In a recent landmark decision, the Supreme People’s Court of the PRC (“SPC”) held that a unique term created in a fictional work is capable of being protected as a prior right to invalidate the same later trademark registration, so long as it meets certain requirements.

The case involved a long running trademark invalidation dispute between two parties since 2015. Shanghai You Qi Limited, the trademark registrant, sought a registration for the term “Kui Hua Bao Dian” in standard Chinese characters as a mark for services, among other things, “game services provided on-line from a computer network”.

The thing is that “Kui Hua Bao Dian” is not any random term, but the title of a martial art guidebook made up by Louise Cha in one of his famous wuxia novels. Louise Cha, more famously known as JIN Yong, is one of the most influential wuxia novelists in modern China, whose wuxia novel Xiao Ao Jiang Hu has quite a wide readership across all Chinese-speaking areas and has been adapted into seven versions of television series and four versions of films. In that novel, the swordsman who acquires the ultimate kung fu from the guidebook “Kui Hua Bao Dian” can be unstoppable and reign supreme over the fictional world, so this mysterious guidebook leaves a lasting impression on the reader and audience. It's no exaggeration to say that “Kui Hua Bao Dian” is also a household word in China.

JIN Yong had authorized Perfect World Limited to adapt its novel Xiao Ao Jiang Hu for online video games, which makes Perfect World Limited a legally related party who has the right to prevent third party from commercially using the novel and its essential elements to develop video games.

Since Shanghai You Qi Limited and Perfect World Limited both are video game developers and publishers, the latter initiated an invalidation action against the former’s ill-registered trademark “Kui Hua Bao Dian”, asserting that the registration infringed upon its prior right under Article 31 of the Chinese Trademark Law of 2001.

Article 31 provides that registration of a trademark must not prejudice the existing prior rights of others. However, the trademark law remains silent as to the content or scope of the prior rights. It is undisputed that the said prior rights normally include copyright, patent right, tradename right and right of name. The SPC moved further in its Judicial Interpretation in 2017 that the title of a work and the name of a fictional character with high reputation can also be protected as “prior interests” to enjoin the same or similar trademark from registration. But the situation is a little bit different here. “Kui Hua Bao Dian” is a unique and famous element in the novel Xiao Ao Jiang Hu. Can it also be equally protected as the title of the novel or the name of a fictional character in the novel?

The then Trademark Review and Adjudication Board (“TRAB”) and the now China National Intellectual Property Administration (“CNIPA”) supported Perfect World Limited’s claim and invalidated the registration, mainly on the ground that “Kui Hua Bao Dian” could be the protectable object of merchandising rights, and that the merchandising rights should be read into the “prior right” clause of trademark law. Dissatisfied with this decision, Shanghai You Qi Limited brought the case to the court.

The Beijing Intellectual Property Court (“BIPC”) and Beijing Higher People’s Court (“BHPC”) both treaded cautiously in addressing the issue of merchandising rights and successively sided with Shanghai You Qi Limited. Recognizing the high fame of the term “Kui Hua Bao Dian”, the BIPC turned to find that the association between the term and its creator had been cut off, since the evidence in the record could show the meaning of the term has been gradually evolved into “high-end strategy for achieving certain goal”. Thus, for the sake of public freedom of expression, the term should not be protected.

The BHPC held that in the absence of explicit statutory language in Chinese Civil Code, Copyright Law and SPC’s Judicial Interpretation in 2017, “Kui Hua Bao Dian”, as a made-up book name in the novel Xiao Ao Jiang Hu, as opposed to the title of the novel itself or characters’ name in that novel, could not be protected in the form of merchandising rights. The Court then vacated the decision of the TRAB and remanded the case for further proceedings consistent with its opinion.

The TRAB and Perfect World Limited both stuck to their initial assertion that the famous “Kui Hua Bao Dian” is definitely eligible for protection and thus brought the case to the Supreme People’s Court for retrial. In its potentially significant decision, the SPC extracted from Article 22.2 of its Judicial Interpretation in 2017 three factors in determining merchandising rights protection under Article 31 of the trademark law.

Article 22.2 sets forth that for works within the term of copyright protection, if the copyright holder claims prior rights and interests based on the title of the work, the name of the character, and the like, the People's Court shall support such claim when the title of the work, the name of the character, and the like in the work are highly known to the public and the use of them as a trademark on the relevant goods is likely to cause the relevant public to mistakenly believe that the mark has been authorized by the copyright holder or has a specific connection with the copyright holder.

Following this article, the SPC stated that to find out whether the title of the work, the name of the character, and the like are protectable as “prior rights and interests”, three factors should be considered:

1. The work in question is within the term of copyright protection;
2. The title of the work, the name of the character, and the like enjoy high fame;
3. It is likely to cause public confusion when the title of the work, the name of the character, and the like are unauthorizedly used as trademark on related goods.

Applying this three-factor test, the SPC affirmed the term “Kui Hua Bao Dian” should be protected, finding it meets all the three requirements.

First, as a matter of fact, the novel Xiao Ao Jiang Hu from which the term “Kui Hua Bao Dian” is derived was created in 1969 and is still within the term of copyright protection.

Second, there is no dispute as to the high fame and reputation of the term “Kui Hua Bao Dian” prior to the filing date of the same trademark. As to the connection between the term and its creator, Shanghai You Qi Limited failed to show by a preponderance of the evidence that the term is perceived by the public as generic. In fact, the claimed meaning of “high-end strategy for achieving certain goal” is mainly derived from the nature of the term as a superior martial art guidebook. Also, the newly submitted market survey report shows that there is still a strong connection between the term and the writer and his novel among public awareness. Thus, the SPC confirmed that the BIPC and the BHPC both erred in finding the stable connection had been cut off.

Third, as an established business practice, one of the typical spin-off merchandises from a successful wuxia novel is a video game. The writer JIN Yong had authorized Perfect World Limited to adapt its wuxia novel Xiao Ao Jiang Hu to video games early in 2008. The contested mark “Kui Hua Bao Dian” is designated for services “game services provided on-line from a computer network; entertainment services; etc.”, which fall within the generally recognized scope of spin-off service of wuxia novels. The SPC particularly noted that Shanghai You Qi Limited also registered several marks “Xiao Ao Jiang Hu” for game services, which could serve as secondary evidence showing the registrant has intention of taking advantage of the profitable novel Xiao Ao Jiang Hu. The SPC thus found that the use of “Kui Hua Bao Dian” as a trademark for the designated services would make the relevant public mistakenly believe the services provided under the mark were somehow connected with the famous novelist and his novel Xiao Ao Jiang Hu.

In view of the foregoing, the SPC sustained the TRAB’s decision. As a response, the SPC clarifies that a conclusion cannot be drawn that the merchandising rights will not be protected simply because there is no conception of merchandising rights in all existing Chinese laws.

This case suggests that the merchandising rights, though quite elusive in definition, can be an effective claim as “prior interests” in fighting back against malicious trademark registration. The title of a work, the name of the character, and other unique elements in a fictional work are not subject to copyright protection, but the merchandising rights opens the door for the right holder to obtain limited protection, provided that these elements pass the three-factor test.

Authored by:  Mr. Yanglin Zhang ([email protected]), trademark attorney.