[Fieldfisher] Application of Laws concerning the Use of Domain Name and Trade Name

23rd March 2020
Chamber News, Legal, Member News

—- Analysis of the MGM trademark infringement case and unfair competition case

Last September, the People’s Court of Pudong District of Shanghai made two significant decisions on the MGM trademark infringement case and unfair competition case (MGM Lion Corp. and MGM Studios Inc. v Shenzhen MGM Films Company), which have drawn lots of attention. The media reports mainly focused on the high reputation of MGM 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 recognized the reputation of Plaintiffs’ English trade name and its abbreviation “mgm” and offered protection to both names.

Here, Plaintiffs filed two lawsuits against Defendant for trademark infringement and unfair competition. In the trademark infringement action, the Court held that the marks “米高梅,” “MGM,” “mgm” used by Defendant are the same as the registered trademarks owned by Plaintiffs. 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),” etc., which easily caused confusion amongst the related public and therefore constituted trademark infringement. In the unfair competition action, the Court found Defendant’s acts below constituted unfair competition: using the trade name “米高梅,” authorizing others to start or operate cinemas with the trademarks and trade names concerned, using marks “METRO-GOLDWYN-MAYER” and “METRO GOLDWYN MAYER,” using Plaintiffs’ trademark and the abbreviation of the trade name “mgm” to register domain names, and using the websites to promote its franchising business.

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 Defendant in this case. Therefore, this article is to analyze 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. Use of registered trademarks and trade names of another as one’s domain name

A domain name is a name and address where Internet users can access the website. It is used for identifying computers on the Computer Network. Registering and using the trademark owned by another as one’s domain names in bad faith, and exploiting the goodwill of another’s trademarks or trade names for commercial promotion would not only confuse the relevant viewers as to the owner of the domain names but also misappropriate the reputation of another to seek benefits for oneself and hence breach the principle of good faith. Therefore, it may constitute trademark infringement or unfair competition.

Concerning whether the registration and use of a domain name constitute unfair competition, Article 4 of 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”) requires fulfillment of four elements to convict a defendant’s act of registration or use of the domain names to be a tort or unfair competition:

(a) The civil rights and interests the plaintiff 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 plaintiff’s well-known trademarks; or are the same with or similar enough to the plaintiff’s registered trademarks 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.

Here, Defendant registered and used the domain names “www.mgmchn.com” and “www.mgmchn.cn,” introduced the process to franchise and start an MGM cinema on related websites and provided some franchising examples.

In the unfair competition lawsuit, the Court considered the four elements listed above and found that the registration and use of the domain names by Defendant constituted unfair competition. Firstly, Plaintiffs have exclusive rights to use the registered trademark “mgm,” the main and significant part of the infringing domain names. Meanwhile, as the abbreviation of Plaintiffs’ 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 Plaintiffs enjoy lawful and effective civil interests of “MGM.” Secondly, there is no difference between “mgm,” the main and significant part of the infringing domain names and “MGM,” in which Plaintiffs have lawful rights and interests, except for capitalization. The Court therefore found that “mgm” and “MGM” were the same and it would confuse the related public. Further, Defendant enjoyed no interests in “mgm,” and had no reasonable grounds to register it as its domain names. It was therefore obvious that Defendant maliciously exploited the goodwill of the MGM Group and Plaintiffs. Consequently, the Court considered Defendant’s registration and use of the infringing domain names was unfair competition.

As to whether the registration and use of a domain name constitutes trademark 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 Trademark Cases”) states that it would constitute a trademark infringement by registering the words or characters that are same as or similar to the registered trademark 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.

Here, the Court did not expressly state whether the registration and use of the domain names by Defendant constituted trademark infringement in the court decision. 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 Trademark Cases or not, i.e., whether the defendant uses the registered trademark of another and engages in electronic commerce of relevant goods. If it does not pass the test above but fulfills the four elements stipulated in Judicial Interpretation of Domain Name Cases, courts may consider it as unfair competition.

For example, in ZIPPO Manufacturing Company v Zheng Jia, ZIPPO alleged that the registration of four domain names (“www.zipp0light.c0m.cn,” “www.zipp0light.cn,” “www.zipp0light.net,” “www.zipp0light.net.cn”) by Zheng Jia constituted infringement. Based on Article 1, Section 3 of Judicial Interpretation of Trademark Cases, the Court held that the registration and commercial use of the domain name “www.zipp0light.c0m.cn” constituted infringement of plaintiff’s exclusive right to use the trademark, for Zheng Jia had sold various lighters with “ZIPPO” logo on the website. However, as to the other three domain names (“www.zipp0light.cn,” “www.zipp0light.net,” “www.zipp0light.net.cn”) registered by Zheng Jia, since there was no actual use after registration, the Court considered it as unfair competition according to Article 4 of Judicial Interpretation of Domain Name Cases.

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 trademark owned by Longjing Company, constituted unfair competition instead of trademark 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.

