Why did the Courts Determine Google Receive a Prior Right in its Pre-approved China Enterprise Name?

01300000044935126051590609706(By You Yunting and Wang Ting) Abstract: Generally, before registration, an enterprise never receives corresponding protection for its enterprise name. However, in relation to its pre-approved enterprise name before registration, the pre-approved enterprise name shall be provided appropriate protection.

Today, we will introduce a typical case touching upon this issue, specifically, the process of approving an enterprise name under the establishment of a foreign-invested company. In this case, Google successfully defended itself against a Chinese enterprise, and finally won rights in the Chinese transliteration of its name, written in Chinese as“谷歌” and pronounced “gu-ge”.

(Interpretation: To better understand the companies in this post, GOOGLE refers to Google Inc. (NASDAQ:GOOG) in the United States; “谷歌信息技术(中国)有限公司 Guge Information Technology (China) Co. Ltd”, hereinafter, refers to Google China; “北京谷歌科技有限公司Beijing Guge Keji Technology Co., Ltd” , hereinafter, refers to Beijing Google, a company registered by a Chinese national.)

Introduction to the Case:

On March 20, 2006, the State Administration for Industry and Commerce approved the enterprise name “谷歌信息技术(中国)有限公司 Guge Information Technology (China) Co. Ltd” (the “Google China” hereinafter) and issued an Approval of a Pre-approved Enterprise Name. This pre-approval would last until August 10, 2006.

On April 12, 2006, Google officially published its Chinese name “谷歌 Guge”. At about 15:05 on that day, related reports and news about Google’s Chinese name “谷歌 Guge” could be seen on the Internet.

At 15:50 on April 12, 2006, Mr. Tian Yunshan’s (a Chinese person) application for “北京谷歌科技有限公司Beijing Guge Keji Technology Co., Ltd” (the “Beijing Google”) received preliminary approval via the Internet.

On April 19, 2005, Tian Yunshan received a business certificate for the company Beijing Google.

On October 20, 2006, the Beijing Municipal Bureau of Commerce approved the establishment of Google China.

On November 24, 2006, Beijing Municipality Administration for Industry and Commerce issued a business license forGoogle China.

On September 24, 2007, GOOGLE signed a licensing agreement for its business name and trademark with Google China. The content of the agreement is as follows: Google China could use “GOOGLE” and its business name within Mainland China; Google China could use the “GOOGLE” trademark and “谷歌 Guge” transliteration trademark under the classifications of 9, 35, 38 and 42; Further, they agreed that the licensing agreement will take effect as of the date of the establishment of Google China, and continue to be effective in perpetuity, terminating only in the event that the licensee terminates the license agreement.

On November 14, 2007, GOOGLE signed a contract authorizing Google China to file a lawsuit in the name of GOOGLE against Beijing Google.

The case was heard in the first instance, second instance, and after a retrial, concluded with Beijing Google losing the case. Although the opinions given by the three courts that heard the case and dispute are not entirely the same, the conclusions all three courts came to were uniform: that Google China should be considered to have obtained a prior right for its preliminarily approved enterprise name in favor of it and not Beijing Google. The reasons are as follows: Google China received its pre-approved enterprise name on March 20, 2006 – earlier than that of Beijing Google. With regard to Google China, taking into consideration the fact that it’s a foreign-invested company, the establishments and registration procedures for a foreign-invested company are far more complex than that of a Chinese-invested enterprise. This led to the actual establishment of Google China much later than that of Beijing Google. However, Google China’s subsequent establishment did not affect its prior right in its preliminarily approved enterprise name. Therefore, the courts determined that Google China should receive a priority right for its pre-approved enterprise name against Beijing Google.

