The Internet Corporation for Assigned Names and Numbers (ICANN) announced recently that Chinese could be used in registering domain names, reporter learned from China Internet Network Information Center (CNNIC). This is a great step in the reform and improvement for Internet domain name system towards opening up to more languages and characters.

Qi Lin, the assistant director of CNNIC said that the non-English domain names' application and deployment would be "fast tracked" hereafter. With several International standards for the Internet and nearly ten-years running and technical support experience, ".中国" (China in Chinese character), representing the Chinese top-level domain name is expected to be the world's first Chinese top level domain name. Internet users will be able to use Chinese to access to the Internet anywhere in the world.

At present, Microsoft IE, Google Chrome, Firefox and other main browsers have achieved barrier-free support for ".中国". While search engines like Google and Yahoo have begun to record the web sites with the domain name ".中国". On the other hand, CNNIC has finished technical work and billions of netizens using the Chinese language worldwide will be able to surf the Internet by entering Chinese-language domain names in August.

Foreign and domestic entities and individuals are entitled to apply to register domains with ASCII characters followed by the Chinese characters ".中国" from October. 29, 2012 (Beijing Time). CNNIC Registry will process applications in order of receipt, first-come, first-served.

We Lehman, Lee & Xu, one of China's most prominent and Beijing's largest law firm, will remain at your disposal for the domain name registration in China including the ".中国" domain name. For more details, please feel free to contact us via the following contact details:

Email: mail@lehmanlaw.com
Tel: (86) (10) 8532-1919
Fax: (86) (10) 8532-1999

Since China’s WTO accession, trademark litigation has boomed along with nearly other IPR-related statistics.  From 2002 to 2011, all levels of court accept the trademark civil disputes over 45,706 cases, with an average annual growth rate reached 39.8%.  Litigation involving trademark validity at the Beijing No. 1 Intermediate Court grew even quicker from 2007 to 2011, to 5383 cases, and the annual average growth rate reached 57.2%.  Trademark criminal cases numbered 8194 during this period, with an average annual growth rate of 27.9%.    In sum, administrative validity cases have grown the quickest by far – due in part to the rapid growth in TM filings.  Administrative cases were  followed by civil cases and then criminal cases, and all of them showed double digit growth.

However, civil cases are still a fraction of administrative trademark enforcement cases, and the above data suggests that the relatively low level of civil trademark litigation in absolute numbers may be due to the high level of SAIC administrative actions.  There were 68,836 reported administrative trademark enforcement actions last year alone or over 20,000 more than the total number of civil cases for the period from 2002-2011.  Moreover, 17,022 of these cases were taken on behalf of foreigners — nearly 14 times the number of all foreign-related civil litigation involving all types of IP rights that were disposed of by the China courts in 2011 (1,321)

Under Chinese trademark law, only a registered trademark enjoys protection and the first person or entity to register it becomes its lawful owner, even if that trademark has already been used by others in China. The only exception to this rule is that of an unregistered trademark which, through its intense and prolonged use in China, has acquired a good reputation among the relevant public or has become famous nationwide at the time of registration of a hostile trademark.

Known as “trademark trolls,” certain Chinese companies or individuals are known to actively follow a strategy of registering intellectual property rights in China that arguably belong to their foreign competitors. Aware of the very strict “first to file” principle, they identify, apply and register trademarks belonging competitors who have forgotten or not yet taken steps to register them. These “stolen” trademark rights create great uncertainty for the foreign investor doing business in China. More worryingly, in some cases the IP rights can be enforced against the foreign investor for opportunistic and unfair motives as was the case this year when a European wine manufacturer, Castel Freres SAS, was ambushed by a Chinese competitor over a “stolen” trademark with catastrophic consequences. In April 2012, Castel wasordered to pay more than $5 million in compensation, one of the largest ever sums of damages in an IP infringement case in China.

Background Facts

Castel Group is one of the world leaders in wines, beers and soft drinks. An internationally recognized name, it has a wide range of brands and presence in more than 130 countries.

Castel Freres SAS entered the Chinese market more than 14 years ago, setting up its filling center in China in 1998.

