China: GossIP - January 2022

We jump in the year of the Rabbit with a selection of cases, guidelines and tips to better understand the business world in China.

The first article deals with the dilemma that everyone encounters when entering the Chinese market: which comes first, the trademark or the search?

The second article explains what happened in the case Tencent vs TikTok, where the last one has been found guilty of copyright infringement made by the users.

We know in China NFTs shall not be traded or used as any kind of financial instrument. Nevertheless, brands may still be able to use NFTs successfully in their promotions, but they should use it in a careful way.

Back on trademark topic, we discuss the case of Oatly, the famous Swedish oat milk brand. In an attempt of registering "BARISTA", one of its most successful products, as a trademark in New Zealand, Oatly AB has met some obstacles. Read along to see what happened.

Right after, we explain what happened to a Chinese fast-food chain founded in 1990 which has been using the logo resembling Bruce Lee's pose since 2004 and got sued in 2019 by Bruce Lee's daughter.

Speaking about Technology Law, we analyze the new Provision on Internet Information Services Depth Synthesis, issued in China to strengthen the regulation on the internet deepfakes

Just before the last article, where we talk about the great victory obtained in China by Jägermeister, you can read what happened to a Chinese academic database, which got a fine of 87.6 million RMB for monopolistic behavior.

Read us, follow us, share us! And enjoy the new year of the Rabbit.

IP CHINA

Which one comes first: the trademark or the search?

Few days ago, a friend called and told me about a new entrepreneurial project. My friend operates in the food & beverage sector and so I have been revealed a coming soon top-notch restaurant in Shanghai. Being aware of the importance of Intellectual Property in China, I am one of the first persons outside the circle of the founders to know about the project.

With great excitement in the voice and shiny eyes, my friend introduced the concept of the new place and – finally - told me the new trademark chosen to distinguish the place. Sorry, for obvious confidentiality reasons, I cannot disclose it here.

This is not the first case I take care of this friend; we have some prior experience and so we agreed to conduct a trademark search – first - and not to rush to file the application without having cleared the registrability.

I did my homework and came back to the friend, reporting that unfortunately the registration of the trademark chosen looks unlikely in China due to prior similar trademarks in the same class. I explained that in China there are over 40 million trademarks in the registry and so nowadays is difficult to find an available slot.

I explained that – at this point – there are two routes.

First is creating different trademark candidates and trying again the trademark search to check the chances of registration. Second is insisting with the "beloved" candidate and attacking the prior existing registrations. For example, a typical cost-effective strategy is filing non-use cancellation(s) against the obstacle-trademark(s) aiming at clearing the way to the registration of the selected trademark.

Though the second route a viable one, it might take more time and more budget than the first one. I would naturally incline toward creating and choosing a different trademark with higher chances of registration. However, I am a lawyer and I tend to underestimate the difficulty of the marketing/communication creative process and overweight the legal issues.

Whatever my friend will decide, investing more in creativity and coming up with more candidates or investing more in legal tools to clear the way to the registration of its first candidate, it will be good.

Of course, the first and most important element is that the chosen trademark is suitable and appealing for the kind of products or service to be distinguished. The communication and marketing perspective is essential, but attention not to push too much on this point and forget about the legal point.

The same freedom or opportunity might not be there in other circumstances. Think, for example, to a company selling apparels in Europe that decide to enter Chinese market. Differently than my F&B friend in the story above, the apparel company from Europe is "limited" by its history and reputation. The company must fight to get his trademark registered in China. It is likely that this company will invest to clear the way to the registration of the same trademark they registered and used in other countries.

In the F&B story above, there is not al limit given by the existing business and reputation abroad. The only limit is the creativity, the patience, and a good trademark search.

So, if you ask me "which one comes first: the trademark or the search?", the answer is easy: Surely, the search, and then the search again, and maybe a new search. Finally, it comes the trademark. There is no dilemma.

Fabio Giacopello
HFG Law & Intellectual Property

IP CHINA

Tencent dramatic victory against TikTok copyright infringement

The year 2022 mark the time when many platforms have been "making peace" in the direction of secondary authoring, but related lawsuits and claims have never stopped.

At the beginning of November 2022, Xi'an Intermediate People's Court made a first instance verdict on Tencent's lawsuit against TikTok for the copyright infringement of the adventure drama "云南虫谷" (pinyin: Yunnan chóng gǔ; Eng.: Yunnan Insect Valley) broadcasted by Tencent. The court held that a large number of users on the TikTok platform have published videos of the drama without authorization.

Although TikTok has taken measures to reduce the number of infringing works, the infringement has not been effectively curbed. Indeed, for the Court perspective, TikTok should immediately take effective measures to delete, filter and intercept relevant videos, and compensate Tencent for economic losses and reasonable expenses of more than 32.4 million yuan.

Prior to this, TikTok has reached cooperation with other broadcasting platform such as Sohu Video and iQiyi asking the authorization to publish film and television works. However, in the process from confrontation to embrace, there are still many problems to be solved.

"云南虫谷" is a 16-episode online drama of suspense and adventure theme produced by Penguin Film and Television, adapted from the world's dominant novel Ghost Blowing the Lamp in Yunnan Insect Valley, which will be broadcast independently on Tencent Video from August 30, 2021.

The defendant TikTok argued that the relevant videos were uploaded by users themselves, and the number of platform users was large, so it was impossible for TikTok to conduct substantive review of massive information.

Additionally, TikTok platform only provides information network storage services, without the obligation of content review. The platform has reminded users that the uploaded content shall not infringe the intellectual property rights of others, and has fulfilled the obligation to notify deletion, so it does not constitute infringement.

The court held that TikTok should have known and clearly knew that there were a large number of infringing acts against Tencent and had the ability to effectively manage the infringing content of the platform.

