Spotlight on Asia
Broken English
With the growing importance of the Chinese market,
DLA Piper’s Edward Chatterton and Ann Cheung offer guidance
to brand owners doing business in China
T
he problem of trademark piracy is
well-known in China and, because
of China’s first-to-file trademark
system, trademark piracy continues
to be a thorn in the side of overseas
(ie non-Chinese) brand owners. An additional
and somewhat less well-known problem
occurs where the overseas brand owner has
registered its brand but has not registered a
Chinese equivalent.
Out of a total population of 1.4bn,
only around 10m Chinese people speak
English. This stark linguistic fact means that,
notwithstanding the huge growth in the
number of people learning English in China,
even very famous overseas brand will be
referred to by a Chinese language equivalent
of the overseas brand. If the brand owner does
not choose a Chinese language equivalent for
its brand, the mere fact of using the overseas
brand name in China will undoubtedly lead to
the natural emergence of a Chinese version
of the brand name adopted by Chinese
locals. This Chinese ‘orphan’ version of the
original brand may not necessarily carry the
connotations, or reflect the brand values,
which the brand owner would prefer. This can,
however, be the least of the brand owner’s
problems. The even bigger risk for the brand
owners is when a third party (frequently called
a “trademark pirate”) registers the equivalent
Chinese brand first. In this situation, the brand
owner faces the threat of losing the Chinese
brand and, worse still, being sued by the third
party registrant for using it.
This article focuses on two distinct but
parallel instances where this can occur. The
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first is with respect to a brand owned and
promoted by a company and the second
occurs in the unique situation where the brand
name is a personal name which is synonymous
with a famous person. Two recent cases are
illustrative of these issues.
Castel
This is what happened in a case involving the
prestigious French winemaker Castel. Castel
entered the Chinese market using a Chinese
equivalent of its Castel brand called ‘Ka Si Te’.
The Ka Si Te brand soon acquired a reputation
with the Chinese public. Crucially, Castel
only registered the ‘Castel’ brand and not its
Chinese equivalent, Ka Si Te.
A Chinese party managed to register the
Ka Si Te mark. Castel tried to cancel the pirate
Ka Si Te mark but, after a cancellation dispute
lasting six years which was appealed as far
as the Supreme People’s Court, Castel failed.
Castel was then sued by the Chinese registrant
for using the Chinese Ka Si Te mark. The trader
sued for infringement and for damages of up
to $31m.
Interestingly, during the course of the
proceedings, in response to an application
from the Chinese trader, the court applied a
property preservation order on Castel’s ‘Caste’
trademark in China (ie a trademark which was,
strictly, unrelated to the proceedings), meaning
that the mark could not be licensed or assigned
until the infringement case was resolved. The
Castel trademark was, in effect, acting as
‘surety’ for any damages which Castel was
required to pay in the event that the Chinese
trader succeeded in the proceedings and
May 2013
Castel did not comply with an order requiring
it to pay damages. It is believed that this was
the first time that a Chinese court had applied
a property preservation order to an intangible
asset.
Castel was finally ordered to pay
compensation to the Chinese party of
RMB33.7m (around $5m). The primary lesson
therefore is regardless of how famous and
well-known a brand is elsewhere around
the world, time should be taken to devise a
Chinese language equivalent of a brand and
that time and money should be spent in
registering that brand.
The decision is of particular note for
foreign entities which do not have significant
assets in China. Typically, such entities may
have considered themselves insulated from
the risk of litigation in China due to a lack of
assets in the country. However, even foreign
entities without significant assets in China
very often have trademarks there. Those
trademarks are now in the firing line if the
foreign entity ever gets sued, whether for
trademark infringement or for other causes
of action, particularly where the foreign entity
has limited assets in China.
Michael Jordan
After two decades on the basketball court,
Michael Jordan, one the greatest basketball
players of all time, is currently learning the
rules of defence and offence in a different
game: the Chinese legal system. Qiaodan
Sports Company Limited (Qiaodan Sports), a
Chinese sportswear company, is throwing its
legal dispute with him back into his court.
Intellectual Property magazine 63
Spotlight on Asia
Michael Jordan’s fame in China is longstanding. He was first seen on Chinese television
playing for the 1984 gold medal-winning US
basketball team at the Los Angeles Olympics.
Since then, he has become hugely famously in
China, both under his English name but also
under his Chinese name 乔丹 which is the
Chinese equivalent of the name Jordan. This
Chinese name is shown in pinyin, the official
system which is used to transcribe Chinese
characters into Latin script, as ‘Qiaodan’. While
Michael Jordan registered trademarks for Jordan
in English in China as far back as 1993, he never
applied for any registered trademarks for 乔丹,
nor for the pinyin representation Qiaodan.
Qiaodan Sports first applied to register
the name Qiaodan when it applied to use the
name with the logo of a baseball player at
bat. It also filed several trademark applications
for 乔丹 and Qiaodan, which were approved
for registration in 1998. Qiaodan Sports has
been using its Qiaodan and 乔丹 brands since
2000 and has made significant brand-building
efforts over the years. Qiaodan Sports currently
owns about 6,000 shops in China which trade
under its name.
In November 2011, Qiaodan Sports won
approval from the China Security Regulatory
Commission for an IPO of 112.5m shares to
raise about RMB1.1bn (approximately $178m).
