BEIJING OLYMPICS 2008 - LET THE "CLEAN" GAMES BEGIN...
The Olympic Games was awarded to Beijing in 2001 amidst hopes that it would enable China to showcase its nation to the world. It could also be an opportunity to show that China had the infrastructure to protect the Olympic brand and its intellectual property. Such protection is vital in order for the host nation to benefit from the commercial aspects of the games. It has been reported that previous Olympic Games hosts made over US$60 million in merchandising revenue. The value of the Olympic brand is reported to be worth US$1 billion. These kinds of figures and the conditions of the Olympic Charter signed by the Beijing Organising Committee of the Olympic Games (BOCOG), ensure that the Chinese Government must tackle the widely-known problem of counterfeiting in China.
The Olympic Charter
The International Olympic Committee (IOC) will retain ownership of the rights to all Olympic symbols including the Olympic rings, flag, motto and emblems. The rights in the emblem, name, anthem and slogan of the BOCOG will also be retained by the IOC.
New Regulations to Protect the Olympic Symbols
Since becoming a member of the WTO in 2001, China has been trying hard to fulfil its obligations to protect and enforce intellectual property rights (IPRs). In addition to the existing Trademark Law, Copyright Law, Patent Law and Regulations on Administration of Special Symbols, China has enacted various special laws to protect the IPRs in the Olympic signs and symbols.
The Regulations on Administration of Special Symbols have already been in existence since 13 July 1996. These Regulations give a broad scope of protection to symbols including names, abbreviations, emblems, mascots, belonging to national and international public welfare organisations. The owner must apply for such marks to be recognised as "special symbols" by the State Administration for Industry and Commerce (SAIC).
The Regulations of Beijing Municipality on Protection of Olympic Intellectual Property came into force on 1 November 2001. These set the overall framework for the protection of IPRs relating to the Beijing Olympic 2008. The use of a name identical or similar to the Olympic Symbols by corporations, social groups, websites, business entities, or as building, geographical area and venue names are prohibited under these Regulations. The Regulations also prohibit the use of the Olympic IPRs in any advertising or promotional activities including charity and non-profit-making events. The law also encourages the reporting of suspected or actual infringing activities relating to the Olympic Symbols, which is one of the new aspects not covered by the earlier Trademark/Patent/Copyright Laws.
It is also clear from the legal statement issued by the Preparatory Office of the BOCOG on 20 August 2001, that any use of the Olympic rings, the name of the Olympic Games, the Olympic flags, the Olympic Motto or the Olympic songs, even if it is exclusively for non-commercial interests, is only permitted with prior consent of the IOC. Thus, the laws restrict both commercial and noncommercial use of the Olympic Symbols.
In 2002, the State Council issued the Regulations on the Protection of Olympic Symbols. These regulations reflect the IPR requirements in the Olympic Charter and define the term "Olympic Symbols" and make clear that specific authorisation for use of the Olympic symbols for commercial purposes must be obtained. Any licensee with the right to use any of the Olympic Symbols must be recorded with the Chinese Trademark Office under the Procedures for Recordal and Administration of Olympic Symbols issued on 22 April 2002.
"Commercial use" covers use on packaging or containers of goods, advertising, commercial exhibition and activities, profit-making performances, sales, manufacturing, import or export of goods, and also any activities which might mislead people into thinking that the user is sponsored by or otherwise connected with the owners of the Olympic Symbols.
The distortion or manipulation of an Olympic Symbol by an organisation or individual under any circumstances is prohibited. Making the emblem part of other incorporated logos is also prohibited.
The Regulations create an institution called The Administration for Industry and Commerce (AIC) which is responsible for the protection of the Olympic Symbols. The enforcement rights of the AIC are similar to those conferred under the existing laws protecting IPRs in China, which include the rights to investigate, order cessation of infringing activities, confiscation and destruction of the infringing goods and related tools, with the special right to impose a fine up to 5 times of the illegal income, or if there is no illegal income, a fine of not more than RMB 50,000. Any use of Olympic Symbols to commit fraud or other illegal activities could attract criminal liability.
In addition to the creation of the AIC, the BOCOG also created the Legal Affairs Department, to manage contracts,combat IP infringement and to protect the IOC's interest.
