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July 02 2018
Article 10bis of the Paris Convention,(1) together with the Agreement on Trade-Related Aspects of Intellectual Property Rights, forms the cornerstone of China's legislative framework on the protection of commercial signs. This legislative framework comprises:
The legislature had been planning the recent amendments to the Anti-unfair Competition Law since China's accession to the World Trade Organisation. During the four drafts that followed, substantial changes were made concerning important issues such as the theft of trade secrets. However, as regards the principles set out in Article 10bis of the Paris Convention, most of the main concepts and principles of the original 1993 text have been maintained.
This update analyses Article 2 of the new law from the perspective of Article 10bis of the Paris Convention and, by way of a comparison with the corresponding provisions of the Trademark Law, examines how the new law will redefine the legal landscape for protecting commercial signs in China.
Article 2 of the new Anti-unfair Competition Law reads as follows:
A business operator shall, during its production and operation, follow the principles of voluntariness, equality, fairness (a) and good faith (b) and observe the laws (c) and business ethics (d).
For purposes of the law, "Unfair Competition Acts" refer to the acts of business operators, during production and operation, which disturb market competition order and damage the lawful rights and interests of other business operators or consumers (e) and thus are in violation of the provisions of the law.
The term "business operator" herein refers to a natural person, a legal person or an unincorporated organization engaged in production and marketing of products (which includes services when used hereinafter) or provision of services (f).
The principle of good faith is present in the Trademark Law, the General Principles of Civil Law and the General Provisions of Civil Law. Article 7(1) of the Trademark Law underlines that this principle must be followed during the registration and use of trademarks. However, the new Anti-unfair Competition Law seems to cover a wider range of acts than previous legislation, and bad faith does not necessarily have to be present for all of them. An intentional act that causes confusion among consumers is an exemplary display of bad faith, but an unintentional act that leads to confusion is still an act of unfair competition.
Acts of unfair competition an offence
Article 2(1) states that a "business operator shall… observe the laws", stressing that engaging in unfair competition is not merely a breach of business ethics, but also an offence. For example, the use of deceptive signs is also specifically prohibited by the Trademark Law.
The concept of consumer interests appeared for the first time in the 2016 draft of the new Anti-unfair Competition Law and has been retained in Article 2(2) of the final text.
Due to the new competitive practices that have emerged in today's internet era, whether consumer welfare will be enhanced by such practices must now be considered. After all, the Anti-unfair Competition Law has been devised to target acts of unfair competition and not competition per se.
The new Anti-unfair Competition Law provides no explicit definition of 'services' and thus predominantly relies on the Classification of Similar Goods and Services, which is normally used in the context of trademark registration. However, discrepancies may occur.
For instance, although some retail services are not listed in the Classification of Similar Good and Services, they are not necessarily ruled out, as Article 15(1) of the Regulations for the Implementation of the Trademark Law provides that "where any indication of goods or services is not listed in the Classification of Goods and Services, a description of the goods or services in question shall be attached thereto". This raises the question of whether a type of service that cannot be registered under the Trademark Law can still subject to protection under the new Anti-unfair Competition Law. For example, the China Trademark Office allows trademarks to be registered only in respect of "retail services of pharmacy" and not all retail services. However, the latter are not deprived of protection under the Anti-unfair Competition Law.
The final text also removed the profitable condition for services, thus extending the scope of protection to non-profitable social organisations, as introduced in Article 6(1)(2) of the new law.
For further information on this topic please contact Hui Huang or Paul Ranjard at Wanhuida Peksung by telephone (+86 10 6892 1000) or email (email@example.com or firstname.lastname@example.org). The Wanhuida Peksung website can be accessed at www.wanhuida.com and www.peksung.com.
(1) The countries of the Union are bound to assure to nationals of such countries effective protection against unfair competition.
(2) Any act of competition contrary to honest practices in industrial or commercial matters constitutes an act of unfair competition.
(3) The following in particular shall be prohibited:
1. all acts of such a nature as to create confusion by any means whatever with the establishment, the goods, or the industrial or commercial activities, of a competitor;
2. false allegations in the course of trade of such a nature as to discredit the establishment, the goods, or the industrial or commercial activities, of a competitor;
3. indications or allegations the use of which in the course of trade is liable to mislead the public as to the nature, the manufacturing process, the characteristics, the suitability for their purpose, or the quantity, of the goods.
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