China Law Insight : China Business and Intellectual Property Lawyers & Attorneys : King & Wood Law Firm : IP, Arbitration, Litigation, Securities, Foreign Investment

One alternative may be found in the Chinese Copyright Law. Article 3 of the Copyright Law of the People's Republic of China (Revised in 2010) provides copyright protection to written works, photographic works, sketches and other graphic works. The purpose of copyright law is intended to protect expressions of ideas and concepts for promotion and development of literary, artistic and scientific works.

On the other hand, trademark laws are commercial devices intended to provide trademark holders with the exclusive right to use a trademark to distinguish his goods and services from other traders to prevent public confusion. Although copyright law is intended to enhance art, culture and the sciences, and not protect brand owners, the law is sufficiently broad to offer a brand owner limited protection in some situations.

A word or simple phrase may be protected as a trademark but it may not be adequately expressed to obtain copyright protection. Unless a word phrase is comprehensive enough to express a thought, idea or concept, chances are it may not be protected by copyright. On the other hand, copyright does recognize photographic work, sketches and other graphic works as protectable works. Use of artistic designs, patterns, logos, devices, photographs or other artistic works alone or in conjunction with word marks as trademarks may allow a brand owner to be protected by the copyright law in China.

There are differences between the two types of intellectual property laws. Trademark protection may be of indefinite duration so long as the trademark holder continues to use the trademark to identify itself as the source of the covered goods and services and pays the necessary maintenance fees. On the other hand, where the copyright is held by the individual author, protection generally lasts the author’s life plus 50 years following his death. If the right is held by a legal entity, protection is for 50 years after its first publication. Trademark protection is tied to the specific mark for the class of goods and services for which the trademark is registered. Copyright protection is not so limited but covers usage of the protected work in different mediums and for different purposes. Copyright protection extends to translations and modifications of the protected work while trademark protection is tied to the registered mark itself.

The differences in protection reflect the differences in the purposes of the two sets of laws. Yet, the overlap between these laws may give brand owners limited protection in situations where protection of trademark law is unavailable. To be protected, brand owners must understand the intentions and purposes of copyright law and create works that fall within its protection.
 

In practice, there are some instances in which advertising slogans are granted copyright protection. For example, in the case of Cheng Du Huangchenglaoma restaurant vs. Beijing Huangronglaoma hotpot restaurant, the court held that the slogans used by the plaintiff possessed the originality to qualify as a literal work and thus should be protected under the copyright law. Accordingly, the defendant infringed on the copyrights of the plaintiff in using the same slogans during its daily business. As to how to judge the originality of advertising slogans, the court specifically made the following analysis and statement on the verdict, " 'original' mentioned in the copyright law means that the works are created by the author independently without plagiarism or imitation, which is mainly manifested in the selection, design and composition of certain material. Although the vocabulary which comprises the slogans was not original, through the plaintiff's selection, combination and arrangement, they have reflected certain personalized characters.

Moreover, if advertising slogan has become a symbol or identifier of the company through long-term use and promotion, hence closely associated with the goodwill and the products of the company, it may also seek protection under the Anti-unfair Competition Law against other party's unauthorized use.

Conclusion

In fierce market competition, companies tend to promote their brand and products by adopting unique advertising slogans. Advertising slogans could become a symbolic sign of the company and thereby attain an intangible value just like a trademark. Under the existing legislation and in practice, advertising slogans can 1) be protected under the Trademark Law through trademark registration, as long as it is original and could function as a source indicator. 2) slogans that have built a connection with certain enterprises in the course of business should also fall within the protection scope of the Anti-Unfair Competition Law. 3) original advertising slogans may also be protected under the Copyright Law. Among the three, trademark registration is the most effective means of protection.
 

Advertising slogans, composed of words in the form of phrases, formally possess both the characteristics of both literal works and trademarks. Therefore, in principle, they can be the protected by the PRC Copyright Law ("Copyright Law") and the PRC Trademark Law ("Trademark Law").

Trademark Protection

The Trademark Law provides that:

"Any visual signs of words, devices, letters, numerals or any combination of the above elements, which being able to distinguish the goods or service of one entity from the others, can be registered as trademarks."