The BOCOG has also registered over 193 "Olympic Symbols" and 6 special marks that include the 5 mascots ("Fuwa"). After the unveiling of the Fuwa mascots in Beijing 2005, the BOCOG issued a proclamation detailing how the mascots can be used and by whom.
Ambush Marketing
To eliminate the nuisance of "ambush marketing" (where firms try to associate themselves with a particular event without paying licence fees), the BOCOG has created the Brand Protection Department to combat IP infringement, specifically ambush marketing. This type of behaviour is being actively pursued. In Beijing, a restaurant was fined and ordered to remove messages from napkins wishing the Olympics good luck. State officials in that case held that it was unauthorised use of a copyright work. A tower block in the Xi'ao Center office complex had two companies that
were official partners of the Olympic games and wanted to attract more corporate clients to lease space in its office block. They put up a banner saying "The Choice of Olympic Organizing Committee Partners." The offenders were ordered to remove the banner and were fined.
Enforcement
The AIC has handled raids at hotels that were selling Olympic souvenirs without proper BOCOG licensing, stopped a car servicing company from using sales promotions featuring the mascots, confiscated counterfeit mascots following market inspections and removed a website selling unlicensed mascots.
In Beijing, an individual induced others to enter into a fake prize draw on an imitation website that was cloned from the official site of the BOCOG. The infringer was sentenced to six months imprisonment.
Another market inspection revealed a stall selling oranges with "Good Fruits welcome the Olympic Games" on the packaging. The slogan was considered used without permission and over 3,000 boxes of oranges were confiscated.
Serious Approach
It has been reported the Chinese Government believes that if it does not hold a "clean" Olympic Games in terms of IPR infringement, it will have deemed to be a failure. From 2004- 2007 the AIC in China handled and investigated 1,357 cases relating to violations of the Olympic Symbols involving counterfeit merchandise with a value of RMB10.72 million. The figures suggest that the efforts of the BOCOG and the Chinese Government are beginning to pay off.
In addition to the various departmental bodies created to protect IPRs in the Olympic Symbols, the BOCOG has also recruited 350 volunteers to help investigate suspicious IP infringement activities and to collect evidence in relation to such activities. They also have the task of publicising knowledge and information on how to combat infringement. The BOCOG hopes to give transparency to its work, promoting the need for consumers to report counterfeit merchandise in the market.
Mischievous Parody
The unlicensed use of the Olympic Emblem and mascots includes the use of the characters in a "mischievous parody". This statement came to light when the Olympic emblem "Chinese Seal, Dancing Beijing", originally posted on an online forum, was taken and turned into a restroom sign. In a separate case, the Olympic mascots were manipulated to be replaced with the heads of Chinese comedians such as Zhao Benshan and Ge You.
Customs
Chinese Customs have been vigilant in the run up to the Olympic Games. Notable seizures include a raid in Guangzhou that uncovered 1967 pieces of counterfeit Olympics clothing, the discovery of 26 cartons of "Olympic Brand Cigarettes" found in a personal parcel sent from Beijing to the UK and a pirated cartoon series relating to the Olympic mascots discovered by Xiamen Airport Customs officials.
Conclusion
The BOCOG has made continuous efforts to raise public awareness of the problem of counterfeits. The creation of specific "Olympic IP weeks" designed to educate the public seems to be working. Another factor is the transparency of the actions taken by enforcement bodies. Releasing details of continuous raids sends a message that a pro-active approach is being taken and that offenders will be targeted and prosecuted.
Most Olympic Games leave a legacy of infrastructure for the host nation. It is hoped that the current enforcement of the Olympic IPRs and the new regulations protecting the Olympic Symbols will leave a legal legacy, leading to stronger enforcement of IPRs in China.
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THIRD AMENDMENT TO THE PRC TRADEMARK LAW - INCREASING THE IMPORTANCE OF WELL-KNOWN TRADEMARK RECOGNITION
The proposed Third Amendment to the PRC Trademark Law (the "Amendment") introduces substantial changes to the trademark law in China. One of the most significant amendments is the proposed abolition of examination on relative grounds. In our view, the amendment is generally favourable, but some of the mechanics will be difficult to implement and could be seen as a step backward.