In 2001, Castel started cooperation with Chang Yu, the largest wine maker in China, under the name “Ka Si Te - Chang Yu Chateau” and with the brand name “Zhang Yu Ka Si Te." Sales grew very well and the brand “Ka Si Te” gained more and more reputation amongst Chinese consumers. However, on March 7, 2000, the name “Ka Si Te” had been registered as a Chinese trademark in class 33 by Wenzhou Wujin Jiaodian Huagong Group. In 2002 it was then transferred to a Li Dao Zhi, a Spanish-Chinese winemaker. In 2008, almost eight years after the original trademark registration, Li established Shanghai Ka Si Te Wine Co. Ltd., which sells wine exported from France to China with the trademark “Ka Si Te.”

It was only in 2005, almost 10 years after having started marketing the name “Ka Si Te” in the Chinese market, that Castel became aware of the hostile trademark “Ka Si Te” of Li. At this time, Castel applied for the trademark application “Ka Si Te” in class 33, but this was rejected due to its collision with the prior “Ka Si Te” of class 33 registered back in 2000 and owned by Li.

The Castel Freres Civil Dispute

On July 8, 2005, Castel filed with the Trademark Office a request to cancel Li’s hostile trademark “Kai Si Te” for nonuse for three consecutive years. This cancellation dispute lasted for six years and the final ruling came from the Supreme People’s Court on Dec. 17, 2011, rejecting the request for cancellation.

In October 2009, parallel to the cancellation action, Li together with Shanghai Banti Wine Company filed a trademark infringement lawsuit against Castel and Shenzhen Castel (its Chinese dealer) with the Wenzhou Intermediate People’s Court. In this civil complaint, Li claimed compensation for RMB 40 million (€5,120,000) by alleging that Castel and its dealers had illegally earned such an amount of profit by their unauthorized use of his trademark “Ka Si Te” from January 2007 to October 2009, including using the brand on wine products, advertisement and packaging.

The Wenzhou Intermediate People’s Court held three hearings, during which Castel argued that its use of the trademark “Ka Si Te” was in good faith as “Ka Si Te” is long known to be the official translation of the Latin name “Castel” and has served as graphic illustration of the trademark “Castel,” rather than being an indication of the origin of the wine sold in China.

Castel also argued that it is their Shenzhen dealer who labels the imported wine with the trademark “Castel” together with the Chinese characters “Ka Si Te” and therefore the dealer should be the only defendant in this case. The Wenzhou Intermediate People’s Court judged that Castel had always had knowledge of the registered Chinese trademark “Ka Si Te," and that the wine Castel produced in France would have been labeled with the infringing mark “Castel Ka Si Te.” Therefore, Castel and Shenzhen Castel were to be seen as joint infringers.

The Civil Judgment

On April 10, 2012, the Wenzhou Intermediate Court issued the first instance judgment regarding the trademark infringement lawsuit between LI Dao Zhi and Castel & Shenzhen Ka Si Te Wine. The court judged that theconduct of the two defendants infringed upon the trademark rights of Li and condemned the defendants to pay damage compensation for RMB 33,734,546.26 (more than $5 million). To date, this is one of the largest damage compensations for an IP infringement case in China.

Collateral Damage

Li and his company also started enforcing their registered trademark “Ka Si Te” against Castel and its distributors, wholesalers and retailers in China, through what may be defined an anti-counterfeiting strategy.

For instance:

• Li sued Beijing Yansha Yonyi Mall, Carrefour and Wal-Mart Stores Inc. for selling fake “Ka Si Te” wines.

• In the litigation against Beijing Yansha Youyi Mall No. , the Beijing Higher People’s Court ordered Beijing Yansha Yonyi Mall stop selling 14 types of wines bearing the “counterfeit” Chinese trademark“Ka Si Te."

• Most recently, on April 23, 2012, Shanghai Ka Si Te sued four companies selling wine bearing with the “fake” Chinese trademark “Ka Si Te” in three courts in Shanghai and has been coordinating with other relevant enforcement departments to raid and penalize the infringers.

Li is ultimately lawfully enjoying the benefit of an exclusive IP right that really should have belonged to Castel, following years of investment in building up their brand in China. In sum, with the cooperation of local trademark enforcing administrations, Li has been able to raid Castel wines in 50 cities in China.