Accordingly, advertising brand names consisting of words are acceptable for trademark. As to whether registration is granted, all trademarks go through an official examination to determine if they possess due distinctiveness and can function as indicators the products they represent. In terms of common word marks, the trademark law does not require a word mark to be original or coined in order to achieve distinctiveness. Generally, as long as the words used by a trademark are not the generic name of the goods or does not directly indicate the features of the products, they are considered distinctive and capable of distinguishing its origin. Hence, "Apple", "Great Wall" and other dictionary words possess just as much distinctiveness as the coined words "NEC", "TCL".

Second, the words used by a brand trademark need not be totally unrelated to the features of the products. For instance, "Safeguard" indicates the features of the products in certain a way, but as long as the indication is not a direct description, the mark does not typically lose its distinctiveness.

However, the examination on trademarks for slogans tends to be more stringent both in terms of the examination criteria employed and in its application by the trademark authorities. According to the Examination Criteria issued by the Trademark Office, a slogan that does "not indicate the characteristics of the products" is one of the most elementary requirements for the registration of a slogan trademark. In addition, slogan trademarks should be original and non-popularly used, which sets a higher threshold in the judgment of their distinctiveness and thereby greatly increases the difficulty in getting them registered in the PRC.

As to whether a trademark is original, it is not difficult to judge in the case of common word marks. Non-dictionary words can most easily be regarded or alleged as "original" words, such as "Haier", "Canon" and "Philips". It seems that applying words in a non-dictionary or non-traditional way, an applicant can relatively easily meet the "originality" component.

The originality of slogans, on the other hand, is not so easy to ascertain. As a short phrase consisting of words, the purpose of slogan is to promote the concept, culture and image of the enterprises and their products, which requires it to be expressed in a way familiar and comprehensible to the general public. Hence, slogan trademarks cannot differ far from the language used by people in daily life. There may be some uniqueness in the sentence structuring, but the slogan ultimately cannot avoid being tinted with a sense of popularity. As such, the originality of a slogan is intrinsically hard to demonstrate.

As different people can have different views and feelings on what is popularly used, this makes Trademark Office's examination subjective and uncertain. The following slogans have previously applied for registration as trademarks: "The world swings with me", "Inspiration lights life", "Your vision, Our future", "Listening creates the future", "Sense the world, foresee the future" and "Share the moment, share the life" of which the Trademark Office directly approved the registration for "The world swings with me", "Inspiration lights life" and "Your vision, Our future", while rejecting the rest for lack of distinctiveness. The Office even makes a contradictory conclusion to the same slogan applied for different goods. For example, the Eastman Kodak Company's slogan "Share the moment, Share life" was approved in for pictures, but was denied in for cameras.

However, Article 11 of the Trademark Law provides that slogans that lack distinctiveness cannot be registered as trademarks with the exception of "those that have acquired distinctiveness through use ". According to this provision, if the slogans have established sole association with certain enterprises in the public recognition through use and are capable of functioning as a distinguisher of their source, they can be granted with trademark registration. As this exceptional provision further increases the threshold of registration, meanwhile it has opened a new path for the registration of slogan trademarks. Having met the requirements of this provision by proving the acquired distinctiveness through use, the slogans mentioned above, i.e. "Listening creates the future" of KENWOOD, "Sense the world, foresee the future" of OMRON and "Share the moment, Share the life" of Kodak, which were preliminarily rejected by the Trademark Office, have eventually all been approved for registration.

“Legal Entity Work”
The NCA Circular recognized a three-point standard concerning “legal entity work.” I.e., creation of a “legal entity work” should at least satisfy three conditions: (i) supervised by the legal entity; (ii) developed according to the intentions of the legal entity; and (iii) the legal entity is responsible for the work.

This standard sheds some light on the issue but is far from clear. Point (ii) is especially difficult to apply due to uncertainties regarding a legal entity's intention. Three issues are often considered in practice to identify the existence of a legal entity's intention:
 

(a) Signature on the work. According to Article 11 [paragraph (4)] of the Copyright Law, so long as the legal entity’s name is mentioned in connection with a work and there is no proof to the contrary, the legal entity should be deemed to be the author of the work and therefore the work should have reflected the intention of legal entity.
 