Abolition of Relative Grounds
Following the worldwide trend (most recently the United Kingdom), Article 36 of the Amendment is proposing the abolition of examination on relative grounds so that the Trademark Office ("TMO") will only reject applications based on absolute grounds or rights confirmed through prior adjudications. The TMO will no longer reject applications based on perceived conflicts with prior trademark registrations or applications (except for well-known marks). This will force trademark owners to protect their rights through oppositions at the Trademark Review
and Adjudication Board ("TRAB") under Article 45 and related provisions of the Amendment.
Many predict a flood of dubious applications with the abolition of examination on relative grounds. However, statistics from the United States of America (where relative grounds are raised) and the European Community (where relative grounds are NOT raised) are showing undramatic consequences. During the period between 2003 and 2007, on average, approximately 1.7% of U.S. trademark applications are opposed whereas approximately 2.46% of Community trademark applications are opposed, with the European Community receiving roughly twice the amount of trademark applications as the US. There are many factors such as the relative costs of trademark oppositions and social makeup of the jurisdictions, which the statistics may not reflect. Because of the sheer size of China and the potential benefit to be gained from successful trademark applications, we forsee increasing problems for legitimate trademark owners in China because:
- many of them do not necessarily have the experience or the resources to engage watch services; and
- the cost of trademark oppositions will adversely affect their bottom line.
However, the introduction of new provisions to protect well-known trademarks in the Amendment may serve to counter
the adverse effects arising from the abolition of relative grounds.
Additional protection for well-known marks
Article 10 of the current Trademark Law provides an exhaustive list of marks which shall not be used as trademarks including, e.g., marks which are identical with or similar to state names, national emblems, flags, and marks which are detrimental to socialist morals or customs etc.
The Amendment is proposing the addition of "marks which infringe upon the rights or interest of well-known trademarks" to this list. The Amendment appears to have elevated the status of well-known trademarks to a new level of importance and imposes a duty on the TMO to reject marks which infringe upon the rights or interests of well-known trademarks as a matter of policy. Moreover, it is important to note that Article 10(3) prohibits the use of relevant marks, not just their registration. This may provide additional ammunition for the owners of well-known trademark owners to challenge the use by third parties of trademarks, even if they are registered.
Introduction of Anti-Trademark Dilution
The current Trademark Law does not make provision for the concept of trade mark dilution. The owner of a well-known trademark must be able to show a certain level of fame and confusion within China in order to enjoy protection. Article 13 provides that an unregistered well-known trademark in China is protected from being registered or used by an unauthorised party in respect of identical or similar goods or services if such use or registration is "liable to create confusion". The owner of a registered well-known trademark will have to prove that the unauthorised registration or use of the well-known trade mark in respect of the dissimilar goods or services will "mislead the public" and result in "possible damage to the interests" of the registered owner.
The Amendment appears to introduce the doctrine of trademark dilution into China. Article 34 of the Amendment contains a prohibition against the registration and use of a trademark which is identical with, or similar to, any other party's prior well-known registered mark, or its distinctive part, without a "justified reason". Article 82(7) of the Amendment (which is similar to Section 14(2)(3) of the German Trademark Law and Article 8(5) of the Council Regulation on the Community Trade Mark) refers to improper use or use which may harm the distinctiveness or reputation of a well-known trademark as an infringing act.
Although the word "dilution" is not used in the Amendment, there is no requirement to prove confusion. The term "justified reason" is not defined in the draft and has caused some controversy. It will be necessary to have further clarification, possibly in the form of a Supreme Court Explanation, to identify and to provide a list of circumstances which can be classified as "justified reasons".
There is no specific timetable as to when the Amendment will proceed to enactment by the People's Congress but it is rumoured that this will not be until mid-2009, at the earliest. Some are predicting another draft. In the meantime, the draft law is still a work in progress.
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CHINA'S INTERNET LAW STILL IN STATE OF FLUX
In our last bulletin, we discussed the obligations and liabilities of Internet service providers (ISPs) under Chinese law and the situations where they could be exempt from liability. The legal framework governing the Internet in China is still in a state of flux. The PRC has no unified or a comprehensive code governing the Internet. Instead, measures, rules and regulations have been promulgated on an ad hoc basis to meet changing needs. In this article, we will further analyse the potential liability of foreign websites and look at the controversial position of search engines in China.
