Are Zong Qinghou’s Proposed Trademark Reforms Viable?

wahaha(By You Yunting) Recently, Chairman Zong Qinghou of Hangzhou Wahaha Group, acting as NPC representative (NPC refers to National People’s Congress), proposed a draft proposal revising the Trademark Law and strengthening the protection of well-known trademarks. We have previously introduced this case in the article Wahaha Group suing KMPG in China, please read this post for further background information. In my opinion, his draft indicates that Chinese entrepreneurs have already found that the growth of Chinese enterprises will be limited unless they improve the standard of protection offered under intellectual property rights law. However, his draft only focused on the intellectual property rights protection of the Wahaha Group, did not account for the interests of the public, and required special protection for the Wahaha Group beyond conventional protection from the government. As such, his draft is not practical.

In an interview of Xinhuanet (the official China news website), Zong Qinghou stated that Wahaha is becoming famous all over the world and would like to be a famous Chinese world-brand but that the inadequate cross-protection provisions for well-known trademarks is preventing the further development of the Wahaha Group. Furthermore, as the Wahaha Group is growing in the food and drinks industry, if companies from every industry used Wahaha as brand, nobody would know what Wahaha produced and specialized in.

Zong Qinghou stated that the Wahaha Group had already taken such strategies as defensive trademarks and protective trademarks, and had separately applied for the Wahaha trademark under various classes. However, the provision stipulating the cancellation of a registered trademark based on the cessation of use for three consecutive years did not provide well-known brands with sufficient trademark protection.

Thus, Zong Qinghou proposed that Chinese governments should protect these well-known trademarks, with potential for worldwide recognition, and prevent other enterprises from registering a well-known brand, such as Wahaha, under different classes. However, despite Wahaha having applied under various classes for trademark, other companies’ registering similar names are likely to create confusion in the relevant public as to a possible relationship between Wahaha and other unauthorized companies.

Lawyers’ Comment:

Wahaha Group has strong trademark awareness. According to our search on the website of the Chinese Trademark Office, for the purpose of protecting Wahaha, the Wahaha Group has registered the Wahaha trademark under all 45 classes and applied Wahaha for defensive trademark protection for all of the last century. In addition, the Wahaha Group filed an application for Wahaha under all classes. As long as the applicant registering the Wahaha trademark is not the Wahaha Group, applications would constantly be in a status of opposition backed by the Wahaha Group.

However, his draft defies the original intent behind intellectual property rights laws and regulations, which are designed to give consideration to both the interests of the trademark right holder, i.e., Wahaha Group, and the public, not merely the right holder.

Paragraph 2, Article 13 of the Trademark Law stipulates that, where a mark is a reproduction, imitation, or translation of a third party’s well-known trademark, which has been registered in China, regarding of different or other types of goods, which may mislead the public and damage the interests of the registrant of the well-known trademark, such a mark shall not be registered and will be prohibited from use. This article includes two standards: anti-confusion and anti-dilution. The purpose of trademark anti-confusion laws are to prevent the public from confusion between the subsequent registered trademark and prior existing well-known trademarks, while trademark anti-dilution refers to the circumstance where a well-known trademark is registered by a third party under different class irrelevant to the said classification of the well-known trademark, resulting in harm to that well-known brand.

On the question of Wahaha, one must apply the standard of trademark anti-confusion and also cautiously apply the standard of trademark anti-dilution. The reason for this is that Wahaha originated from a famous Chinese song in which the author initiated a lawsuit against Wahaha Group on the grounds that Wahaha Group used the name of the song as a registered trademark (Note: the link is in Chinese). Even though the court did not rule in favor of the author, there is no doubt that Wahaha is not an original brand made by Wahaha Group.

Therefore, when governments are attempting to protect the brand of Wahaha, the interests of the public should be given consideration, as it is inappropriate to monopolize the profits by one company. If one were to apply or use the Wahaha mark for the goods and services of non-Wahaha Group operations, thus being unlikely to lead the public into confusion as to a non-existent association, such an application should be registered and not prohibited from use.

Next I will address the question of a registered trademark being canceled after disuse for three-consecutive years. In my opinion, such a provision would create risks for companies concerned about rush registration, who attempt to apply trademark registration under all 45 classes. A company applying for a trademark under a non-operating business category will infringe the interests of the public and, as such, it is fair that a company can apply for a trademark but also face a risk of trademark cancellation.

In Conclusion, as for his draft that the Chinese government should protect well-known trademarks with potential to be world famous brands, and prevent other enterprises from registering such a brand-name under different classes, such a proposal is a claim for special privileges that violates the principles of openness, fairness and justice in the market economy.

 Lawyer Contacts

You Yunting86-21-52134918

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