I. Source of the concerns: slack control in the gray area

Legally speaking, the exclusive right to use a registered trademark is constrained to the designated mark and the designated goods as registered, thereby the scope of rights is being strictly defined. However, this presumes that the Classification of Goods has to blanket every type and item, corresponding item-to-item, which is neither practically nor theoretically possible. Thus, a “gray area” is inevitable ---- allowing some trademark owners to use their registered trademarks on goods outside the designated scope, and giving them an invisible “expansion” of the trademark rights. Use of a registered trademark beyond the designated scope, if not infringing upon other registered marks, is administratively punishable unless it is used without marking, or TM, in other words, as an unregistered mark. As a matter of fact, no organization has been able to come up with a list of classification to cover all goods, particularly relating to esoteric industries, emerging fields and hi-tech industries. How to categorize specific goods demands appropriate professional background knowledge before a decision is made, which poses a difficulty for the feasibility and operability of administrative controls.

In reality, in order to maximize their own interests, many businesses try to expand one way or another the reach of their trademarks sometimes seriously exceeding the approved scope of registration, which is likely to fall into the range of others’ exclusive trademark rights, thus possibly infringing others’ exclusive rights to use trademarks. Here are two examples of such cases in the judicial practice: in one case, the plaintiff is Malata Group whose Malata trademark has been certified as a well-known trademark for disc players in Class 9 and heating apparatus in Class 11. Defendant Shantou Malata Industrial Co., Ltd. has obtained registration of Malata in Chinese pinyin in Class 9 and Malata in Chinese characters in Class 11, both for electric water boiler and electric kettle. Plaintiff argued that defendant’s production and sales have infringed its exclusive right to use the trademark and sued in a Shantou court seeking injunction and damages. In another case, plaintiff Company A is the exclusive right owner of the  registered trademark with design and “Rotork” in Chinese characters. The defendant Company B exclusively owns  registered trademark. Company B has authorized the defendant Company C to separately use the “Rotork” trademark in Chinese characters and “ROTORK” in English on electric valve actuators. Company C used the  sign in production and sales of “intelligent electric actuators” and other actuators, and used ,  and “Rotork” ® in Chinese characters in its promotions. Company B used ,  and “Rotork” in English in the promotion of its actuators and “flow meters.” The plaintiff argued that the two defendants have infringed its trademark right and sued before a Shanghai court demanding corresponding legal liabilities from the two infringers. It has been a matter of great importance for this article to address the criteria over whether the spillover use of trademarks has constituted trademark infringement during the hearing of such cases.

II. Understanding the criteria: analysis of the nature of spillover use of trademarks

We have to admit that the variety of goods will in no way be exhausted by the classification of goods in laws and regulations, and are always increasing. Therefore, trademark proprietors cannot fulfill their purpose of protecting their interests by means of simply registering trademarks for various types of goods, because such means will always lag behind. As the reality has shown that counterfeits and knockoffs have been rife, the easily confusing conduct has objectively eroded the economic interests of trademark owners. It has been a shame to get something for nothing. Snatching fruits from behind trademarks in which others have invested money, resources and manpower not only infringes the trademark owner’s economic interests, but also damages its business reputation, distinctiveness and other intangible assets, gravely hurting the trademark owner. Based on the above, the authors think it is necessary to clearly define the right to exclude, thus marking the reasonable range in the exercise of trademark rights, in a bid to prevent blind infringement and provide basis for damages.

Cognitively, it is relatively easy to understand “identical” goods or services as defined by Article 9 of Interpretation of the Supreme People’s Court on Certain Issues Concerning the Application of Law in the Trial of Civil Cases Involving Trademark Disputes (Interpretation). It is rather difficult to understand “similar” goods or services, and “similar” trademarks. Therefore, there is a “vague zone” in the exercise of the right to exclude. It has been a difficulty in defining the vague zone in the judicial practice. The second paragraph of Article 9 of the Interpretation has laid down provisions on whether a trademark is similar or not. However, the judicial practice differs subjectively in determining “similar” trademarks. The common practice is based on the trademark’s three elements of shape, sound and meaning. In determining whether a word mark and a combination trademark are similar, examinations should be made as to whether the word and design or the combination thereof are identical or similar in the overall visual impression. In practice, different judges may have different approaches; therefore, they may have different understandings on similarity of trademarks.

It has been a controversial matter when it comes to determination of “similar” goods. The first paragraph of Article 11 of the Interpretation provides that “Similar goods, as mentioned in Item (1) of Article 52 of the Trademark Law, shall mean goods of which the functionality, purposes, production divisions, sales channels, consumers, etc. are the same goods that have a particular association between each other, as the relevant public usually believes, which is liable to cause confusion.” The paragraph has, as a matter of fact, expanded the range of similar goods as defined by the classification of goods by the trademark bureau. The Trademark Office mainly determines similar goods on the basis of the Classification of Goods, while in the judicial practice, the Classification will be used as a reference. As a result, if criteria from both the Trademark Office and the courts are applicable, different results may be achieved.