Potential Liability of Foreign Websites under Chinese Laws
According to the relevant rules and regulations, an ISP (arguably both domestic or foreign) is prohibited from producing, copying, publicising, disseminating information that include contents which:
- are against the basic principles prescribed in the Constitution;
- jeopardise national security, disclose State secrets, subvert the State regime, or damage State integrity;
- harm national honour and interests;
- instigate hatred or discrimination between different nationalities, or damage national solidarity;
- violate the State religion policies or propagate cult and feudal superstition;
- spread rumours, disrupt public order or damage social stability;
- spread pornography, obscenity, gambling, violence, homicide, terror or abetting crimes;
- insult, libel against others and infringe other people's legal rights and interests; or
- other contents prohibited by laws, rules and administrative regulations.
The PRC Regulations on Telecommunications (2000), the Measures for the Administration of Internet Information Service (2000) and Measures for the Recordal Administration of Non-Commercial Internet Information Service (2005) apply to anyone who engages in telecommunication activities or activities relating to telecommunications in the territory of China. However, the regulations and measures do not elaborate on what would be regarded as "carrying on Internet information services in the territory of China". Technically, any website on the Internet (no matter where its host server is located) is accessible online from anywhere in the world. What factors would the PRC authorities take into account in deciding whether a "foreign" website will be subject to the rules and regulations? The location of a website's hosting server? The location of the operator or owner of a website? Or whether the operator/owner has a local presence in China?
The Chinese Government imposes an approval system for commercial ISPs and a recordal system for non-commercial ISPs. An ISP wishing to conduct business in the areas of:
- news reporting
- publications
- education
- medical and health care
- pharmaceutical and medical devices
- culture or film and television broadcasts
must obtain the prior consent of the relevant competent authority in those areas before applying for approval or recordal.
However, are these requirements applicable to foreign website? Arguably not, if the rules and regulations are interpreted literally. The Ministry of Information Industry has confirmed that if the owner/operator of a website is not in China and the host servers are located outside China, then the ISP will not be subject to the registration/approval requirements.
This does not mean that a foreign website is not subject to other PRC laws. Most international ISPs intending to exploit the Chinese market are not too concerned about liability arising from complaints by end users. They already seek to mitigate their risk by relying on the contractual relationship between itself and the customers in the end-user licensing agreement or terms of use of the website. In accordance with the PRC Contract Law, PRC Civil Litigation Law and the PRC Electronic Signature Law, generally speaking, online contracts are recognised and enforceable in China.
One of the biggest concerns for ISPs, globally, is liability to third parties arising from content uploaded/generated by end users which turns out to be infringing, pornographic, defamatory etc. Recent legislation, in particular those relating to copyright protection on Internet, e.g. , the Measures for the Administrative Protection of Copyright on the Internet (2005), Regulations on Protection of Information Network Transmission Right (2006) and the Supreme Court Interpretation of Several Issues on the Laws Applicable to the Trial of Cases Involving Internet Copyright Disputes (2006), would appear to be applicable to foreign websites as well. Some of the provisions set out in the legislation are similar to those of the US Digital Millennium Copyright Act. However, it would be difficult to enforce any judgment against a foreign website with its host server located outside China (assuming the owner/operator of such website has no local presence in China) unless there is a bilateral agreement on reciprocal recognition and enforcement of judgments between the Courts of China and the jurisdiction of the foreign website.
Although, we are not aware of any cases so far of foreign companies being caught by these rules and regulations, it is still advisable for a foreign website(whether its host server is located inside China or not) to provide an "illegal / infringing content report mechanism" and "take down procedures" including reasonable measures to remove or disable access to illegal/infringing material upon receiving notice from a copyright owner of infringing activities and keeping records of such activities. Otherwise, an ISP risks being regarded as a joint tortfeasor with the uploader ofthe infringing content in any administrative or judicial proceedings.
Search Engines
As with the rest of the world, this is an area of law which is still evolving. Changes in policy may later affect the implementation of the existing rules and regulations which are often left vague to allow officials flexibility in their interpretation. In particular, search engines operating in China are coming under increased scrutiny and the courts are showing signs that they are willing to crack down on the activities of search engines.