Brief Analysis

In this case, it was clear in 2000 when Li registered “Ka Si Te” that the same name had been used enough by Castel to become famous in China.

The word “Castel” sounds similar with the Chinese word “Ka Si Te," and rarely will Chinese consumers be able to tell the difference between the two, since Chinese customers are more pronunciation-oriented and would tend to deem the two trademarks to sound identical.

Although Castel set up its own business in China early in 1998, and cooperated with one of the top three wine makers-Zhangyu in China to produce wine bearing with the brand “Zhang Yu Ka Si Te," it failed to applyimmediately the Chinese name “Ka Si Te” in class 33 when it started marketing the brand “Ka Si Te” and“Castel” together.

Recognizing this mistake, Li recognized the opportunity and has ultimately exploited it to his advantage. Unlike many trademark grabbers, who register trademarks of others without intention of using it, in this case it was registered with the intention of preventing a competitor’s brand gaining lawful access to the Chinese market.

Conclusion

Clearly Castel should have registered “Ka Si Te” immediately before or at the latest upon entering the Chinese market in 1998.

Any enterprise seeking to sell their products or services in China needs to plan the construction of an appropriate trademark portfolio as early as possible.

Ideally, trademarks should be registered in China even when the foreign enterprise is currently using China only for manufacturing its products. This category of enterprise is particularly at risk as it raises awareness of the brand in China among trademark trolls looking for this sort of opportunity. Companies who later decide to sell these same products China can find their trademarks already “occupied” by competitors (sometimes even their Chinese business partners). Also, if they do not plan to sell in China at all in the foreseeable future, Chinese competitors may still register their trademarks in China and use them to shut down their manufacturingoperations.

Another lesson to learn from such a case is that when applying for a Latin name in China as a trademark, a suitable Chinese translation or transliteration, or transposition should be immediately conceived and registered along with the Latin name.

Failure to plan ahead to protect your trademarks in China may cost dearly as the Castel case shows, or you may find yourself unable to sell products in the world’s fastest growing market under the brand name that you have invested so heavily in building elsewhere.

Traditional religious images can be copyrighted if they contain "innovative elements" created by artists, according to a recent Beijing court ruling that found sculptor Huang Quanfu owns the rights to a wood sculpture design for Maitreya - the so-called fat smiling Buddha.

The ruling came in a lawsuit filed by Huang after he found a shop in Beijing's Haidian district selling woodcarvings that looked like his own works.

An advertising leaflet in each package even boasted that the shop "provides Huang Quanfu's series of Buddha works", the court heard.

After the discovery, Huang's sued the shop and Aika International Collections Market, where the shop was located, claiming that they used his work without authorization.

He said he created two series of wood Maitreya sculptures in 2005 and registered copyrights for them in 2007 with copyright authorities in Fujian.

The shop owner, surnamed Cao, countered that the Maitreya sculptures sold in his shop "only look like the ones Huang has copyrights to, but are not exactly the same".

"Maitreya is a typical figure in Buddhist culture and any sculptor can create a Maitreya with his own style, so there is no originality in Huang's works," said the shop owner.

But the Haidian district court found that Cao had infringed on the artist's copyright because the products in his shop are "basically the same as Huang's copyrighted ones" and he used Huang's name in advertising, on business cards and in packaging.

The court ruled that Cao must pay 60,000 yuan ($9,588) in compensation to Huang. Cao's appeal of the verdict was rejected by a higher court.

Haidian District Judge Guo Zhenhua said Huang has copyrights to the sculptures because his works "are not simply replicas of traditional Buddhist images, but have integrated his own ideas".

"The facial expressions, manners and body gestures of the Maitreya embody the creative work of the sculptor," he said.

"The protection of traditional culture mainly focuses on the creative elements, but it is very difficult to decide which are creative," said Guo. "It is important to make records using words and pictures during the creation of a work based on traditional cultural elements."

He also suggested cultural administrations improve their systems and standards to encourage artists to register copyrights and make it easier to prove infringement.

The second defendant, Aika International Collections Market, was found not guilty, because it is not responsible for the business operations in individual shops, the court ruled.

"The market has some economic connections with the shop, but it is difficult to prove that it has obtained direct benefit from a single case of the shop's infringement," Guo said.