China Merchandising Rights: Can You Trademark the Wuxi Finger Hold?

Did China just recognize merchandizing rights?

Not long ago, the Beijing Higher People’s Court ruled against a trademark squatter, Hu Xiaozhong (胡晓中), who had attempted to register the phrase “Kung Fu Panda” for a variety of automotive-related products such as childrens’ carseats, seat headrests, and steering wheel covers. The basis of the decision was that the film Kung Fu Panda was so well known in China that the trademarked phrase “Kung Fu Panda” had inherent “merchandising rights” – that is, prior rights such that (1) the public identified the trademark (“Kung Fu Panda”) with a specific business entity (Dreamworks Animation SKG) and (2) that entity derived additional commercial value from such identification. These “merchandising rights” applied even to classes (such as Class 12, the class for autos and auto-related products) not covered by Dreamworks Animation SKG’s registered trademark for “Kung Fu Panda.”

This is the first time a Chinese court has recognized “merchandising rights” as a trademark-related prior right. Indeed, before this ruling the Chinese Trademark Office, the Trademark Review and Adjudication Board, and the Beijing Number One Intermediate People’s Court had all explicitly rejected Dreamworks’ opposition to Hu’s trademark, on the basis that Chinese law did not recognize merchandising rights.

The decision is a strong move by the Beijing Higher People’s Court and foreign trademark holders should view it with some optimism. Nevertheless, the decision should not change anyone’s trademark strategy in China. First, Kung Fu Panda was a huge hit in China and was well known by the Chinese public at the same time it became famous in the rest of the world. Many other supposedly famous foreign marks are not actually famous in China. So it’s not like the “merchandising rights” argument could be widely deployed. Second, China is not a common law country and this decision has no value as precedent — and in fact has some detractors for having declared a heretofore unrecognized trademark right. Third, it took more than five years and four different adjudications for Dreamworks Animation to gain this legal victory. Most companies do not have the time, money, or energy for such a fight.

So once again: if you’re doing business in China, register your trademark now — and in every class you care about — before someone else does it for you.

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