(b) Content of the work. Does the content of the work likely reflect the legal entity’s intention or only the employee's own creative expression?
 

(c) The nature and purposes of the work. Given the nature and intended purposes of the work, in which party’s name will the work be published? For example, the advertising and explanatory materials created by a governmental agency for policy making, or an agency’s declaration or statement on certain events or actions (such as the “China's Situation in IPR Protection” issued by the Press Office of the State Council of PRC)—are all considered having reflected the intention of the legal entity.
 

“Occupational Work”
According to the NCA Circular, “occupational work” should meet two criteria: (i) the citizen who created the work should have an employment relationship with the legal entity; (ii) the work is created to fulfill tasks assigned by the legal entity employer. While criterion (i)--existence of employment relationship is to be decided in accordance with the labor law of China, Article 11 of the Implementation Regulations interpreted the term “work assignment” in criterion (ii) as –“a work within the scope of the duties that a citizen should fulfill for the legal entity or body.”
 

Two issues are often considered in practice to identify whether a work falls within the scope of the duties to be fulfilled by the employee: (a) whether the duties are specified in the employment contract or labor rules & regulations of the company, or reflected in the company's long term work planning; (b) whether the work has significant and direct correlations with the normal business of the legal entity employer.

B. Corporate sales model

Since corporate users usually need a large number of licensed copies of the software, the suppliers do not usually provide corporate users a CD-ROM for each of the copies. Instead, corporate users are provided with a master copy and a certain number of licenses. From the view point of the Copyright Law, this sales model does not affect the relevant legal relationships which refer to the transfer of ownership of the medium, the transfer of the copy of the software and copyright licensing.

Under the corporate sales model, software is usually resalable as in the traditional sales model, if the sale involves the transfer of the medium carrying the software such as a master copy on a CD-ROM. However, if the corporate client only purchased the license right to use the software -- for example, only paid for an increase in the number of software users -- based on the current practice, it would be difficult to implement a lawful resale. In practice, the judges may also evaluate a sales activity according to the PRC Anti-Monopoly Law or the PRC Anti-Unfair Competition Law on a case-by-case basis.

C. Online sales model

The increased usage of the Internet and the expansion of bandwidth have caused fundamental changes to the sale of software. Software suppliers do not need to provide CD-ROM for their products; instead, they may direct their clients to the designated websites where the clients can download the software. After downloading the software on their computer, the clients can install and activate the software with the registration code or serial number provided by the software suppliers. Compared with the first two sales models, the possession of the medium containing the software does not shift from the suppliers to their clients. Therefore, this type of sale only involves transferring the copy of the software and licensing.

Online sale of software is merely an act of licensing. According to the Regulations on the Protection of Software Copyright, the copyright owner is entitled to all copyrights which are not clearly mentioned otherwise and the licensee shall not sub-license such rights. Therefore, unless otherwise specifically stated in a written agreement, reselling software by transferring registration codes or accounts infringes the copyright of the software owners and is prohibited by the existing PRC laws.

D. Sales of distributed software

As the Internet evolves, software no longer runs on stand-alone computers, instead, the actual running of software requires simultaneous running of both server software and the client software. A typical example of distributed software is online game software, where the distributors of online game software are also acting as server providers. These companies only provide clients with the installation software for clients' computer with related use right license for logging on to the server. The sale of this type of software involves the license of the client terminal software and the server software, and the scopes of the said two licenses are also different. The license of the client software includes the authorization for client terminal software installation, copying and operation, and the license of the server software only grants the clients use right to access the server from their terminals. In other words, the former license grants the client's use right under the Copyright Law, and the latter license merely allows the functional use of the software for the purpose of visiting a server.

The scope of license for distributed software varies since such software usually differentiates between client terminal software and server software. Therefore, whether distributed software can be resold and to what extent it can be resold should be decided on a case-by-case basis.

Theoretically, the exhaustion of rights is equally applicable to software, which is a form of work. In practice, however, problems arise when the software is "licensed" to public users, since the "doctrine of exhaustion of rights" only applies to the distribution methods of "sale" or "gifting". Under such circumstances, software licensing will not trigger the exhaustion of distribution rights. However, the sale of software will inevitably involve licensing and is usually subject to software licensing agreements. Therefore, the key factor which determines whether the exhaustion of distribution rights occurs depends on when a sale of software constitutes "sale" and when it constitutes "license"; this factor also determines whether a resale of software constitutes copyright infringement. Different jurisdictions have developed their own approach towards this issue.

