in effect making progress, albeit slowly in a piecemeal and ad hoc fashion. When dealing with an ancient civilization partially cloaked in and still striving for modernity, it is easy to forget that China started to build its modern commercial law only about thirty years ago. So, attacking China in the abstract with allegations that it “does not have a body of civil law” might not only show ignorance and a lack of patience, but also piss some people off.

Anheuser-Busch: How Good Does a Slam Dunk in Chinese Court Feel?

Anheuser-Busch, the world’s largest brewer, recently won a trademark infringement lawsuit against a Chinese infringer, obtaining substantial damages and an injunction.

The opinion of this case has not been reported in China, or at least I have not been able to find it on the Internet after substantial searching efforts. So, the facts of the case are based on a news report in Chinese (if any part of the facts is inaccurate, please kindly inform me by leaving a comment.).

The lawsuit involved Anheuser-Busch’s registered trademark, Budweiser, which in Chinese is “百威.” And in pinyin, it is pronounced “Baiwei.” In addition to the character, Anheuser-Busch also registered two other related marks in symbols. One of them is the “Wheat + Sash” graphic; and another is a combination of the graphic and the Chinese characters “百威.”

Around April of 2006, Anheuser-Busch began to see an infringing type of beer brewed by a Chinese company named Putian Golden Key Company (“PGKC”). What Anheuser-Busch found was a product titled “New Generation Beer,” bearing the very “Wheat + Sash” graphic. What is more, PGKC packaged its beer with boxes with large font Chinese characters—“American Budweiser International Beer Group, Ltd.” (“美國百威啤酒國際集團有限公司”). This type of beer was being sold in Shanghai, Jiangsu Province, and Jiangxi Province. Anheuser-Busch was not alone in discovering these copycat activities; in fact local branches of the Bureau of Industrial and Commerce fined four companies that distributed the beer made by PGKC.

Then, Anheuser-Busch went after PGKC and the afore-mentioned four distributing companies, suing PGKC for trademark infringement in the Shanghai First Intermediate People’s Court. Anheuser-Busch also sought an injunction against PGKC for manufacturing the infringing product in addition to damages in the amount of 500,000 Yuan. Further, it asked the Court to prohibit the four distributing companies from selling the “infringing beer.”

The plaintiff’s victory did not come as a surprise for a number of reasons. First, Anheuser-Busch registered its flagship trademark “Budweiser” in China in Chinese properly in 1998, and it even registered marks related to the “Budweiser” mark. Second, Anheuser-Busch signed a trademark use agreement with Wuhan Budweiser Co., making the latter the only party in China with permission to use its registered trademarks (I assume that the trademark license agreement was appropriately recorded with relevant government agencies). Third, the plaintiff had a very strong case from the beginning given the ample evidence of infringement, such as the similarity between the infringer’s “trademark” and that of Anheuser-Busch. And quite significantly, PGKC did not appear in Court even upon proper service of process by the Court (in China, courts have the authority to serve defendants), thus basically handing Anheuser-Busch a default judgment.

Besides the relative ease of the plaintiff’s ability to obtain the win, another element of this legal dispute seems significant to me. The Court took special notice of the misleading packaging used by PGKC, which, in the Court’s view, evidenced infringement with obvious malice. As a result, the Court imposed a civil penalty on PGKC.

Civil penalties are not commonly handed down in most civil cases. Normally, in a trademark infringement case, Article 59 of the Trademark Law of China controls in terms of damages and penalties:

Where any party uses, without the authorization from the trademark registrant, a trademark identical with a registered trademark, and the case is so serious as to constitute a crime, he shall be prosecuted, according to law, for his criminal liabilities in addition to his compensation for the damages suffered by the infringed party.

As one may notice, nothing in the language of the statute mentions civil penalties in a trademark infringement case. However, the absence of a court’s power to impose civil penalties in the Trademark Law does not mean that a court does not ever have the authority to do so. Because a trademark infringement action is a civil action, the General Principles of Civil Law of China (1986) (also referred to as the “Civil Code”) is also operative in the adjudication of such a case. Pursuant to Article 134 of the Civil Code, a people’s court has the discretion to “impose fines or detentions as stipulated by law” while at the same time awarding civil damages and granting injunctions. Thus, the imposition of civil fines and penalties, although unspecified in the Trademark Law, is strictly within a court’s discretional power as granted by the Civil Code.

Naturally, the Court’s decision to fine PGKC 10,000 Yuan begs the question—why did the court go out of its way to exercise the discretional power? In my opinion, it just demonstrates the overall judicial trend, especially in economically more developed areas of China, to step up intellectual rights protection. And civil fines may operate as another deterrent to infringement.

Anti-Cybersquatting in China: A Judicial Overview

For trademark owners, it is important to know that China does not have a comprehensive law (by the National People’s Congress) or regulation (by the State Council) regarding cybersquatting. Rather, the China Internet Network Information Center (“CNNIC”) and the Ministry of Information Industry (“MII”) both issued rules and measures on the topic of domain name. Among these rules and measures, the most prominent is the Regulations of Internet Domain Name Administration in China (“Domain Name Regulations”) by the MII. In accordance with the Domain Name Regulations, the CNNIC compiled the Detailed Rules of Registration for Domain Names, the Domain Name Dispute Resolution Policy, and the Procedure Rules for CNNIC Domain Name Dispute Resolution Policy.

For a detailed account of the above-mentioned rules and measures, please refer to Professor Mo Zhang’s article on SSRN. The content of this post is attributable to his excellent research and scholarship.

Besides detailing the regulatory framework of domain name registration and dispute resolution thereof, Professor highlighted the judicial standards as set by the Supreme People’s Court of China.

