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

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.
 

Chow Fang Pu (周芳谱) had six sons, three from his wife and three from his concubine. In the 1930’s, his sons from his wife started a jewelry business in Guangzhou with money he provided. The business traded under the Chow Sang Sang name. In the early 1940's, shortly before his death, Mr. Chow split his assets among his six sons. He instructed both branches of his family to run their businesses “side-by-side in a peaceful manner” and provided that his “descendants may use the name Chow Sang Sang but they shall not allow outsiders to join in their businesses” or sell the name to outsiders.

Over the decades, both branches of the family prospered and expanded their jewelry businesses using some form of the Chinese and English versions of “Chow Sang Sang” as an integral and distinctive part of their business names. The “original brothers” formed a partnership but ultimately operated separate jewelry stores. By 1989, the last of their separate interests was bought by one of the original brothers. These businesses were consolidated and now operate under the name of “C.S.S. Jewellery Company Limited”.

The “half-brothers” branch of the family operated their business under a corporation now known as “Chow Sang Sang Jewellery Company Limited”. Its parent company, Chow Sang Sang Holdings International Limited, is listed on the Hong Kong Stock Exchange.

In recent years, relations between the two branches have become tense.

In the 1990’s, the half brothers, through their company, registered the trademark “A CORPORATE GIFT IDEA BY CHOW SANG SANG”. Then in 2003, the remaining original brother tried to register “CHOW SANG SANG” as a trademark. The application was rejected by the Registrar of Trade Marks during the preliminary stage on the grounds that the mark is too close to the earlier mark and that its registration is likely to cause confusion on the part of the public. The company then appealed the decision to the High Court of Hong Kong and recently, the court rendered its decision.

The court noted that for decades, there had already been honest and concurrent use of the Chinese and English versions of CHOW SANG SANG by both branches of the family. This is not a situation where allowing the registration of the mark may lead to public confusion that did not exist before. Whatever public confusion there may be had existed from the time the two branches of the family started using the mark and its Chinese equivalent decades ago. The court observed that the real issue is not whether confusion will be created by registration, but the increase of public confusion that may result if the mark is registered.

Noting that the honest concurrent use of the mark arose from the historical link and that the original brothers had used the Chinese and English marks for more than half a century, the judge felt that it “would be a surprising result if only one branch of the extended Chow family could have “Chow Sang Sang” registered as a trade mark, even though both branches have been using “Chow Sang Sang” (as a transliteration of “周生生”) in one form or another, continuously for decades”. Since the half-brothers branch of the family had already registered a trademark incorporating “CHOW SANG SANG”, allowing the current application to proceed will allow both branches to continue their respective use of “CHOW SANG SANG” as a trademark. On the other hand, rejecting the application at this stage may expose one branch to an infringement claim by the other branch.

After considering the background, the court decided that the risk of increase in public confusion was not substantial. The judge also observed that in recent years, the appellant, C.S.S. Jewellery Company Limited, had been deliberately using the mark in a slightly different manner and in addition had been using it with other logos and marks in attempt to distinguish its goods and services from those of the other branch of the family. To refuse registration because of this shift “would have the practical effect of ‘penalizing’ the appellant for its effort to lessen the potential confusion to the public". Allowing the application will not prevent the other branch from using CHOW SANG SANG because of its earlier registration. On the other hand, in view of the growing animosity between the two branches, rejecting the application may effectively prevent the applicant from using the mark in the future because of a real threat of a claim of infringement of the earlier mark.

On the issue of public confusion, the court confirmed that there is a distinction between creation of public confusion and an increase of public confusion in allowing registration of a similar mark for the same or similar goods or services. Where other factors, such as honest and concurrent use or special circumstances exist, the existence of public confusion is not necessarily enough to reject registration.

After weighing the relevant factors, the court concluded that the “application should not have been thrown out the window” by the Registrar of Trade Marks. While the other branch may still oppose its counterpart’s application on other grounds as the application continues to publication and public notice, the Registrar of Trade Marks was wrong in its reasoning for rejecting the application at this stage.

One point of interest is the court stopping short of saying “the public has got use to the confusion or possible confusion”. Given the proliferation of franchising and product licensing, the shifting nature of trademarks from being badges of origin to endorsement of providers of goods and services by trademark owners may be factors in countering rejection due to the likelihood of public confusion.

In other words, it may be possible in the right situation to argue that the public understands that trademarks are used by unrelated businesses and that such usage does not necessarily indicate the goods and services originated from the trademark owners. Instead, common usage may reflect the trademark owner's endorsement of the goods and services bearing the mark.
When a consumer visits a fast food restaurant operating under the same trademark as numerous other similar restaurants, the consumer may not assume automatically that all such restaurants are operated by the same entity. While the consumer may have some expectation of uniformity in menu and service, he or she may understand that each is a separate business entity operating with the permission of the trademark owner. In such a situation, public confusion may be minimal.

However, a cooperation agreement is hard to reach since the parties have different expectations. For example, the Chinese franchisee generally wishes to obtain permanent exclusive distribution rights within China, and would not want to be restricted to a subordinate position forever. On the other hand, the franchisor must maintain the quality of products and services provided by the franchisee, or risk damaging the reputation of brand.
 