In the United States, for example, ProCD Corp. v. Zerdenberg, the United States Court of Appeals for the Seventh Circuit established three criteria on how to distinguish a sale activity from licensing:

1. Purchasers of mass-market software pay a single purchase price rather than a series of royalties;

2. The software publisher does not retain title to the "product" as a security interest; and

3. The rights of the licensee to the software copy are perpetual, like the rights of a purchaser pursuant to a sale

China has developed its own criteria for the applicability of the doctrine of exhaustion of rights with a reference to the theories and laws of other jurisdictions. Under Chinese criteria, the rights are exhausted if the software is distributed by way of transfer of ownership, otherwise, it should be deemed as "license" only.  On May 14, 2008, the Shanghai High People's Court rendered the final decision in respect of copyright infringement on Shanghai Shanjun Industrial Ltd., Zheng Feng v. Shanghai Jiliang Software Technology Ltd. In this case, a third party legally acquired a set of copyrighted software by Shanghai Jiliang Software Technology Ltd. ("Jiliang") and resold it to Shanghai Shanjun Industrial Ltd. ("Shanjun"). Shanjun later resold the software to another company, which is also a third party to the case. Jiliang sued Shanjun for copyright infringement.

The court held that "the copyright owner enjoys the right to distribute the original work or copies of such work by transferring proprietary rights to the public. However, once the copyrighted work or the copies are initially sold or gifted to the public under the license of the copyright owner, the copyright owner will no longer enjoy the right to control further resale of the work or its copies. In other words, the party that legally acquired the ownership of the original copyrighted work or its copies may resell or gift such work or copies or provide them to other parties without seeking further license from the copyright owner.”

The above analysis of the Court of the Second Instance has great significance for software related copyright matters in China. It not only defines the doctrine of exhaustion of distribution rights for the first time in China, but also confirms that the application of the doctrine should be determined by whether the distribution involves the change of the ownership of software. Instead of following the traditional method of merely distinguishing "sale" from ‘license", the Court instead uses a more pragmatic approach.

Perfect 10, the Plaintiff, is a publisher of an adult entertainment magazine and the owner of a pornographic website. The Plaintiff has created approximately 5,000 images of models for display on its website and magazine and holds registered copyrights for these images. However, the Plaintiff found that a large number of the images later appeared on the adult websites of its competitors.

CCBill LLC, the Defendant, and its affiliated companies, provides web hosting and online credit card payment services for such adult websites. For example, if a user wants to log-on to a particular adult website, he would need to provide his credit card number to the Defendant. Only after the Defendant contacts the credit card company on behalf of the website operator and a fee is paid will the Defendant connect the user to the gateway of the adult website.

The Defendant was found providing this service to many of the websites which posted copyrighted images. Therefore, the Plaintiff sued the Defendant and other infringing website owners ( collectively " Defendants " ) for contributory copyright infringement.

During the proceedings, the Defendant successfully argued that it only provided hyperlinks towards the infringing adult websites and, according to the Safe Harbor Principle under the Digital Millennium Copyright Act ("DMCA"), it was not liable for infringement as proper notice was not provided.

In China, a principle similar to the Safe Harbor Principle (the "Chinese Safe Harbor Principle") is established by Article 23(4) of the Regulations on the Protection of the Right of Information Network Dissemination of China (The “PRC Regulations”). Under this principle, an ISP is immune from liability if the ISP removes the links to the infringing work, performance, and audio or video products upon receiving notice from the right owner. Article 14(5) of the PRC Regulations requires the notice issued by the copyright owner to include the following information:

1) the right owner's name, contact information, and physical address;
2) the description and network address of the infringing work, performance and audio or video products that are required to be removed; and
3) the preliminary evidential materials that prove the alleged infringement.

The PRC National Copyright Administration (the "NCA") provides on its official website a standard format of the Notification for Requesting Removal or Disconnection of Internet Links which Containing Infringing Contents. This form requires information from the copyright owner such as the name, domain name and IP address of the infringing website.

