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What can we learn from the MGM court decisions in China?

Xu Lin
12/03/2020

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China

Here we look at the lessons learnt from two significant decisions by the People’s Court of Pudong District of Shanghai about trade mark infringement and unfair competition of the MGM trade marks.
 
Last September 2019, the People’s Court of Pudong District of Shanghai made two significant decisions on the MGM trade mark infringement case and unfair competition case (MGM Lion Corp. and MGM Studios Inc. v  Shenzhen MGM Films Company). Both decisions have drawn lots of attention due to MGM's high reputation and the compensation it was awarded of 3 million Yuan, the maximum amount of statutory damage under the applicable law in each case. Meanwhile, it is quite impressive that the court decision recognised the reputation of the claimants’ English trade name and its abbreviation “mgm” and offered protection to them.


Brief overview

The claimants filed two lawsuits against the defendant for trade mark infringement and unfair competition. In the trade mark infringement action, the court held that the defendant's prominent use of the marks “米高梅” (the Chinese name of MGM) and “mgm,” and its self-proclaim as “米高梅(中国)影业 (MGM (China) Pictures),” “米高梅影业(MGM Pictures),” etc. easily caused confusion amongst the related public and therefore constituted trade mark infringement. In the unfair competition action, the court found the defendant's use of the claimant's trade names and its registration and use of the domain names was unfair competition.

Due to the close relationship between Trademark Law and Anti-unfair Competition Law, it can be quite controversial sometimes in practice regarding which law shall be applied to which infringements, e.g., the use of the domain name and trade name by the defendant in this case. In this blog we analyse these and other relevant court decisions and consider how the use of domain names and trade names can be dealt with in practice in litigation.


I.    Using MGM's trade mark as a domain name

A. Was it unfair competition?

There are four elements necessary for a defendant's act to be a tort of unfair competition: 
(a) The civil rights and interests the claimant claimed are lawful and effective; 
(b) The defendant's domain names or the main parts of the domain names are copies, imitations, translations, or transliterations of the claimant's well-known trade marks; or are the same with or similar enough to the claimant's registered trade marks or domain names that would confuse the concerned public; 
(c) The defendant has neither rights or interests in the domain names or their main parts, nor reasonable ground for registration or use; and
(d) The defendant's registration or use of the domain names is malicious.
(This is set out in Article 4 of the Interpretation of the Supreme People's Court on Application of Laws in the Trial of Civil Disputes Over Domain Names of Computer Network (“Judicial Interpretation of Domain Name Cases”).)

Here, the defendant registered and used the domain names “www.mgmchn.com” and “www.mgmchn.cn,” to franchise and start an MGM cinema on related websites. The Court considered each of the above elements:
(a) The claimants have exclusive rights to use the registered trade mark “mgm,” the main and significant part of the infringing domain names. The abbreviation of the claimants’ English company name, “MGM”, enjoys a high reputation in the entertainment and media industry, especially in the field of film. Therefore, the MGM Group and the claimants enjoy lawful and effective civil interests in “MGM.”
(b) The court found that “mgm” and “MGM” were the same and it would confuse the related public. 
(c) The defendant enjoyed no interests in “mgm,” and had no reasonable grounds to register it as its domain names. 
(d) It was therefore obvious that the defendant maliciously exploited the goodwill of the MGM Group and the claimants. Consequently, the court considered that the defendant's registration and use of the infringing domain names was unfair competition.

B. Was it trade mark infringement?

As to whether the registration and use of a domain name constitutes trade mark infringement, Article 1, Section 3 of Interpretation of the Supreme People's Court Concerning the Application of Laws in the Trial of Cases of Civil Disputes Arising from Trademarks (“Judicial Interpretation of Trade mark Cases”) states that it would constitute a trade mark infringement by registering the words or characters that are same as or similar to the registered trade mark of another as one’s domain name and engaging in electronic commerce of relevant goods via the domain name, which is likely to mislead the concerned public.

In the MGM case, the court did not expressly state whether the registration and use of the domain names by the defendant constituted trade mark infringement. However, in judicial practice regarding domain names disputes, courts usually firstly determine whether the defendant's registration and use of domain names satisfy the elements prescribed in Judicial Interpretation of Trade mark Cases or not. If it does not pass the test above but fulfills the four elements stipulated in the Judicial Interpretation of Domain Name Cases, the courts may consider it as unfair competition.

For example, in Guangdong Gongcha Investment Co., Ltd. v. Hangzhou West Lake Longjing Tea Co., Ltd., the court held that Gongcha Company’s registration and use of the domain name containing “gong,” which was similar to the trade mark owned by Longjing Company, constituted unfair competition instead of trade mark infringement. This was because Gongcha Company did not use the domain name to engage in any sale of tea or tea products, but only used it for promotion of its franchising business.


