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Protection of Merchandising Rights in Trademark Piracy Cases

By Tian-ying Zhao & Yoyo Yao
Posted: 10th November 2017 12:44
In recent years, we have seen an increasing number of trademark applications that were filed in bad faith for the names of famous people, movies or fictions, and the main characters of these movies or fictions. Prior right owners have made attempts to block such bad-faith applications by claiming merchandising rights over the names. This article will first briefly discuss the legal basis of claiming merchandising rights in trademark piracy cases, and then introduce past changes and recent trends in administrative/judicial practices and legislative activities associated with protection of merchandising rights in trademark piracy cases.
Definition & Legal Basis
Some Chinese scholars believe that merchandising rights are a new type of Intellectual property rights, which refers to the rights to obtain economic interests by commercially exploiting the name/image of a famous people, the name of a work, or the name of a character in the work. Merchandising rights consist of two types of rights, which are the right to use the above-mentioned names or images exclusively, and the right to prohibit unauthorised commercial exploitation by others.
Character merchandising rights, being a subordinate concept of merchandising rights, involves the name or image of a character of literary work, films and TV dramas, animation and cartoons, and computer games. In 1994, WIPO released a research report on character merchandising, defining it as the adaptation or a secondary exploitation, by the creator of a fictional character or by a real person or by one or several authorised third party, of the essential personality features of a character in relation to various goods and/or services with a view to creating in prospective customers a desire to acquire those goods and/or to use those services because of customers’ affinity with that character.
Chinese law does not clearly provide for merchandising rights. Article 32 of the Trademark Law does prohibit registration of trademarks that infringe existing prior rights held by others, which can serve as a legal basis for right owners to oppose or invalidate bad-faith trademarks that infringe their merchandising rights. However, the fact that merchandising rights are not among statutory rights in China makes such legal basis rather shaky.
Past Changes in Administrative & Judicial Practices
At an earlier time, the Trademark Review and Adjudication Board (TRAB) and courts, held different attitudes towards the question whether merchandising rights should be protected under Article 32 of the Trademark Law. A typical case is the opposition against the mark “BANG DE (Bond in Chinese characters) 007 Bond”. The opposing party claimed merchandising rights over “Bond” and “007”, the names of the main character of the 007 series movies. In its review of opposition decision made in March 2010, the TRAB deemed that there was no legal ground for the opposing party to claim merchandising rights over a movie character. The decision was overturned by Beijing Higher People’s Courts (BHPC) in August 2011, and the court believed that the names “Bond” and “007” had acquired a high degree of fame as a result of the creative work of the opposing party, and the opposing party shall enjoy the business values and opportunities generated by the fame. The merchandising rights over the names “Bond” and “007” should be protected as prior rights and the opposed mark should be rejected based on Article 32 of the Trademark Law.
In November 2013, the TRAB ruled on the review for opposition case against the mark “Gong Fu Xiong Mao (in Chinese characters) KUNGFU PANDA”. It held that merchandising right, which was not a type of statutory rights or interests, should not be granted protection. The BHPC overturned the TRAB adjudication in August 2015, and ruled that the opposed mark, which was both the name of a prior famous movie and that of a main character in the movie, should be protected as prior merchandising rights.
Learning from BHPC’s previous decisions, the TRAB began to grant protection for merchandising rights in the past two years. For example, in October 2015, the TRAB ruled in the invalidation case against the mark “Dong Xie Xi Du (in Chinese characters)” that “Dong Xie Xi Du”, as the name of a character in Mr. Jin Yong’s literary work and the name of a movie adapted from the work, had become well known among the relevant public so that the business reputations brought about should be protected as merchandising rights. In April 2016, the TRAB ruled in favour of the right owner in an invalidation case against the mark “BARBAPAPA (in Chinese)” by recognising its merchandising rights over the famous animated character, Barbapapa.
Moreover, the scope of protection over merchandising rights has been extended from the name of works and characters to that of famous people and bands. In December 2015, BHPC granted protection to “Beatles”, the name of the famous rock band in a trademark opposition case, and in June 2016, the court invalidated a mark consisting “Michael Jackson”, the name of the renowned rock star.
Recent Trends
As the number of precedents granting protection to merchandising rights grows, there is still much uncertainty surrounding such rights as they are not provided by law. There is much controversy going on over the nature and scope of the rights. As a result, in 2016, Beijing Intellectual Property Court required its judges to adopt the concept cautiously to avoid misuse. Yet, with no doubt, merchandising rights will remain a useful, if not always effective, tool for right owners to combat trademark piracy in China, and one may expect changes at the legislative level in the coming years.
In October 2014, the Supreme People’s Court of China released a draft legal interpretation regarding trademark administrative cases for public comments. The said draft provides that if an interested party argues that it holds prior rights and interests over the name of a work or a character in the work, which are protected by the Article 32 of the Trademark Law, such argument shall be supported by the courts where the name, although, is not a work, but has a fairly high degree of fame, and the use of the name as a trademark on related goods is likely to mislead the relevant public into believing the existence of permission from or any other specific association with the right owner of the work. Unfortunately, after two years of discussion, the legal interpretation has not been approved yet. If it is finally released without removing the above-said provision, there will be a clear legal basis for judicial protection of merchandising rights associated with the name of a work or character.
Tian-ying Zhao (Ms.)
Mobile: +86 13011892568
Phone: +86 10-88395588
Fax: +86 10-88395599
Ms. Zhao received her undergraduate and graduate education in Canada. With more than 10 years of experience in intellectual property law, she works both on contentious and non-contentious matters, and her practice has a particular focus on trademark oppositions/invalidations, enforcement of trademark rights and copyrights, and dispute resolutions. She counsels mostly overseas clients, including many multi-national corporations, and impresses her clients with her insightful analysis of the situation and thoughtful advices on legal strategies. Ms. Zhao is currently a partner at IntellecPro.
Yoyo Yao (Ms.)
Mobile: +86 13810719514
Phone: +86 10-88395588
Fax: +86 10-88395599
After graduating from the Beijing International Study University as a Business Administration major in 2007, Ms. Yao started her career in the IP profession, and has worked in this field for more than nine years, advising foreign clients on trademark prosecution, investigation, enforcement and civil litigation in China. Being a PRC qualified lawyer, she has a profound knowledge of the IP regime and operation in China and is experienced in legal counselling on a variety of issues concerning trademark, copyrights, unfair competition and anti-counterfeiting. Mr. Yao is currently a senior associate at IntellecPro.

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