Accordingly, it is clear that Chinese laws and regulations have also set forth a reasonably complete provision regarding the formality requirements of a notice by the owner. If a copyright owner fails to provide a notice that satisfies all the requirements, such notice will be regarded as ineffective. The ISP may refuse to remove or disconnect the links to the infringing content on the grounds that the information provided by the notice is incomplete.

The purpose of the Safe Harbor Principle, which defines clearly the rights and obligations of copyright owners and ISPs, is to balance the interests of the said two parties. The key point is that the Chinese courts should consider carefully whether effective notification is given by the copyright owner to the ISP, and whether the ISP removes the hyperlinks to the infringing contents promptly once the notification requirements are satisfied.

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Providing South Korea as an example, Dr. Cave commented on the fast development and implementation of broadband in that country, and added to that example the Singapore government's policy “for creating a very high speed broadband network throughout the island.” According to Dr. Cave, “This approach yields much quicker results, and can also be used to support local equipment development and manufacture.”

As the conversation progressed from these Asian countries towards China, Dr. Cave pointed out that while he is not a China expert, in his opinion,

“…it is obvious that mobile voice, in China, as in India and elsewhere, is transforming the consumer market place. Mobile also provides a fertile opportunity for the development of Chinese technologies and standards. I have recently prepared a report for the GSM Association, a coalition of mobile operators, which argues that mobile communications thrive in a relatively unregulated atmosphere -- one which utilises competing operators' desires to win customers with keen prices and new services."

Dr. Cave commented that this transforming marketplace naturally progresses towards mobile broadband and that the next decade will see increasing broadband speeds, In fact, securing access to broadband has become intrinsically tied to a country's economic growth. Dr. Cave further commented on mobile broadband that

“A country which loses out in this race [to develop mobile broadband networks] risks suffering major economic loss. In areas where there is no fixed network, wireless is the key, and many technologies are or will be available -- 3G, varieties of 4G, Wi-max, etc. ”

Dr. Cave provided as an example the Australian company, Telstra, which has built a wireless network within a short time period which delivers high speed broadband to 99% of the population. He commented that Telstra's network

“…is encouraging its competitors to follow suit. If this sort of network is replicated in other countries, and if enough spectrum is made available to support the traffic, the capacity of less affluent countries to 'catch-up' could have remarkable effects. There will still be a need to develop fibre-based networks for business, and in areas where they are already available, but these might take second place to wireless networks in meeting household demand. The good thing about wireless technologies is that they are inherently competitive, so the need for regulation is more limited than it is for monopoly fixed networks; this state of ‘permanent competition’ imposes on operators a permanent need to invest to retain customers and capture new ones. ”

However, while certain areas develop best with minimal regulatory interference, Dr. Cave added that others require regulatory interaction to ensure fair competition in an international market. He emphasizes that

“business customers - especially large corporations – [need to] get the range and quality of services which assist them in competing successfully in international markets. This involves creating regulatory incentives to extend fibre deployment in business districts.”

Dr. Cave added that he sees enormous scope for China in the communications equipment market. He commented, “[China] has a large home market, and already a major international one, where its success is increasingly based on technological rather than price-based competition.”

When asked about the future of copyright protection for data exchanged over the
Internet, through phone devices, or through other web-related devices, Dr. Cave pointed to the market power shift from networks to content that has occurred in the last two decades. He states

“From this point of view, the proponents of net neutrality, such as Google, are fighting off an attempt by network operators such as AT&T and Verizon to re-assert themselves. However, content is only as valuable as its copyright protection is effective, and peer-to-peer exchanges, social networking sites and other developments endanger its value. But this is a new manifestation of the permanent battle between owners and would-be copiers. The copyright owners use technology such as digital rights management and new business models such as low-cost music downloads to make their paid offerings more palatable to consumers.”

As our discussion with Dr. Cave came to a close, he predicted that while copyright owners won't lose this battle over copyright, the way they are remunerated may change significantly.

