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Legal protection of business name rights of foreign companies in China
Mr. Zhenkun Fu and Ms. Brenda Zhao from Corner Stone & Partners give an analysis of Unfair Competition case: Reusch GMBH v. Shijiazhuang Marsnow Outdoor Commerce & Trade Co., Ltd.
The right to a business name is the right a company has to use its registered name by law. A business name is a distinctive name which a company has by law to distinguish it from others in its operations. Its main function is to indicate the provider of goods or services and avoid confusion among consumers and the public over the goods or services provided by a company. A business name, as the carrier of the company’s goodwill, represents the image of the company. Preventing misuse of business names, goodwill dilution, and prohibiting unfair competition are an integral part of competition legislation in all countries and are an important part of IP protection in China.
However, as the basic principle of business name registration in China is “registration at different levels and administration on different territories”, for legal protection of a business name right the right holder should provide evidence that the business name is famous on the market and well-known to the relevant public. When a case concerning a business name right is heard at court, the right will also be subject to certain restrictions on business scopes and the court will also consider whether confusion will be caused among the relevant public.
Comparatively speaking, since foreign business names are not registered in China – and foreign business names in foreign languages are little known to Chinese consumers– it is more difficult to secure protection for their business name right. Here we analyze a case which was lost at first instance and won at second instance to see how protection was secured for the right to a foreign business name where the defendant did not use it prominently.
The circumstances of the case
Reusch GMBH (“Reusch”), the plaintiff, is a German company established in 1934. The word “REUSCH” is both Reusch’s business name and its registered trademark. Reusch has a more than 80-year history of production of protective gear in sports. Skiing gloves and goalkeeper’s gloves are its core products. Reusch owns two “REUSCH” registered trademarks in China.
Shijiazhuang Marsnow Outdoor Commerce & Trade Co., Ltd. (“Marsnow”), the defendant, is a company that manufactures and sells outdoor sportswear. Through investigation, Reusch found that some of Marsnow’s skiing gloves were suspected of infringement. These products attached several tags, the front of one of which bore strikingly Marsnow’s registered trademark “Marsnow” and a line of small words “Reusch GmbH Eichendorfstr.5.72666 Neckartailfingen” (see the picture below). The expression “Reusch GmbH” is Reusch’s German name in lower case and Eichendorfstr.5.72666 Neckartailfingen is Reusch’s former place of business.
Then Reusch sued Marsnow before Shijiazhuang Intermediate People’s Court for trademark infringement and unfair competition.
The court rulings at first and second instances
The Court, in the first instance, held that Marsnow’s act to print the words “Reusch GmbH Eichendorfstr.5.72666 Neckartailfingen” on the lower part of the tag of Marsnow’s skiing gloves did not constitute the use of a trademark in the sense of the Trademark Law of PRC and would not be liable to cause confusion with the registered trademark REUSCH among consumers. This meant, therefore, they did not constitute an infringement of the registered trademark REUSCH. As for Reusch’s claim that Marsnow’s use of the plaintiff ’s business name in foreign language constitutes unfair competition, the court in the first instance dismissed it on the grounds that the business name in foreign language was not registered in China, was little known, and was not liable to cause confusion among consumers. Dissatisfied, Reusch appealed to Hebei Provincial High People’s Court.
The Court, in the second instance, held the following: Marsnow’s use of the words “Reusch GmbH” on the tag of its products is liable to mislead consumers who have special needs for Reusch’s goods into associating its goods with Reusch. Because Marsnow could not justify the use of Reusch’s business name, it tried to make its goods confused with Reusch’s in bad faith. In accordance with Article 5 of the Anti-Unfair Competition Law of PRC, which says that “A business operator shall not harm his competitors in market transactions by resorting to any of the following unfair means: (3) using without authorization the name of another enterprise or person, thereby leading people to mistake their commodities for those of the said enterprise or person,” Marsnow’s act aforesaid constituted unfair competition. The court ordered that the defendant stop its infringing act and pay the plaintiff CNY 77,600 (USD 12,000) in damages.
Our strategy for the second instance
We represented the plaintiff to concentrate on unfair competition at the second instance.
Article 5 of the Anti-Unfair Competition Law of PRC provides that a business operator shall not harm his competitors in market transactions by resorting to any of the following unfair means: (3) using without authorization the name of another enterprise or person, thereby leading people to mistake their commodities for those of the said enterprise or person.
For the protection of foreign business names, Interpretations of the Supreme People’s Court of PRC about Some Problems with Application of Laws to Unfair Competition Cases sets out the condition of “commercial use”. Article 7 of the Interpretations specifies “the commercial use on the territory of China, including use of the name, packaging and decoration peculiar to well-known commodities or use of the name of other companies or persons for commodities, commodity packaging and commodity exchange documents, or in advertisements, exhibitions and other commercial activities”, further defining commercial use.
As far as this case is concerned, although Reusch is not registered in China, evidence demonstrates that it has operated in China since early 1990s and its skiing gloves and goalkeeper’s gloves are well-known to a certain extent in China. Therefore, Reusch’s business name in foreign language is in alignment with the provisions for business name in the Anti-Unfair Competition Law of PRC.
There is some difference in specification of the extent of commercial use between Article 5.3 of the Anti-Unfair Competition Law of PRC “using without authorization the name of another enterprise or person, thereby leading people to mistake their commodities for those of the said enterprise or person” and Article 48 of the Trademark Law of PRC “The use of trademarks as stipulated in this Law refers to the affixation of trademarks to commodities, commodity packaging or containers, as well as commodity exchange documents or the use of trademarks in advertisements, exhibitions, and for other commercial activities, in order to identify the source of the goods.”. The commercial use is a kind of “prominent use” according to the Trademark Law of PRC, while the Anti-Unfair Competition Law of PRC does not have this stipulation, that is to say, the Anti-Unfair Competition Law of PRC specifies smaller extent of commercial use of the name of others without authorization than the use of a trademark.
To sum up, the court ruling it the second instance stated that“Marsnow’s use of the words ‘Reusch GmbH’ on the tag of its products is liable to mislead consumers who have special needs for Reusch’s goods into associating its goods with Reusch and Marsnow’s act constitute unfair competition” is correct because however slight Marsnow’s illegal use is, its act is liable to mislead those consumers who have special needs for Reusch’s goods, like Reusch GmbH fans, into believing that Marsnow is associated somehow with Reusch.
Note:
The First Instance File No. (2016)Ji01MinChu708
The Second Instance File No. (2017)JiMinZhong267