Therefore, it is important to find a structure which will not only satisfy the franchisee, but also provide sufficient protection for the franchisor' s brand. As such, the franchisor may consider setting up a joint venture ("JV") with the franchisee, and assign the brand's Chinese trademark rights to the JV. As a shareholder in the JV, the requirement of "being in control" of the franchisee is more or less satisfied. At the same time, as a shareholder of the company, the franchisor, although it may be unable to have total control of the operation, may also be able to become involved in the company management thereby reducing some operational risks.
 

However, it should be noted that in circumstances where the JV pays a trademark transfer fee and the trademark rights are transferred to the JV, the JV itself will be the owner of trademark rights in China. As the PRC Trademark Office will not accept assignment with restrictions, it is thus impossible to require the Trademark Office to examine conditions attached with the assignment agreement. As a result, if the two parties of the assignment have any disputes over the terms and conditions of the assignment, they can only bring the matter to the court or an arbitration body. This is to say that, once the Trademark Office has approved the trademark assignment, the franchisor cannot reclaim the trademark in the event of disputes.
 

Suggestions for a Franchisor
 

A. Choose your franchisee wisely
 

When the franchisor evaluates a franchisee, it not only needs to have a thorough understanding of the franchisee's strengths, but is also required to look into the franchisee's experience with protecting its own business model, business philosophy, and its own brand. Moreover, even after the franchisor has selected its franchisee, it must be sure to strictly control and monitor its franchisee, and prevent any actions that are inconsistent with its brand image, even if it has to consider termination of the franchising agreement.
 

B. Develop a long term global strategy

In practice, the Chinese market has shown that some of the world's leading multinational corporations which have a well-established network of trademark rights in western countries often neglect to develop a Chinese trademark strategy until they are ready to enter the Chinese market. However, these companies often find it difficult to register their brands, because their brands have already been registered by some other companies in China, or there are already a number of similar trademarks in the Chinese market. In order to unify a global brand, these companies have had to temporarily slow down their expansions, and address the companies' trademark issues first.

Another common problem that multinational corporations face is ineffective Chinese interpretation of their trademark. They often believe that all they need is a Chinese translation of their trademark. However, most Chinese consumers believe that the "Chinese translation" is a trademark of a Chinese product, while a foreign trademark is the corresponding translation. The foreign companies will be placed in a very passive position if the Chinese version of their trademark becomes well-known, and they cannot effectively file their trademark registration.

It is more common that franchisors forget to protect Chinese versions of their brands' domain names and keywords, and thus, they get registered by others. If a company has protected the rights of its Chinese trademark, it can easily acquire a domain name that someone else has registered by using the PRC' s laws against cyber-squatting. However, if the trademark has been registered only in a foreign language, it will be very difficult to defend.

C. Ensure the enforceability of the terms of its agreement

A particularly difficult issue for franchising parties to resolve is how to restore the status quo between the parties when a dispute arises. Apart from the problems caused by the nature of dealing with intangible assets, many other problems arise from the procedures that each country's intellectual property regime imposes and the difficulty of implementing a foreign judgment in another country. Therefore, it is very important for the parties of a franchising agreement to consider national procedure laws and relevant international laws to reduce the risk that the franchise agreement will not be enforceable.

D. Consider franchisee a “regional franchisor” by developing a strong partnership.

Franchisor should stop considering the franchisee a regional agent but a true partner in a brand. This will change the franchisee from being the franchisor's agent to the franchisor's regional franchisor in China, and will enable the brand owner to promote its brand while taking advantage of the franchisee' s knowledge of the consumer market in China.
 

1. According to the decision, “a generic term” that cannot be trademarked is defined as “a product name which is set out in the national standard and/or industry criteria, or accepted by common use”. The Examiner held that “解百纳” is not the name of a grape variety published in the national standard nor the generic term of a wine regulated by the applicable “wine” related industry criteria and standards. 

In addition, “解百纳” was not deemed as the generic term accepted in common use. As a generic term, it must explicitly refer to one product and reflect the essential differences between one product from another. However, “Cabernet” has been translated into “解百纳”, “加本力”、“加本纳特”、“卡贝奈特”. The Chinese wording “解百纳” does not establish a substantial and clear relationship with “Cabernet” as it would in English since there are other equally valid translations. Secondly, three grape varieties contain the word “Cabernet”, i.e. Cabernet Sauvignon; Cabernet Franc; Cabernet Gernischt which are translated as “赤霞珠”; “品丽珠” and “蛇龙珠” respectively leading one to conclude that the wording “Cabernet” is merely a prefix to the name of grape varieties. The above three grape varieties are not translated into “解百纳” and thus are not the common use terms.

2. As for the second issue, the TRAB held that “解百纳” originated from Changyu’s first use beginning in 1936.  “解百纳” was registered as a part of Changyu's trademark and was recognized as Changyu's trademark by wine magazines, the authorities, as well as the China national food industry association. Through its long term use, “解百纳” has become a trademark for Changyu's wine and identifies the origins of the wine products. Therefore “解百纳” has developed its distinctive use by Changyu's over its 70 year history.

However it is obvious that the 6-year dispute regarding the mark “解百纳” has not come to an end since as many as 12 competitors including China Great Wall Winery, Dynasty Fine Wines Group Limited and Yantai Weilong Grape Wine Co., have all claimed to have filed lawsuits against the TRAB with the First Intermediate People's Court of Beijing. It remains to be seen to what extent the court's decision will influence the wine industry in China by this case as well as how the court will set an interesting precedent for judging what constitutes a “generic name”.