Lawyers Comments:

In China, when establishing a foreign-invested company, 4 steps must be carried out, as follows:

1. Feasibility study of its operation (including economic feasibility and legislative feasibility);

2. Enterprise name approval (applying for a pre-approved enterprise name with the competent administration for industry and commerce)

3. Examining and approving the feasibility reports by Chinese foreign trade departments (a substantive step for the establishment of foreign-invested companies)

4. The business registration at the administrations for industry and commerce (this step refers to examining and approving the business registration by the administrations for Industry and Commerce. If an establishing company is relevant to specific industries, such as foods, medicine and hygiene, related management approval shall be first examined before this step.).

Generally, after a pre-approved enterprise name is registered, it shall apply for examination and approval authority, actually, referring to the third step. The examination and approval authority shall make a decision on whether or not to approve an application to establish a foreign-invested company within 90 days of the date on which it receives all the documents pertaining to the application. Where the examination and approval authority finds that the aforementioned documents are incomplete or inappropriate, it may require the applicant to submit supplemented or corrected documents within a specified period of time (note: the period for the submitting supplemented or corrected documents falls outside of the 90 day limitation for approval). After an application to establish a foreign-invested company is approved by the examination and approval authority, the foreign investor shall, within 30 days from the date on which it receives the approval document, apply to the administrative authority for industry and commerce for registration and obtain a business license. At this point, a foreign-invested company can now be considered to be officially established.

In this case, the key point is whether Google China ought to receive a prior right for its pre-approved enterprise name. According to the relevant laws and regulations in our country, prior ownership of an enterprise name is a defense against a latter right. However, whether a pre-approved enterprise name can obtain a prior right, which can defend against a subsequent right, is a worthy question. In addition, in this case, one factor that ought to be taken into consideration is that the registration procedure for a foreign-invested company is far more complex and requires a longer length of time than that of a Chinese-invested enterprise.

As Article 3 of the Administrative Provisions on the Registration of Enterprise Names provides:

An application filed by an enterprise for registration of its enterprise name shall be subject to the examination and approval of the competent registration authority. No enterprise name may be used without due approval and registration and the exclusive right to the use of an enterprise name shall be subject to prescribed limits.

With this, on one hand, an enterprise may not be entitled to its enterprise name before a business registration.

On the other hand, this does not mean that the enterprise may not enjoy any protection before a formal business registration. Pursuant to Article 25 of these regulations, the following is expressly stipulated:

Where a dispute arises between two or more enterprises over the same or a similar enterprise name that has already been registered, the competent registration authority shall make a decision in accordance with the principle of prior registration. Where a dispute arises within Chinese territory between a Chinese enterprise and an enterprise from a foreign country or region over an enterprise name and the enterprises apply to a competent registration authority for a decision, the State Administration for Industry and Commerce shall make a decision in accordance with the principles specified in international treaties ratified by China or to which China is a party or in accordance with these Regulations.

That is, when two or more enterprises enter into a dispute over the same or a similar enterprise name that has already been registered, then, in accordance with the legislative principle of fairness and impartiality, a decision shall be made by the competent registration authority relying on the principle of prior registration in order to protect the prior registered enterprise name. In this case, Google China registered its enterprise name earlier than that of Beijing Google; considering the fact that the delay of Google China’s application for its business registration was not due to its own fault, therefore, the enterprise name of Google China shall be protected and Beijing Google’s ownership of its enterprise name cannot defend itself against the prior ownership of the enterprise name Google China. Based on these reasons, the courts supported Google China’s claim.

In the author’s opinion, where GOOGLE enjoys a high degree of notoriety in regard to its enterprise name and registered trademark, GOOGLE rightfully received preliminary approval for its enterprise name in China; in addition, GOOGLE published and publicized its Chinese name “谷歌 Guge” to a global audience through the Internet. Meanwhile, Tian Yunshan’s registration for”谷歌 Guge” as an enterprise name would undoubtedly result in consumer confusion between the former and the latter. Due to these aforementioned reasons, we support the courts’ decision in this case.

Lawyer Contacts

You Yunting86-21-52134918 youyunting@debund.com/yytbest@gmail.com

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