It did not take appropriate measures to control and manage the infringing content of the platform within a reasonable period of time and found that it met the constitutive requirements of helping the oblige with the infringement of the information network communication right of the works involved in the case, and there were acts of helping the infringer.

Effective measures should be taken immediately to delete, filter and intercept relevant videos.

Considering the types of works involved, popularity, possible losses, expected earnings, rights protection, the scale of the defendant's infringement, duration, subjective malice, possible benefits and other factors, the court decided that the plaintiff suffered an average loss of economic benefits of 2 million yuan per episode of the network drama, so the economic losses and reasonable expenses totaled more than 32.4 million yuan.

This is also the highest amount of compensation Tencent has received in film and television copyright litigation. According to the judgment, the production cost of a single episode of "云南虫谷" reached more than 6.6 million yuan, and the total production cost of 16 episodes reached 334 million yuan.

In recent years, short video infringements have been rampant, causing great damage to the legitimate rights and interests of obliges, and courts around the country have increased their efforts to award compensation.

How to determine the amount of compensation in a case is based on the influence of the works involved, production costs and the licensing fees of the episodes that can be referred to, especially the severity of the alleged infringement and the infringement profits.

Of course, to some extent, the short video platform has become an important content dissemination channel. Producers choose to open accounts to release materials, and some platforms will also jointly launch short videos with creators.

Also, some users lamented that the reason why they would like to see a play is that they "feel good" after brushing some clips. In other words, the existence of secondary creative content can promote users to watch content on the long video platform.

However, the platforms have not disclosed more information about the current authorization cooperation for publishing of short videos. After all, the endless re-creation of content means the accumulation of traffic. The creators earn subsidies from the short video platform, but it is the long video platform that pays for the cost of content, which is also the crux of the imbalance between the demands of both sides. As for the revenue of long video platforms and producers, more perfect cooperation models and solutions are needed.

This decision is highly disputable for below reasons:

1. The infringement claim was filed against TikTok solely based on secondary infringement;
2. Notice-takedown principle seemed to be override: The court ruled that TikTok shall be aware of the large volume of infringement occurred on it platform in the case of repeated prior warning, complaints, lawsuits, and applications for preservation of conduct by rights holders filed by the copyright owner. The court also make the judgement based on the reason that TikTok also has the ability to make sufficient management over the infringement content in the platform.
   The ruling by the court seemed suggesting mega platforms like TikTok should've been able to manage the infringement on the platform only based on a letter from right owner (without even indicating the specific link). If TikTok can do that for Tencent, can it do the same for all other right owners?
3. The court override the process of infringement comparison: The court deemed that a detail comparison between the original works and all the claimed infringing pieces are "not the only option" in this case. Instead, the court ruled on substantial similarity based on the "highly consistency and repeatability" in the accused infringing videos.
   We understand the court aimed to attack infringing conducts like mechanical video-reclipping or one of those short videos like "5-minutes to finish a movie", but the court also seemed to sacrifice the interest of secondary creation who indeed constitute fair use.
4. Similar decisions nationwide would only award damages below RMB 1 million. Most people would expect a higher damage would occur, but more likely in the court of Shanghai or Guangzhou. A sudden damage award for RMB 50 million in Xi'an seemed to be surprising.

Laura Batzella, Fredrick Xie
HFG Law & Intellectual Property

ADVERTISING LAW

All you need to know to advertise with NFTs in China

Marketing with NFTs (non-fungible tokens) has become a new trend in China.

Imagine how exciting when buying a piece of digital artwork on the internet and getting a unique digital token that proves your authority over the artwork you bought. In time, when the NFT artwork sells well online, the offline product price arises as well.

Wouldn't it be a unique way to promote a upcoming new product to the consumers?

However, the market and regulatory environment for NFTs in China have evolved quite differently than in many other countries.

Legal Environment: Ambiguous

On May 18 2021, the National Internet Finance Association of China, China Banking Association and Payment & Clearing Association of China issued the Announcement on Prevention of Speculation Risks Caused by Virtual Currency Transactions.

On September 15, 2021, the Circular on Further Preventing and Handling the Risk of Speculation in Virtual Currency Transactions, issued by the People's Bank of China (PBOC) together with 9 other governmental departments, came into effect.

This notice bans the use or circulation of virtual currencies in the market as currency, along with all virtual currency transactions. It also says that it is illegal for overseas cryptocurrency exchanges to provide such services to Chinese residents.

On 13 April, 2022, several industrial associations including the National Internet Finance Association, Securities Association, and the China Banking Association jointly issued a Proposals on Preventing NFT-related Financial Risks.

On July 20, 2022, Tencent decided to close its NFT platform "Huanhe", the biggest NFT platform in China, as a result of the government discouraging any trading or speculation in NFTs.

However, there are still several mainstream platforms offering to mint and purchase NFT works. They are trying to comply with the Chinese government policy.

For example, Alipay updated its NFT platform agreement, saying that NFT cannot be traded between users, and the owners have to hold NFT works for at least 180 days after he or she purchased the NFTs, or 2 years after receiving the NFTs as a gift before giving to the next person. In addition, the owner needs to pass the identity verification and a series of supervision procedures.

Conclusions

In summary, brands may still be able to use NFTs successfully in their promotions in China but they should use it in a careful way. Currently, global approaches to NFTs are not totally banned, but you need to consider:

• Register your NFTs legally (choose platforms which obtain the relevant license for the record)
• Describe NFTs in China as "digital collectibles", not as "tokens" and never as "currency"
• Do not allow or encourage any trading or speculation in NFTs, or imply that NFTs may increase in value or can be used as currency. Namely, you can consider buying NFT works as a donation to the owner, in a way, to support their career.

Emily Ma
HFG Law & Intellectual Property

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The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.