The fair use of registered trademarks

Although the PRC Trademark Law, its implementing regulations and related judicial interpretations all list types of trademark infringement, infringers often defend themselves against the legal claims brought by trademark owners by invoking the doctrine of fair use. There are many examples of the successful use of this defence.

Origin and overseas practice

The doctrine of fair use of trademarks applies to both commercial and non-commercial use, but this article will only address the former. The doctrine holds that another party may, in some circumstances, legitimately use a rights holder’s trademark in its production and operations without the permission of the rights holder and without paying a licence fee.

Law and practice relating to the fair use of trademarks are relatively developed in the US. The earliest legal source is statutory fair use (or classic fair use) in the US Lanham Act of 1946. Section 1115(b)(4) of this act permits a third party to use another’s name, term or device which is descriptive of the goods or services of that third party, provided that they are used fairly and in good faith.

To invoke the doctrine of classic fair use, the user is required to provide evidence that:

• the use is descriptive and not use as a mark, i.e. its use is for the purpose of describing the quality or features of the user’s products or services, and not to distinguish the source of those goods or services;
• the user is using the mark to describe its own products or services; and
• the mark is used fairly and in good faith. Where a mark has a primary meaning and a secondary meaning, and a third party uses the primary meaning descriptively rather than as a mark, this will generally be deemed to be classic fair use.

The legal basis of fair use is that a trademark registrant or owner cannot use a descriptive term on an exclusive basis, thereby depriving others of the right to use such term accurately to describe their goods.

Subsequent precedents established the doctrine of nominative fair use, by which a party may use the registered trademark of another as a reference to indicate its goods or services, usually in order to explain a connection between the user’s goods and goods bearing the registered trademark of another.

The words that are used in the trademark may be a fanciful term or a generic term.

The doctrine of nominative fair use was first recognized in New Kids on the Block v News America Publishing, Inc in 1992. Based on that case and subsequent related cases, nominative fair use requires that four conditions be satisfied:

• the product or service cannot be described without using the trademark;
• the description using the trademark is fair and necessary;
• use of the trademark may not cause consumers mistakenly to believe such use is sponsored or endorsed by the trademark holder; and
• the use may not suggest that there exists a sponsorship or licence relationship between the user and the rights holder.

Chinese law and practice

The PRC Trademark Law specifies that a trademark rights holder has the right to use its trademark and preclude others from infringing its trademark rights. It does not place any limitations on the exclusive right to use trademarks.

Article 49 of the subsequently issued PRC Trademark Law Implementing Regulations provides that “the holder of the exclusive right to use a registered trademark has no right to prohibit others from making legitimate use of the generic name, device or model number of the goods in question, or direct expressions of the quality, principal raw materials, functions, uses, weight, quantity or other characteristics of the goods, or place names, which are included in the registered trademark.” In principle, this article clearly places restrictions on trademark rights.

However, as the Implementing Regulations lack detail and contain ambiguities, higher people’s courts in the provinces have issued various guidelines to the courts in their jurisdictions. The most representative of these is the Beijing Municipal Higher People’s Court Answers to Several Questions Concerning the Trial of Civil Disputes Over Trademarks (Jing Gao Fa Fa [2006] No. 68).

These answers not only recognize descriptive but also nominative fair use of trademarks, and provide for a scope of descriptive fair use that is broader than that provided in article 49 of the Implementing Regulations.

Pursuant to the answers, three conditions must be satisfied to constitute fair use of a trademark:

• the use must be in good faith;
• the trademark cannot be used as a trademark for the user’s goods; and
• the use must be solely for the purpose of explaining or describing the user’s goods.

The use must also fall within one of the following six circumstances:

• use of the generic name, device or model of the user’s goods contained in the registered trademark;
• use of a sign contained in the registered trademark that directly indicates the nature, purpose, quality, main raw materials, type or other feature of the goods;
• at the time of sale of the goods, use within the necessary scope of a representation of the registered trademark of another for the purpose of explaining their origin, indicating their purpose, etc.;
• use of the user’s enterprise and trade name that is identical or similar to another’s registered trademark;
• use of the name of the place where the user is located that is identical or similar to another’s registered trademark; or
• another act of the legitimate use of a representation of a trademark. The nominative fair use of a representation of another’s registered trademark may occur whether the “R” symbol denoting a registered trademark is present or not.

Robin Zhou is a senior attorney and head of the Shanghai office of Chang Tsi & Partners. Angela Kim is a foreign counsel, admitted in New York, at Chang Tsi & Partners