In determining similarity of goods, a judge usually starts with the purposes, sales channels and public confusion that may have been caused, but he also needs to make a decision based on the reasonable level of cognition among a particular consumer group. However, the judge is not an expert in every field and cannot acquire the equivalent level of cognition when it comes to goods in some esoteric industries or those demanding highly professional expertise. Even if the judge resorts to authentication centers, the judge’s professionalism is also required to extract necessary elements from authentication reports. Therefore, the authors think that for some goods which are not distinguishable among ordinary consumers, we may consider adopting the criteria of the trademark bureau in determining similarity of goods, namely, a decision is based mainly on the classification of goods, combined with the functionality and purposes of the goods. For goods unfamiliar to ordinary consumers, the basis generally lies in the functionality and purposes as described in the goods specification.

III. Determining infringement: spillover use of trademarks should be treated on a case-by-case basis

Provisions on Several Issues Concerning the Trial of Civil Disputes Involving Conflicts between Prior Rights and Registered Trademarks or Enterprise Names clearly states that the court shall hear a case where the plaintiff files a lawsuit claiming a registered trademark being used beyond the designated scope of goods or by means of changing its salient features, splitting or combining, is identical with or similar to its registered trademark. The above interpretation shows that use of a registered trademark beyond the approved scope shall not be deemed as use of a registered trademark. Therefore, it is unnecessary for the relevant authorities to proceed as to whether the two registered trademarks have conflicting rights, and the court may, in accordance with the fundamental principle of trademark infringement, directly make a decision as to whether the alleged infringing sign has constituted trademark infringement. Where use of a trademark beyond the designated scope of goods is identical with or similar to the registered trademarks of others, what decision will the court make? Will the court definitely find for infringement upon the others’ exclusive right to use trademarks? There are two viewpoints in practice.

The first viewpoint holds that where the two trademarks are identical or similar, if goods whose use has gone beyond the approved scope are similar to goods of others, then infringement has been committed upon others’ trademark rights. This is based on the legal judgment of trademark infringement, namely, the following two conditions must be met simultaneously: the trademarks are identical or similar, and the goods are identical or similar, which is also covered in the right to forbid. The authors term it as the absolutist protection principle.

The second viewpoint holds that where one’s trademark is identical with or similar to another’s trademark, whether use of the trademark beyond the approved scope of goods has infringed others’ exclusive right to use trademarks is based on the criteria that the goods at issue are closer, more similar to others’ approved scope of goods, if the goods are closer to others’ approved goods, then infringement ensues. The authors term it as the flexible protection principle.

The authors believe that we need to rely on facts of each case to decide which principle should apply. The first viewpoint is clearly beneficial in combating bad faith use of trademarks beyond the approved scope of goods, but the likely fallout is that some businesses may fall into the shooting range even if they don’t have the intention to infringe or facts of infringement are not clearly ascertained, which goes against the equitable balancing of interests. In determining trademark infringement, we cannot simply equate facts with articles of law, and we need to weigh and consider from different perspectives such as the principle of right restriction (namely the principle of prevention of right abuse) and underlying economic values behind the trademarks. In particular, when a product is likely to be closer to another product the allegedly infringing business has been approved to use, then it will make no sense to expand others’ right to exclude to cover such product. The right to exclude cannot be abused and expanded infinitely. Furthermore, the trademark registered to be used for each product contains the right to exclude, because of the vagueness in defining the right to exclude, the rights between trademarks may overlap. If the overlap is directly deemed as infringement, abuse of rights and imbalance of interests will follow. However, if the judge, in hearing such cases, only adopts the flexible principle, the hearing will be more difficult, possibly tending to result in one-sided facts and one-way examination, and overlooking the alleged infringer’s subjective degree of bad faith, reputation of the trademark itself or any prior use. As a result, the flexible principle, on the contrary, becomes inflexible, the overall perspective of the judge will be stripped, the discretionary power will be affected, and the result of the hearing may not be necessarily the most fair and reasonable.

In summary, the authors believe that we need to make a prudent decision as to the allegedly infringing goods in such cases. Under normal circumstances, when an alleged trademark or sign falls into the scope of spillover use of a registered trademark, and such use belongs to use of the same trademark for the same goods with the approved scope of the right-holding trademark, then such use constitutes trademark infringement. When the alleged trademark or sign falls into the scope of spillover use of a registered trademark, and such use belongs to use of the similar trademark for the same goods with the approved scope of the right holding trademark, or use of the same or similar trademark for similar goods, then market confusion shall be examined and the “closer” way of judgment should be adopted to reasonably define the exclusion range of the right-holding trademark and ensure clearly demarcated boundaries in the trademark use among businesses. Of course, if the plaintiff’s trademark has enjoyed certain reputation, and the defendant has committed significant infringement in other aspects with the obvious intention of free riding, then willful infringement can be determined. In this case, there is a greater degree of ill-will, and it is not necessary to decide which is closer, the strong protection principle can be adopted to find for infringement.

In the application of the flexible protection principle, the “closer” way of judgment should give full consideration to the following factors: (a) whether the goods the alleged sign uses for are closer to the goods approved for use by the registered trademark, or closer to the goods approved to be used beyond the scope of the registered trademark in functionality, purposes, production divisions, sales channels, consumers, etc.; (2) whether the alleged sign itself is closer to the sign approved for use by the right-holding trademark, or closer to the sign for use by the registered trademark beyond the approved scope in terms of its shape, pronunciation, meaning, or the pattern and color of the design, or an overall structure of combination of all elements, or its three-dimensional shape, color combinations; (3) the above (1) and (2) ways of judgment should be based on the criteria that whether the use of the alleged sign is sufficient to make the relevant public believe that there is some association and likely confusion.

(Translated by Wang Hongjun)