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专家看通信技术的发展
——专访通信规制经济学家Martin Cave 博士

采写：Serwat Perwaiz*

当谈到感兴趣的主要领域时，Cave博士表示，他特别关注“无线电频谱技术的革新和使用自由化”。因为，“在过去的十年里，无线电频谱为语音技术和宽带无线技术提供了技术支持，并推动了后两项技术的飞速发展”。Cave博士还介绍了欧洲和美国的标准模式与亚洲国家的模式的区别。他表示，欧美的标准模式是“依靠最激烈的竞争实现最低程度的监管，从而减小该技术对政府政策和财政津贴的依赖”。而亚洲国家的模式主要依赖“政府政策驱动”。

Cave博士指出，当今宽带发展迅速、使用日益普遍，韩国就是一个例子。新加坡政府也推出了“在全国建立高速宽带网络”的政策。Cave博士称，“这种做法的效果立竿见影，并能促进本土的通信设施的开发和制造”。

谈到中国时，Cave博士表示，他并非中国问题的专家，但是认为：“很明显，在中国，如同印度和世界上其他国家一样，移动通信正在转变消费者市场。同时也为中国的技术和行业标准的发展提供了良好的契机。”在最近为移动营运商联盟全球移动通信协会（GSM Association）准备的报告中，他指出，移动通信在一个相对缺乏规范的环境中迅猛发展，这种环境会导致竞争者通过压低价位和推出新业务来赢得顾客。”

Cave博士说，转型中的市场会很自然地朝移动宽带的方向发展，未来十年中，宽带的速度将不断加快。事实上，保证宽带的使用已与一个国家的经济增长紧密联系在一起。Cave博士对移动宽带的功能做出了如下评价：如果一个国家（移动宽带网络的发展）落后于其他国家，将面临遭受重大经济损失的危险。在没有有线网络的区域内，无线技术尤为重要，能够或将能发挥作用的其他技术，还有第3代移动通信技术（3G），各种第4代移动通信技术（4G），全球通用微波通信技术（Wi-max）等等。

Cave博士以澳大利亚电信公司（Telstra）为例进行说明。该公司在很短时间内建成了无线网络，并向全国99%的居民提供高速宽带。他认为，Telstra的网络“激励了其他竞争者追随其脚步。如果这种网络应用于其他国家，并且有足够的频谱来支持流量，较为贫穷的国家赶上来的能力可能会得到显著提高。为商业活动发展光纤网络的需求仍然存在。但在已有光纤网络的地区，此类网络在满足家庭使用方面，可能成为无线网络以外的第二选择。无线技术本身具有竞争性，因此与占据垄断地位的有线网络相比，政策法规无需对无线网络作出过多限制。这种“永久性的竞争”使得运营商永远都需要不断投入资本，以维系现有客户群并开发新客户。”

Cave博士进一步指出，虽然对市场的某些方面来说，最低程度的监管对其发展最为有利，而其他方面却需要监管来保证国际市场上的公平竞争。他强调，公司型客户，尤其是大公司，（需要）得到全面和高质量的服务，以帮助其在国际市场的竞争中立于不败之地。这包括通过立法鼓励在商业区发展光纤网络。

Cave博士认为，中国的通信设备市场有巨大的发展空间。他表示：“中国具有一个巨大的国内市场，也是国际市场的一个主要成员，而这一成功更多地是依靠技术进步而非价格竞争。”

当问到对于互联网、电话设备或其它网络设备进行数据传输的的著做权保护的前景，Cave博士指出，在过去的二十年里，市场能量正从网络转向其内容。他表示：“从这一点来看，网络中立性的提倡者，如谷歌（Google），正在与美国电话电报公司（AT&T ）以及Verizon等网络营运商进行较量以维护自身的利益。但是，内容只有在著作权的有效保护下才有价值，而点对点（peer-to-peer）数据交换、交友网站和其它技术的发展都可能危及其价值。而这也是内容所有者和潜在的复制者将进行持久战的表现之一。著作权人使用技术（如数字版权管理）及新的商业模式（如低成本音乐下载）等，使其网上付款式销售更为消费者所接受。

在采访的最后，Cave博士对网络著作权的保护做出了预测。他认为，著作权人将不会输掉这场著作权的斗争，但他们获得报酬的方式可能会发生重大的改变。