Enterprise name vs. trade mark: throwing a straw against the wind?

Yes, probably.

Enterprise names in China 

In China, enterprise names must be composed in a specific format. The basic structure is shown below*: 

Enterprise name = Administrative division + trade name + industry + organisational form 

e.g.  Hunan Valin Steel Co., Ltd. 

Compared to other countries, it would seem that China places extra significance on administrative divisions. This is understandable since it provides geographic information that helps consumers distinguish between different market players across the vast Chinese territory. 

Sometimes, when certain conditions are satisfied, a business entity might be able to use an enterprise name that does not contain an administrative division, e.g. Tencent Holdings Ltd. and New Oriental Education & Technology Group Inc. These specific conditions include being approved by the State Council, or that the registered capital/fund value is at least CNY 50 million. In such cases, authorisation can be granted by the State Administration for Market Regulation (known, prior to the 2018 government administration overhaul, as the State Administration for Industry and Commerce, i.e. SAIC). 

Within the framework of the basic four-element structure, many similar-sounding enterprises names are, in fact, possible. Given the dominant role of the trade name, it would seem that this unhappy situation could easily taken advantage of by free riders: 

e.g. 

Beijing KatKat Information Technology Co., Ltd. 

Shanghai KatKat Information Technology Co., Ltd. 

Beijing KatKat Information innovation Co., Ltd. 

Beijing KatKat Information innovation Group Co. Ltd. 

… … 

The co-existence of similar enterprise names does not necessarily cause problems unless the identical trade name has been registered as a trade mark. In this case, the trade mark owner can seek to challenge the name. 

A case in point

Chengdu Huamei Dental Chain Co., Ltd. (‘Chengdu Huamei’) registered the two trade marks below in 2001 and 2005, respectively. 

More than two thousand kilometres away, Shanghai Huamei Women’s Hospital (later re-named Shanghai Huamei Medical Cosmetology Hospital, ‘Shanghai Huamei’) was founded (in May 2005). Chengdu Huamei and Shanghai Huamei share the identical trade name ‘Huamei’. 

In 2017, Chengdu Huamei sued Shanghai Huamei in the Shanghai Pudong New Area People's Court, claiming that: (1) Shanghai Huamei had been using the trade name ‘Huamei’ without Chengdu Huamei’s authorisation, thus committing acts of unfair competition; and (2) Shanghai Huamei had infringed Chengdu Huamei’s exclusive trade mark rights by frequently and prominently using phrases such as ‘Huamei’, ‘Shanghai Huamei’, ‘Huamei Dental’ and ‘Huamei Plastics’ in their business premises, on their website, their WeChat public account, etc. The alleged infringement also included using ‘Huamei’ and ‘Shanghai Huamei’ as keywords for Baidu ads shopping bidding. 

Chengdu Huamei requested that Shanghai Huamei: (1) immediately stop the above-mentioned infringements and the unfair competitive behaviour; (2) compensate for the economic losses, the investigation costs and any reasonable expenses incurred in the process of rights protection, and (3) publishe an apology to alleviate any negative impacts arising from the case. 

In reply, Shanghai Huamei contended that: (1) such usage in the provision of services and publicity were merely fair use of its own enterprise name, and did not constitute trade mark use, let alone trade mark infringement; (2) Shanghai Huamei’s sign of enterprise (see below) differed significantly from the trade mark registrations at issue; and (3) the dentistry service they offered was entirely local so their respective markets were completely separate from each other geographically, thus no confusion would be caused. 

First instance 

[2017] Shanghai 0015, First Instance Civil Judgement No. 15920 
The full text of this ruling (.pdf) is available here (in Chinese) 

Considering the facts, including the difference in business scope and the low market recognition at the time of establishment, the court ruled that merely having an identical trade name would not lead to the conclusion that Shanghai Huamei committed unfair competition or acted as a free rider. Secondly, most of the uses of ‘Huamei’ or ‘Shanghai Huamei’ for publicity purposes fell within the scope of fair use of Shanghai Huamei’s own trade name. However, when it came to the use of the signs containing ‘Huamei Dental’ ‘Huamei Plastics’ and ‘Shanghai Huamei’ that were similar to the trade marks at issue, the court found that it could easily cause confusion among members of the public and thus amounted to trade mark infringement. 

On appeal 

[2018] Shanghai Final Civil No. 143 
(Once published online, the full text of this final judgement will be linked here)

Shanghai Huamei appealed to the Shanghai IP Court submitting, among other things, that no trade marks had been infringed since the specific uses of ‘Huamei Dental’ ‘Huamei Plastics’ and ‘Shanghai Huamei’ were merely fair uses of its own trade name, ‘Huamei’. They argued that such use, at least in Shanghai, caused no confusion among consumers. 

After hearing the case, the Shanghai IP Court held that, although no intentional confusion could be proven, the different functions of trade mark and enterprise name determined the different strength of protection they would receive when the two were used as commercial signs: 

“The main function of an enterprise name is to distinguish between market actors (producer or operator), whilst the main function of a trade mark is to indicate the goods or services.” 

When a trade name was prominently used as a commercial sign on goods or services that were the same as, or similar to, a registered trade mark, the Shanghai IP Court ruled that the trade mark registration should hold priority to prevent confusion among consumers. 

In this case, the enterprise name ‘Shanghai Huamei Medical Cosmetology Hospital’ contained no references to ‘dental’ or ‘plastics’, and in 2007, Shanghai Huamei specifically removed ‘stomatology’ from its registered scope of business. The prominent use of ‘Huamei Dental’ and ‘Huamei Plastics’ did not fall within the permitted use of its own enterprise name and contravened trade mark law. In addition, since the word ‘Huamei’ was exactly the same as the text part of the registered trade mark, and the words ‘dental’ and ‘plastics’ were already approved services of the trade mark, this could easily have caused confusion among uninformed members of the public and thus constituted infringements of the Chengdu Huamei’s exclusive trade mark rights. 

In view of the above, the Shanghai IP Court dismissed the appeal and upheld the original judgement. 

Judge’s comments 

After the final ruling, Judge Xu from the Shanghai IP Court stated that the exclusive right to use a registered trade mark extended nationwide and was not limited to the specific regions of China in which it was actually used or acquired. In this case, although the two enterprises were currently operated rather locally, no possibility of future expansion of their services could be ruled out. That was to say, with the expansions in terms of business operational areas and their respective reputations, if the boundaries between the uses of their commercial signs were not clarified in time, it would inevitably lead to confusion in the market regarding the identifications of ‘Huamei’ ‘Shanghai Huamei’ ‘Huamei dental/ dentistry’ and ‘Huamei plastics’, which would not only damage the interests of the relevant public, but also would adversely affect the continued operations of both parties.

* Certain flexibilities are allowed by law regarding this basic structure, which will not be elaborated in this blog post. 

Photo: Shelley - Tian's kat.