On 21 February 2012, just as Qiaodan
Sports was set to debut on the stock market,
Michael Jordan cried foul and commenced
proceedings against Qiaodan Sports for the
unauthorised use of his name at Shanghai
No. 2 People’s Intermediate Court. He claimed
that Qiaodan Sports was illegally using his
Chinese name and his jersey number 23 on
their products without his permission. Since
Michael Jordan has never registered any
trademarks for his Chinese name, his claim is
based on the grounds that Qiaodan Sports’
use of his Chinese name was in breach of his
rights in his Chinese name. He demanded that
Qiaodan Sports stop using the name and the
trademarks and requested compensation.
While Chinese law generally protects parties
who hold registrations and who file early for
them, this does not mean that it is open season
to register the names of famous people, even
if they do not have registered trademarks.
Specifically, Chinese law protects the right of
personal names under Article 99 of 民法通则
(General Principle of Civil Law) and prohibits
infringement of the naming rights of individuals
under Article 2 of 侵权责任法 (Torts Liabilities
Law). These principles are also reflected in
Article 31 of 商标法 (Chinese Trademark Law)
which provides that an individual’s name rights
shall be protected as a prior legitimate right.
In its defence, Qiaodan Sports contended
that the Chinese name 乔丹 and its pinyin
64 Intellectual Property magazine
representation Qiaodan were only a translation
of the English word Jordan and that they were
not Michael Jordan’s real name or full name.
It noted that there were about 4,600 Chinese
citizens with the name Qiaodan and even more
foreigners that have translated their names to
Qiaodan. As such, it argued that 乔丹 and
Qiaodan should not belong exclusively to
Michael Jordan.
These proceedings were brought following
recent decisions by the Chinese courts in
favour of protecting the naming rights of
other well-known basketball players such as
Yao Ming in 2011 and Yi Jianlian in 2010. A
Chinese court ruled for former NBA player, Yao
Ming, who challenged Wuhan Yunhe Sharks
Sportswear Company for using his name and
the logo, Yao Ming Era, on its products. The
company was forced to stop using the name
and to pay RMB300,000 in damages. Another
NBA player, Yi Jianlian, won against Fujian Yi
Jianlian Sport Goods Company at a Chinese
court which held that an individual’s name
right should be recognised as a prior right.
To slam dunk his naming rights claim,
Michael Jordan will need to establish that:
1. He is a famous public figure and his fame
under his Chinese name preceded Qiaodan
Sports’ trademarks
2. Qiaodan Sports has acted in bad faith by
intentionally using his Chinese name
or other personal attributes without his
permission
3. The use of his Chinese name or other
personal attributes has injured him by
causing confusion among consumers who
misguidedly associate Qiaodan Sports or
their products with him.
The Shanghai court accepted this case on 1
March 2012, and there has not yet been any
verdict so far.
In an interesting twist to this case, on
26 March 2013, Qiaodan Sports threw the
ball back into Michael Jordan’s court and
countersued him for an apology and damages
at the Quanzhou City Intermediate People’s
Court in Fujian, alleging that the above lawsuit
has tarnished its reputation and thwarted
its plan for an IPO on the Shanghai stock
exchange. The Fujian court accepted the case
on 2 April 2013.
Many sports companies in China have been
looking to capitalise on the sudden popularity
of NBA surprise standout Jeremy Lin by selling
jerseys and t-shirts bearing his Chinese name,
Lin Shuhao, or his English name. The Financial
and Economic Committee of the National
People’s Congress recognises that there are
many businesses that register the names of
celebrities as trademarks, affecting the rights
and reputation of these celebrities and public
May 2013
interests. Therefore, they have already made
recommendations to the Legislative Affairs
Office of the State Council for amendment
to 商标法 (Trade Mark Law) in order to give
additional protection to the naming rights of
individuals.
There are two practical consequences of
these cases for overseas brand owners. Firstly,
these cases highlight yet again the importance
to overseas brand owners of ensuring that
they adequately protect their brands in China.
Failing to file trademark applications in China
at the earliest possible date is a mistake which
many overseas brand owners continue to
make, despite the fact that China has clear and
well-established rules giving preference to the
party who is first to file. A prudent trademark
protection strategy should involve (where
necessary) devising and, just as importantly,
filing to protect the Chinese language version
of their mark.
With respect to the particular situation of a
foreign celebrity, he or she should not assume
that their name rights necessarily extend to
Chinese equivalents of their name, such as
乔丹 or the pinyin representation of the
celebrity’s name such as Qiaodan. As well as
registering their name in Latin characters,
celebrities should, at an early stage, invest time
and money in registering the Chinese equivalent
of their name in order to avoid third parties in
China from registering it before they do.
Authors
Edward Chatterton is a partner (foreign legal
consultant) in the intellectual property and
technology team based in Hong Kong. He
specialises in intellectual property work, with
a particular emphasis on providing litigation
and transactional intellectual property advice.
Ann Cheung is a trainee lawyer in DLA Piper’s
intellectual property & technology group,
based in Hong Kong. Cheung has experience
in the sports, media and entertainment sector
and has assisted on a number of high profile
deals including structured finance work for
Hollywood studios, litigation work for
football organisations, the sales and
purchasing of IP rights, the acquisition and
disposal of broadcasting companies and joint
ventures and advice on data protection laws
and copyright assignments.
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