Litigants, seeking to protect their trademark rights in China against cybersquatters, should pay special attention to the Supreme People’s Court’s Explanations to Several Questions on Application of Law in Civil Actions Concerning Internet Domain Names (“Explanations”). The Explanations serves as judicial guidance to all levels of people’s courts in China adjudicating domain-name related disputes.

Jurisdiction

Only intermediate level courts have jurisdiction to domain name disputes, and suits should be brought in courts where the defendant is domiciled. Where the defendant’s domicile cannot be ascertained, the court where the infringing equipment (computer terminal) is located shall have the proper jurisdiction.

Causes of Action

According to Professor Zhang’s article, two most common causes of action for trademark rights are under the Chinese law are trademark infringement and unfair competition.

Legal Test for Infringement or Unfair Competition

Based on the Explanations, if the legal test requirements are met, the plaintiff can plead in the alternative for Trademark Infringement and Unfair Competition.

The determining factors in the legal test are:
1. the plaintiff must have valid and legitimate rights to the interests for which the legal action is being initiated. (in other words, if you are want to protect your trademark rights, make sure your trademark is registered under your name in China, unless your mark is deemed legally famous elsewhere.)

2. the defendant’s domain name must “be found to be either a copy, imitation, translation, or transliteration of the plaintiff’s well-known trademark”, or it must be same or similar to the plaintiff’s “registered trademark” so as to cause confusion to the consuming public. (this is the confusion prong of the test)

3. the defendant does not have a legitimate right or interest to the registered domain name, nor does it have “reasonable grounds for its registration or use of the domain name. (this factor balances the right of the plaintiff against that of the defendant)

4. the court must determine whether there was bad faith on the part of the defendant in its registration of the domain name. (black mailing the plaintiff using the domain name, offering to sell the domain name, registering the domain name using other’s famous marks for commercial purposes are all evidence for bad faith.)

5. in case involving famous trademarks, the likelihood of confusion prong of the test is eliminated because famous trademarks deserve special protection. (this further demonstrates China’s fulfillment to its TRIPS commitment over IP protection)

6. in terms of remedies, people’s courts can only grant damages of cancellation of the infringing domain name, which means transfer of the infringing domain name is not a remedy. (obviously, a trademark owner needs to register the domain name ASAP.)

Granted, a combination of agency level rules and judicial opinions do make the scene of anti-cybersquatting law in China complicated. However, the growing popularity of e-commerce in China makes it imperative for foreign trademark owners to register domain names with their trademarks. The cost of registration is a nano-fraction of what it would cost in a lawsuit against an unscrupulous Chinese cybersquatter. In the same vein, consideration should be given for registration in other commercially significant jurisdictions to which the trademark owners are likely to expand. In order to achieve that, a coordinated and calculated approach to IP protection becomes necessary. It is called IP Strategy. Mr. Godfrey Firth has an excellent article out on this very topic of developing an IP strategy for China, and I think some of his ideas are good for anywhere.

Read Professor Zhang's full article at SSRN.

Trademark Owners Beware: Anti-Cybersquatting in China

Let’s push aside the academic debate about the nature of domain rights, namely, whether the right to register a domain name is an independent form of intellectual property right or just an extension of exclusive rights inherent in the ownership of a trademark. Rather, let’s focus on the practical question of what a trademark owner or domain name holder can do to protect his legitimate rights accordingly in China.

First off, what is cybersquatting? It arises in the unique context of a conflict between a domain name holder and trademark owner. If a domain name, containing a recognized trademark, is registered in bad faith for the purpose of infringing on the rights of a mark owner, the holder of the domain name is considered to be a cybersquatter. Four types of squatters exist out there, and a detailed discussion of them is the topic of a law review article. Here, let’s make it almost black and white for ease of discussion—a squatter that purposefully registered the name associated with a trademark with the intention to cause confusion or blackmailing the mark owner; and a suspected squatter whose registration of the a domain name, which having the same name as a recognized brand, was in good faith and does not in essence infringe IP right of the mark’ owner (i.e. the domain name was registered way before the trademark was registered or in use).

In the international arena, pursuant to the Uniform Dispute Resolution Policy (“UDR” Policy) put forth by the Internet Corporation for Assigned Names and Numbers (“ICANN”), a trademark owner can file a complaint against suspected cybersquatters who registered top level domain names in violation of the owner’s trademark rights. Top level domain names (“TLD”) can be exemplified as: .com, .org, .net, etc. Since TLD registrants are bound by the UDR Policy, a plaintiff can file an arbitration complaint thereunder. A favorite venue for such arbitration is National Arbitration Forum. The World Intellectual Property Organization (“WIPO”) also offers arbitration proceedings through which a trademark owner could seek the cancellation or transfer of infringing domain names. Therefore, a trademark owner has two venues to seek redress for a TLD infringer—UDR arbitration or WIPO arbitration, of course in addition litigation in proper jurisdictions.

As to litigation, a trademark owner can sue under the Anti-Cybersquatting Consumer Protection Act or the Federal Anti-Dilution Act, assuming that proper jurisdiction over defendants can be had.

What if a trademark owner finds out that a sub-TLD domain name has already been registered in China, and the domain name used the mark owner’s trademark? Obviously, UDR arbitration is not available since the domain name is not a TLD. Neither is the WIPO arbitration for the same reason. And if the trademark owner happens to be in a country without a judicial treaty with China to enforce judgments against a Chinese defendant, the plaintiff’s right of action in its own jurisdiction is practically meaningless (both the China Law Blog and Korea Law Blog addresed this general topic). With that, a trademark owner’s option is limited to seeking redress in China. And seeking rightful redress and protection in China is fraught with pitfalls due to the fragmented nature of the Chinese law on anti-cybersquatting as China currently does not have a comprehensive law/regulation on point.