II.    Use of MGM's trade marks and trade name 

The court made the following rulings regarding the defendant's specific uses of the claimants’ trade names and trade marks, respectively:

A.    Defendant's change of its trade name to “米高梅” constituted unfair competition

MGM Group entered into the Chinese market as early as the 1990s. Its Chinese trade name “米高梅” has a great influence in the China. In 2013, the defendant changed its company name to current name and started to use “米高梅” as its trade name.  The defendant also engaged in franchising business of MGM cinemas without any authorisation by or affiliation with the claimants, which was highly likely to mislead the public to believe that it had specific connections with the claimants, and therefore caused confusion. Based on Article 6, Section 2 of the Anti-unfair Competition Law, the Court held that defendant's acts constituted unfair competition.

Meanwhile, the court expressly pointed out that defendant's acts mentioned above should be regarded as unfair competition also under Article 58 of the Trademark Law based on the claimants’ exclusive rights to use the registered trade mark “米高梅.”

B.    Defendant's use of “METRO GOLDWYN MAYER” and “METRO-GOLDWYN-MAYER” for its franchising business of MGM cinemas constituted unfair competition
 

Any foreign company name used within the territory of China for commercial purpose shall be ascertained as a company name as stipulated in Article 5, Section 3 of the Anti-unfair Competition Law (see Article 6, Section 1 of Interpretation of the Supreme People's Court on Some Issues About the Application of Law in the Trial of Civil Cases Involving Unfair Competition). As MGM Group has been using “METRO-GOLDWYN-MAYER” as its English trade name since it entered into the Chinese market, this trade name shall be therefore protected under Anti-unfair Competition Law. 

The court found that the defendant's use of the marks for its franchising business of MGM cinemas would mislead the public to believe that it had specific connections with claimants and cause confusion, which hence constituted unfair competition.

C.    Defendant's self-proclaim as “米高梅中国(MGM China),” “米高梅(中国)影业 (MGM (China) Pictures),” “米高梅影业(MGM Pictures),” “米高梅” in its business operations constituted trade mark infringement

Prominent use of the words that are same with or similar to the registered trade mark of another as one’s trade name on identical or similar goods which is likely to confuse the relevant public, shall be regarded as trade mark infringement (see Under Article 1, Section 1 of Judicial Interpretations of Trade mark Cases) .

Here, the defendant declared itself as “米高梅中国(MGM China),” “米高梅(中国)影业 (MGM (China) Pictures),” “米高梅影业(MGM Pictures),” “米高梅” in its business operations and did not use its full company name in a standard way. Instead, it prominently used the claimants’ registered trade mark “米高梅”. Therefore, the court held that it should be regarded as trade mark infringement.


Summary

To sum up, the reputation of the claimants’ trade names was recognized by the court here. The court held that the defendant's use of “米高梅” as its trade name and its use of MGM’s English company name for its franchising business constituted unfair competition. Meanwhile, regarding the act that the defendant declared itself as “米高梅中国(MGM China),” “米高梅(中国)影业 (MGM (China) Pictures)” etc. in its business operations, the court considered it as trade mark infringement. 

In legal practice, it is not always clear whether the use of another’s trade name shall be considered as trade mark infringement or unfair competition. In Li Huiting v. Ohsho (Dalian) Food Co., Ltd., the Supreme People’s Court clarified how to determine the application of Trade mark Law or Anti-unfair Competition Law under different circumstances: it shall be considered:
  • as unfair competition if the registration and use of the company name are unjustifiable, i.e. even a standard use of the trade name would be likely to result in market confusion; 
  • as trade mark infringement if the registration of the company name is proper, but the prominent use of the trade name causes market confusion.

In Yuli Xiaobalang Food Technology Co., Ltd. and Yuli Kaisi Food Development Co., Ltd. v. Zhou Hong, the court found that the registration and use of the company name by the appellants were lawful, but their prominent use of the trade name had constituted trade mark infringement.

In Lan Jianjun and Hangzhou Little Finger Vehicle Repair Technology Co., Ltd. v. Tianjin Little Finger Vehicle Repair Service Co., Ltd., the court held that Tianjin Little Finger Company’s registration and use of the company name breached the principle of good faith. The act would result in market confusion no matter whether there was prominent use. Therefore, the court considered it as unfair competition.


Conclusion and Comments: 

Due to the overlap in the protection scope of intellectual property rights between Trade mark Law and Anti-unfair Competition Law, certain infringements may involve both laws. The two laws provide different levels of protection for the right holders’ rights and interests in parallel. In practice, both in cases of trade mark infringement and unfair competition, the claimant needs to prove the popularity of his/her trade name or trade mark and the public confusion resulted from the defendant's acts. Consequently, many claimants choose to combine the two causes of actions in practice. In this case the claimants filed the two actions separately, which might be due to the limitation of statutory compensation. 

For right-holders to obtain comprehensive protection for their lawful rights and interests, it is important to be aware of the differences between the application of Trade mark Law and Anti-unfair Competition Law and adopt corresponding litigation strategies.

With thanks to Sherry Qian, Intern, co-author of this blog.
 

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