Kung Fu Panda case brings focus on merchandising rights

By Wang Yadong, Run Ming Law Office
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Recently, the Beijing High Court rendered the final judgment in the “KUNG FU PANDA” trademark administrative appeal case. The express recognition and specific explanation of “merchandising rights” in the judgment have again drawn the attention to merchandising rights and sparked debate on this topic.

王亚东 Wang Yadong 润明律师事务所 执行合伙人 Executive Partner Run Ming Law Office
王亚东
Wang Yadong
润明律师事务所
执行合伙人
Executive Partner
Run Ming Law Office

In the case, the application to register the trademark “KUNG FU PANDA” for such goods as steering wheel covers by a person who shall remain anonymous here was opposed by DreamWorks. DreamWorks claimed that its motion picture, Kung Fu Panda, had a high level of recognition in China, and this well-known motion picture title embodied high commercial value and numerous business opportunities, and should therefore be protected as civil rights and interests. The opposed trademark harmed DreamWorks’ prior “merchandising rights and interests”, constituting the circumstance set out in article 31 of the 2001 Trademark Law, and should therefore not be granted registration. Neither the Trademark Review and Adjudication Board (TRAB) nor the court of first instance upheld these claims, but they were upheld by the Beijing High Court at appeal.

The history

“Merchandising rights” began in such countries as the US and Japan. In the 1990s, Zheng Cheng’en, a leading authority on intellectual property in China, suggested that the study of such rights was necessary. He argued that “what is called ‘image’ includes the image of real people. For example, the images of living persons, the images of fictional persons, the images of created persons and animals, the images of human bodies, etc. The rights of commercial use attached to these images are collectively called image rights” and “such rights exist in the realm between personal rights and copyrights in general civil law and in a borderline area among trademark rights, trade name rights and goodwill rights”.

Subsequently, the exploration of such rights has appeared unceasingly in theoretical works, with a number of different terms used in Chinese for the concept. However, in the legislative and judicial areas, as said by the TRAB and the court of first instance in the “KUNG FU PANDA” case, “existing laws in mainland China do not consider so-called ‘merchandising rights’ as a statutory right, and the substance and boundaries of such rights and interests are unclear”.

For a time, a large number of titles of famous domestic and foreign works and the names of famous characters were preemptively registered by others as trademarks. Unable to find a legal basis in the Trademark Law, the claims by concerned parties to protect their “merchandising rights” failed to find support from the administrative and judicial authorities.

Individual cases

With the ever increasing use of celebrities, well-known characters and animated characters on goods, the economic value embodied in them has gradually come to the attention of the public, and the call to protect such rights has gradually become louder. In recent years, both the TRAB and the courts have rendered certain judgments of an exploratory nature.

For example, the TRAB upheld the request by the rights holder to refuse registration of the opposed trademark “Harry Potter”, which another sought to preemptively register, on the grounds of “negative effect” as specified in item (8) of the first paragraph of article 10 of the Trademark Law. Although this case protected the interests of the rights holder, it did not, however, recognize “merchandising rights”.

Taking the “007 BOND” administrative procedure case as a further example, the court at first instance also cited the “negative effect” of item (8) of the first paragraph of article 10 of the Trademark Law. However, the appeals court, the Beijing High Court, found that “the commercial value and business opportunities brought about by the famous character name were derived by Danjaq through the input of a great deal of labour and capital. Accordingly as a prior famous motion picture character name, it should be protected as a prior right”. In the “KUNG FU PANDA” judgment, the Beijing High Court further elucidated that “motion picture titles and the images and names of motion picture characters can constitute merchandising rights and become ‘prior rights’ in trademark registration”.

However, the exploration of individual cases has miniscule effect on the legal regime as a whole. DreamWorks, after the 007 case, lost at the review and adjudication stage and in the procedure at first instance. Recently, at the Chinese Intellectual Property Judges Forum and the Beijing University Symposium on Private Law and Intellectual Property, attendees showed that there still existed differences of opinion on such issues as the term for, the definition of, and the legal basis for the protection of “merchandising rights”. For example, some attendees argued that the creation of a new civil right was predicated on the amendment of higher level laws (civil law), as failing to do so would lead to problems in the legal regime. Others argued that reality is pressing on judicial practice, and judicial authorities can, under current circumstances, resolve issues existing in reality through legal interpretation.

Prospects uncertain

Article 17 of the Provisions on Several Issues Concerning the Trial of Trademark Right Grant and Confirmation Administrative Cases (Draft for Comment) issued by the Supreme People’s Court in 2014 specifies that “the title of a work, the names of characters in a work, etc., do not constitute a work, but they do have a relatively high degree of recognition, and if used as trademarks for relevant goods, are likely to cause confusion, resulting in the relevant public mistakenly believing that they were licensed from the holder of the rights in the original work, or that there exists another specific connection with the holder of the rights in the original work. If a party claims that the same constitutes prior rights and interests subject to the protection of the Trademark Law, the People’s Court shall uphold such claim.”

This provision dictates a very clear guideline to protect “merchandising rights”. However, despite the lapse of more than one year, the final version of the draft has yet to be released, one of the reasons likely being the lack of a consensus on “merchandising rights”. It is the author’s opinion that although the “KUNG FU PANDA” case has again drawn attention to “merchandising rights”, it is only one isolated case with no general binding force. What will ultimately become of “merchandising rights” depends on legislation or judicial interpretations after the various parties have achieved a consensus.

Wang Yadong is the executive partner of Run Ming Law Office

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