Similarly, in Zhejiang Wuhuan Bearing Group Co., Ltd. v Li Hua, the Court also considered Li Hua’s registration and use of the domain name concerned as unfair competition. Here, Wuhuan Group did not provide clear evidence to prove that Li Hua had engaged in electronic commerce of related goods and hence no trademark infringement was found. However, the Court found that Li Hua’s behavior breached the business principle of fair competition and good faith and shall be therefore regarded as unfair competition.

II. Use of another’s trade name or trademark as one’s trade name, or use of another’s trade name in one’s business operations

A trademark is used to identify and indicate the source of the goods or services. A trade name is the main part of a company’s registered name, which is used to identify the market players. Both as marks with functions in distinguishing, the registration basis, the ways to obtain, and the features of rights are different between a trademark and a trade name. Use of another’s trade name or trademark as one’s trade name, or use of another’s trade name in one’s business operations may constitute trademark infringement or unfair competition. Here, regarding Defendant’s specific uses of Plaintiffs’ trade names and trademarks, the Court made following determinations respectively

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

The MGM Group was established in the U.S. in the 1920s. It enjoys a great worldwide reputation by investing, producing, and distributing a large number of well-known award-winning films. It entered into the Chinese market as early as the 1990s and gradually increased its popularity. Its trade name “米高梅” has also a great influence in the Chinese entertainment industry. In 2013, Defendant changed its company name to current name and started to use “米高梅” as its trade name. Defendant also engaged in franchising business of MGM cinemas without any authorization by or affiliation with Plaintiffs, which was highly likely to mislead the public to believe that it had specific connections with Plaintiffs, and therefore caused confusion. Based on Article 6, Section 2 of 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 Trademark Law based on Plaintiffs’ exclusive rights to use the registered trademark “米高梅.”

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

According to 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, 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. As the 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 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 Plaintiffs and cause confusion, which hence constituted unfair competition.

3. 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 trademark infringement

Under Article 1, Section 1 of Judicial Interpretations of Trademark Cases, prominent use of the words that are same with or similar to the registered trademark of another as one’s trade name on identical or similar goods which is likely to confuse the relevant public, shall be regarded as the acts of causing other damages to another’s exclusive right to use registered trademarks as provided for in Article 52, Section 5 of Trademark Law.

Here, 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 Plaintiffs’ registered trademark “米高梅.” According to Article 1, Section 1 of Judicial Interpretations of Trademark Cases, the Court held that it should be regarded as trademark infringement.

To sum up, the reputation of Plaintiffs’ trade names was recognized by the Court here. The Court held that Defendant’s use of “米高梅” as its trade name and its use of MGM’s English company name for its franchising business of MGM cinemas constituted unfair competition. Meanwhile, regarding the act that 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, the Court considered it as trademark infringement. It can be therefore concluded that the use of another’s trade name may constitute trademark infringement or unfair competition.

In legal practice, it is not always clear whether the use of another’s trade name shall be considered as trademark 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 Trademark 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, such as improperly registering a prior registered trademark with high reputation as one’s trade name, i.e. even a standard use of the trade name would be likely to result in market confusion; it shall be considered as trademark 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 cited the opinion of the Supreme People’s Court mentioned above. The Court found that the registration and use of the company name by Appellants were lawful, but their prominent use of the trade name had infringed Appellee’s exclusive rights to use the registered trademark. Therefore, the Court found the act as trademark 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 Trademark Law and Anti-unfair Competition Law, certain infringements may involve both laws. To qualify as trademark infringement, the plaintiff must prove that the defendant’s use of the trademark is a use in the sense of Trademark Law, i.e., the use shall reach the extent that required by relevant laws (e.g., “engagement in electronic commerce of relevant goods” as prescribed in Article 1, Section 3 of Judicial Interpretations of Trademark Law). If the act committed by the defendant does not constitute a trademark use in the sense of Trademark Law but satisfies the requirements of unfair competition, the act may be considered as unfair competition. In a word, the two laws provide different levels of protection for the right holders’ rights and interests parallelly.

In practice, both in cases of trademark infringement and unfair competition, the plaintiff needs to prove the popularity of his/her trade name or trademark and the public confusion resulted from the defendant’s acts. Consequently, many plaintiffs choose to combine the two causes of actions (trademark infringement and unfair competition). Here, Plaintiffs 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 Trademark Law and Anti-unfair Competition Law and adopt corresponding litigation strategies.

References:

Judgments: Civil Judgment of (2017) Hu 0115 Min Chu No.85362

Civil Judgment of (2017) Hu 0115 Min Chu No.85356

Civil Judgment of (2012) Zhe Wen Zhi Chu No.145

Civil Judgment of (2017) Zhe Min Zhong No.280

Civil Judgment of (2007) Shi Min Chu No.56

Civil Judgment of (2010) Min Ti No.15

Civil Judgment of (2015) Xin Min San Zhong No.14

Civil Judgment of (2012) Jin Gao Min San Zhong No.0046

Article: Ling, Zongliang, ‘The distinction between trademark infringement and unfair competition involving trademarks’ (2015) 11 China Trademark

Online Sources: Baidu Encyclopedia Page “米高梅”

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