Identifying a direct line to a successful intellectual property portfolio in China is not easy. There are many variables in the equation, including knowledge of the gray areas between the lines of black letter law and the ability to be creative. It is the latter variable that often plays the most important role. Creativity requires an understanding of China’s intellectual property (IP) system both as codified and as practiced.

The protection of the outward appearance of an article can be a foundational element of an IP portfolio. Too often, the avenues available for protection, like design patents, are ignored by foreigners. As a result, IP portfolios in China may be incomplete and enforcement opportunities may be lost. But design patents are not necessarily the only way of protecting the outward appearance of an object. Enter China’s trade dress protection, an often misunderstood and fairly undeveloped form of protecting the same outward appearance. An understanding of both forms of protection will help companies better protect their IP portfolios in China.

 

Design patent practice in China

A “design” is any new design of the shape, pattern, or color, and their combination, that creates an aesthetic feeling and is fit for industrial application according to China’s Patent Law. The design patent in China is a popular form of patent protection, at least to the Chinese who file about ten times as many design patent applications in China compared with foreign applicants. A design patent in China is relatively inexpensive, is easy to secure, and has value. Design patents in China are not substantively examined and are granted quickly, typically within weeks or months. Once granted, they have a ten-year lifespan.

And design patents in China have staying power. When challenged, the validity rate of Chinese design patents, about 42 percent, is comparable to Chinese invention patents, having validity rates of 46 percent, and is far better than the validity rate of utility model patents.

One of the reasons foreign applicants are in short supply is a lack of experience with the Chinese IP system. A US practitioner would know that, in the United States, design patent protection is generally limited to protecting the ornamental appearance of the article, and not necessarily its function. For example, a vehicle fender is ordinarily mostly ornamental and may be protected by a US design patent, while a vehicle’s transmission would not be as transmissions are normally entirely functional. Not so in China, where design patents may cover functional products.

Another important deterrent to seeking design patent protection in China is the perception that Chinese courts will not find infringement unless the accused article is a virtual photocopy of the design patent itself. While courts historically have demonstrated little flexibility in this regard, there is evidence that the attitudes are changing. See, for example, Matsushita v. Kingdom, Beijing High Court (2016), and M&G v. Deli, Shanghai Intellectual Property Court (2016), where similarities between the accused product and the design patent were found sufficient for a holding of patent infringement without being identical.

For all its strengths, and there are many, the number of new design patent application filings has actually slowed over the last couple of years when compared with the numbers of utility model and invention patent applications. I mentioned this fact during a presentation at an IP program on China not long ago. A member of the audience, a Chinese IP lawyer, commented that the reason for this was the increased usage of trade dress in China to protect the outward appearance of an article. I found this response curious—I never regarded design patents and trade dress in China as being mutually exclusive. I thought instead that, at the very least, they would be complementary. It was at that point that I realized that trade dress itself may be poorly understood, or perhaps simply misunderstood, even by Chinese practitioners.

 

The trade dress variable

The very discussion of trade dress in China is especially complicated by the fact that China does not have the same concept of trade dress as is found in the United States and, in fact, there is no legal reference to trade dress as being a form of non-patent design protection.

With its basis in the 1985 Patent Law, design patent practice in China has had the opportunity to develop in terms of both prosecution and enforcement for the last 35 years. The same, however, cannot be said for trade dress. Many countries, including the US, India, and Japan, allow for the registration of trade dress under trademark law. For example, trade dress in the United States can be registered based on the Lanham Act. Unregistered trade dress can also be protected in some cases.

China does not provide clear protection for trade dress, which, according to practice, refers to the overall appearance of an article, sometimes characterized as “look and feel.” China is not alone in this regard as other countries (including Brazil and South Korea) do not make provisions for the registration of trade dress but alternatively provide for enforcement under an unfair competition law. This is not to be confused with trademarks, which are able to be registered in China. (Nike successfully used a registered 2D trademark in protecting its Converse Chuck Taylor shoe against infringement of the look and feel of the design.) While providing no specific reference to “trade dress,” China’s Anti-Unfair Competition Law has been used to protect the overall visual appearance unique to a product that enjoys a “certain level of reputation.”

In this way, trade dress is similar to trademark protection – both seek to protect the underlying product, but trade dress is directed to the protection of the visual appearance. However, in China, unlike the United States, trade dress is not handled the same as trademark protection and falls outside of the specific scope of trademarks as well as the other forms of IP protection for products in China, patents and copyrights.

 

How to navigate trade dress in China

To be successful in an action involving trade dress infringement, the plaintiff has to prove that the look and feel of the item is both well recognized by consumers—the “fame” factor—and that the infringing item therefore creates confusion among customers.

The “fame” requirement is probably the most difficult to achieve. To establish “fame” and other elements constituting unfair competition, Chinese courts will look at a variety of factors, including the quality, quantity, and cost of advertisement and the duration of product sales.

As a key example, the market value of a product was highlighted by the Pudong New Area People’s Court in Shanghai when deciding New Balance v. New Barlun (China) Co., Ltd. The Pudong Court recognized that New Balance invested heavily and continuously in brand advertising. As a result, New Balance was able to demonstrate that its “N” mark constituted a “decoration of influential goods” before the defendant’s trademark registration.

Perhaps the best-known recent decision interpreting trade dress in China is Land Rover v. Jiangling handled by the Chaoyang District Court in 2019. Arguing successfully that the shape of one Land Rover vehicle had acquired fame through long-term publicity, the court found that the shape of the vehicle met the “decoration … with certain influence” requirement of the Anti-Unfair Competition Law. Jiangling was ordered to halt the production of its own vehicle and to pay Land Rover compensation.

Importantly, the level of “fame” must be demonstrable in China as it was in all of these cases, and thus trade dress, by definition, almost certainly excludes new brands. In cases where both items have achieved “famous” status in China (such as in Guangdong Jiaduobao Beverage & Food Co., Ltd. v. Guangzhou Pharmaceutical Group Co., Ltd), it can be difficult to prove infringement.

 

Design patent or trade dress or both?

So do you make a choice in China between a design patent or trade dress to protect the outward appearance of an article? Do you, as the skeptical audience member believed, eschew design patent in this day and age in favor of trade dress? I asked some of my Chinese colleagues about the strategy of passing on design patent protection in favor of trade dress. The majority disagreed with this conclusion, saying instead that trade dress protection in China at this stage of development should be relied upon only as a “backup” strategy, one that provides complimentary protection to a more conventional design patent. Yet an article may be simultaneously protected by both design patent and trade dress. In fact, the court may combine the hearings for both the alleged design patent infringement and trade dress violations (two separate actions) so that they are held on the same day. Still, trade dress protection, while still not fully developed in China and while not a likely candidate to provide sole protection to the configuration of an article, has the great advantage of extending beyond the fixed term of protection provided in a design patent. The truly creative model IP portfolio in China should include both design patents and trade dress among its many components.

 

 

Thomas T. Moga ([email protected]) is an attorney with Dykema Gossett and is registered to practice before the US Patent and Trademark Office. Mr. Moga lived and worked in China and, as a Fulbright Scholar, served as an instructor to patent examiners at China’s National Intellectual Property Administration. He is a member of the Industry Trade Advisory Committee on Intellectual Property Rights of the US Department of Commerce. 

Thank you to Ms. Susan Anthony and Mr. Michael Mangelson, both of the Office of Policy and International Affairs, USPTO, and Mr. Gavin Jia, a patent attorney with NTD Intellectual Property Attorneys, Beijing, China, for their contributions to this article.

Posted by Thomas T. Moga