The much-publicised Yahoo! China and Baidu cases are an indication of the turbulence in this area of law. In January 2007, the Beijing No.2 Intermediate People's Court accepted complaints filed by eleven international music companies, including WEA International Inc., Universal Music Ltd., EMI (Taiwan) Ltd., Mercury RecordsLtd., Sony BMG Music Entertainment and Go East Entertainment Co., Ltd., against Yahoo! China (owned by Alibaba.com Ltd) for being involved in illegal downloading of their copyright works by providing links to unlicenseddownload sites in its music search results.
In April 2007, the Court found Yahoo! China liable as a joint tortfeasor and held it to be guilty of infringing the producers'rights in the sound recordings, their network transmission rights and rights to receive payments. Yahoo! appealed. In a landmark decision in December 2007, Yahoo's appeal was dismissed by the Beijing High Court. Yahoo! was ordered to remove all hyperlinks relating to copyright works; it was not sufficient to only remove links provided to it by the copyright owners. Yahoo! was also ordered to compensate the Plaintiffs US$27,000 in damages (although this is significantly less than the US$710,000 sought).
However, on the same day, the Court dismissed an appeal against a decision finding that Baidu.com (China's biggest search engine company) was not guilty of copyright infringement. Both Baidu.com and Yahoo! China offered MP3 services that allowed users to search for websites offering unlicensed music downloads. The Beijing No.1 Intermediate People's Court in Baidu's first instance case had rejected the Plaintiff's claims, holding that, as the search engine's web crawler could not anticipate nor control the legality of the search results, the MP3 search service which provided hyperlinks to the Plaintiff's copyright works should not give rise to liability on the part of Baidu. Further, the Court was of the view that the Plaintiff had failed to fulfil its duty to notify Baidu of the infringing hyperlinks.
The Yahoo! China case has been listed in The Top Ten IP cases of 2007 published recently by the Beijing Intermediate Court in China and sets a precedent for cases against similar operations in China. The Baidu case was originally decided under laws which have been superseded and, in an interview with a chief judge of the Beijing Intellectual Property Higher People's Court (published recently by SIPO), it appears that the judgment which allowed Baidu to escape liability is unlikely to happen again.
In fact, this could be tested very soon as new proceedings for copyright infringement were filed in February in the Beijing No.1 Intermediate People's Court against Baidu by Universal Music Ltd, Sony BMG Music Entertainment (Hong Kong) Ltd and Warner Music Hong Kong Ltd. The music companies have also joined with Gold Label Entertainment Limited in a separate suit against Chinese media company Sohu.com Inc and its search engine, Sogou. Coincidentally, Sohu is an official sponsor of the 2008 Beijing Olympics.
Meanwhile, Yahoo! China has still not complied with the December court ruling and enforcement proceedings have been commenced.
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BEIJING COURT DECISION IN LONG-RUNNING DISPUTE BETWEEN "TWO CROCODILES"
The dispute between La Chemise Lacoste SA (the famous French clothing manufacturer) and Singapore-based Crocodile International Pte Ltd, over the crocodile logo has been on-going for over 40 years. Lacoste SA first registered its iconic right-facing crocodile logo as a trade mark in France in 1933. The mark has been registered in China since October 2000.
Singapore business man, Tan Hian Tsin, claims to have independently created a design comprising the italicized word "Crocodile" and a left-facing crocodile device in 1947. The mark has been registered in Singapore since 1951. Singapore Crocodile International Pte Ltd ("CI") is the exclusive licensee of the Singapore mark.
The two companies' long-running battle over the logo has resulted in settlement agreements allowing the parties to use their respective logos in Singapore, Indonesia, Malaysia, Brunei and Taiwan, but the agreements do not cover the profitable Chinese market.
A Beijing Court ruling has now ended a 14 year struggle by CI to register its trade mark "CARTELO AND DEVICE" in the Mainland. The device consists of the word "CARTELO" composed on a green, blue and red rectangular background, with a left-facing crocodile in the foreground.
CI filed to register the CARTELO AND DEVICE in China in 1993. Lacoste filed an opposition to the application which was unsuccessful. Lacoste appealed against the Trade Mark Office's decision. In 2005 TRAB ruled in favour of CI adjudicating that CARTELO AND DEVICE should proceed to registration. Lacoste then brought proceedings in the Beijing First Intermediate People's Court, asking for TRAB's decision to be withdrawn. The Court reversed TRAB's adjudication and ordered it to make a fresh adjudication. Both TRAB and CI appealed to the Beijing Higher People's Court. The Beijing Higher People's Court recently entered its final decision finding that CI's mark is distinguishable from Lacoste's and upholding the validity of CI's mark. The Court held that "CARTELO AND DEVICE" is a combination of a word and a device with designated colours. The word "CARTELO" is an invented word with no meaning. As such, it is distinctive and original. The word occupies a primary position in the mark.
Although the crocodile device is similar to Lacoste's device, there are clear differences in the composition of words, their pronunciation and the overall appearance of the marks.
In addition, the two marks had co-existed for many years. They enjoyed their own reputation and distinctiveness. The relevant public was able to distinguish between them despite their similarities and confusion would not be caused. Hence, the Beijing Higher People's Court overturned the ruling of the lower court and upheld the adjudication of TRAB.
CI has already been trading in China since 1993 and has built up a substantial business there. In fact, one of its China licensees, Shanghai Eastern Crocodile Apparels Co. Ltd, was appointed as an official leisure wear sponsor to the Chinese Olympic Committee in 2001 and has been authorised to use the Chinese Olympic Committee's logo on Cartelo Crocodile products, packaging, advertisements and promotional events.
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Sweet Victory for Ferrero Rocher
Italian chocolate maker Ferrero Rocher has won a lengthy legal battle against Chinese manufacturer Montresor over its signature hazelnut-centered chocolates wrapped in gold foil. In a decision issued by the Supreme People's Court on 24 March 2008, Montresor was ordered to stop producing the "look-alike" chocolates and to pay Ferrero damages of RMB500,000.
Ferrero began its legal action against Montresor in 2003 but was hampered by the fact that, although it had registered its name FERRERO ROCHER, it failed to register its Chinese trade mark 金莎 ("JINSHA"). The Chinese mark was instead registered by Zhangjiagang Dairy Factory One which started producing chocolates under the mark 金莎 ("JINSHA"). The Chinese mark was then assigned to Montresor which began to market a look-alike. Ferrero was unable to sue under the Trademark Law and had to rely instead on the Anti-Unfair Competition Law which required it to show confusion.
The Tianjin No.2 Intermediate People's Court's decision in 2005 had originally found against Ferrero on the basis that Montresor's product was better known in China than Ferrero's. This was appealed to the Higher People's Court of Tianjin which ruled in 2006 that Montresor had copied Ferrero's trade dress. Montresor then appealed this decision to the Supreme
Court.
The Supreme Court found Ferrero Rocher's chocolate to be a "well-known product" under the Anti-Unfair Competition Law. It is clear from the judgment that it is necessary to show that a product is well-known to the relevant public in China. The Court looked at factors set out in the definition of a well-known product set out in the Supreme People's Court Interpretation on the Anti-Unfair Competition Law of 2006, which includes taking into consideration the duration and extent of sales of the product, the product's revenue and market share, the duration, extent and geographical area of advertising.
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PROFESSIONAL PROFILES
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David Ho
David is an associate in the China I.P. Group and is admitted as a solicitor in Hong Kong and New Zealand. He holds a LL.B. degree from the University of Otago, New Zealand, and has previously practiced in New Zealand as a barrister before joining Deacons in 2006.
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David's practice covers protection and enforcement of intellectual property rights including unfair competition, domain name issues, copyright protection, customs recordal and general advice on exploitation of intellectual property
right.
David enjoys reading and travelling, his hobbies include playing tennis, basketball, jogging and watching football. David is fluent in English, Cantonese and Putonghua (Mandarin). |
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Jacqueline Chu
Jacqueline is an associate in the China I.P. Group and is admitted as an solicitor in Hong Kong. She holds an LL.B. (Hons) from the University of Hong Kong.
Jacqueline's practice covers both contentious and non-contentious trade mark matters including registration, opposition, cancellation and commercial exploitation in China including licensing and assignment. |
| She also advises clients on conducting intellectual property due diligence in corporate transactions and trade mark protection and portfolio management, copyright and domain name issues. Jacqueline is fluet in English, Cantonese and Putonghua (Mandarin). |
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