The Love-Hate Relationship Between Internet Firms and App Trademarks in China
【Zhao Lei／Partner, Unitalen Attorneys at Law】
An Analysis of the Legal Relationship between App Names and Trademarks for Class Nine Products
Due to a complaint by Beijing Green Time Networking Technology Co., Ltd., the owner of a trademark for products in class nine (including downloadable software products), concerning the Chinese name of the SoYoung (Chinese: “xinyang” – new oxygen) app, a health and beauty platform, the app was recently removed from Apple’s App Store. Recently 115 Cloud Storage (115 wangpan) and feminine health app “Xiyou” (grapefruit) were also removed from the App Store due to complaints by holders of the relevant trademarks for products in class nine. This combined with the 2015 revision to the Measures for the Administration of Initial Public Offering and Listing of Stocks, which has led some to suggest that without a trademark for products in class nine, internet firms are unable to launch a public offering and could be accused of trademark infringement, has caused a substantial amount of controversy in China’s IP circles. I will at first reserve judgment on whether internet firms are unable to launch a public offering and run the risk of being accused of trademark infringement and will examine the issue from several different perspectives.
The Measures for the Administration of Initial Public Offering and Listing of Stocks were first promulgated and implemented by the China Securities Regulatory Commission in May 2006 and then revised in December 2015, with amendments taking effect from Jan. 1, 2016. After the amendments, issuers in public offerings must not be subject to risks of negative change in obtaining or utilizing such important assets and technologies, such as trademarks, where their capability of making continuous profits could be negatively affected.
A literal reading of the above-mentioned regulation has no mention of a compulsory obligation on the issuer to legally own the rights or the usage rights to the trademark relating to their manufacturing or operations, nor of internet companies needing to own a trademark for products in class nine in order to be able to launch a public offering, but rather the regulations require a guarantee that no risks of negative change exist in the obtaining or use of a trademark and that nothing exists that will negatively affect a company’s capability for making continuing profit, including lawsuits, mediation proceedings or other major issues. In my opinion, the chance of a trademark registration application being rejected or being challenged successfully, being invalidated or cancelled constitute significant risks of negative change and factors negatively affecting the capability of a company to make continuous profits, but this does not mean that internet companies that do not have a trademark for products in class nine are unable to go public or can be accused of trademark infringement.
Approaching the issue from the concept of trademark registration classes and the nature of trademarks themselves, the ninth class of product in China’s Classification of Goods and Services (based on the NICE Classification) contains a lot of different groups, of which the most important for internet companies and particularly companies with an app is “downloadable mobile phone application software” in the 0901 subclass. As the internet has developed, many internet companies rely on mobile phone apps as a vehicle to provide consumers with services, so, on the surface, it seems like trademarks on products in class nine are extremely important for internet companies, as this represents the core product of internet companies, but trademarks are marks for distinguishing the source of a product or service. Internet companies use apps to promote their company’s products or services.
Internet companies don’t use apps to sell apps, but rather they use apps as a vehicle to deliver their core product or service. Consumers download and use apps to use the service provided by the app, not the app itself. Providing products and services in different fields is the real reason internet firms develop apps, and these are the internet companies’ core class, nor the app itself.
From a trademark infringement perspective, does the failure to register a class nine trademark suggest infringement of the class nine trademark rights of others?
In normal circumstances, internet companies, internet firms and more traditional industries have registered a trademark for their core services, and can distinguish the origin of their services or products through the trademark in this class. They cannot delimit the class of their product or service as use of mobile application software just because of their use of mobile application software in their business operations, but rather they should judge their class on the basis of overall services.
At the same time, similarity of trademarks and similarity of goods or services are only some of the factors to consider in terms of infringement. In addition, likelihood of confusion, the possibility of misidentification and the trademark in question’s significance and fame are also factors in judging trademark infringement. In most situations, internet companies or traditional industries have a trademark for their core services, and their target consumers are those who need this app’s services, and not consumers who need smartphone software. Therefore, the lack of a trademark for products in class nine will not necessarily be misleading to the consumers in question, which does not constitute infringement of the trademark products in class nine. In most cases, the trademarks of internet firms are often arbitrary or suggestive trademarks, and the trademarks already registered for products in class nine are only registered trademarks in terms of status, without being used by the registered owner and used for a significant number of products, the fame of the trademark itself will not be great, and trademarks that aren’t well known and that aren’t very significant should not be given overly-strong protection.
In conclusion, it’s undeniable that trademarks registered for products in class nine have a close connection to many internet companies, so to avoid getting involved in unnecessary trademark disputes or having one’s app removed from app stores, internet firms should eventually register a trademark for products in class nine, but if they don’t have a trademark for products in class nine, this does not necessarily have any effect on their ability to launch a public offering or even put them at risk of being accused of trademark infringement. Jumping to the conclusion that internet firms use of the name of their app is an infringement of existing trademarks on downloadable mobile phone application software products in class nine is not in the interests of the development of China’s internet economy, and harms the interests of the internet firms in question, and, in the end, will lead to apps, such as SoYoung, being removed from the app store, ultimately undermining the rights of consumers. The development of the internet economy in China is extremely fast-paced, so all parties require time to understand these new kinds of legal issues, and they must do so with calm analysis and judgment, balancing the legal rights of all parties involved.
This article was translated from the original Chinese, which appeared in the Issue 646 of the Unitalen Newsletter, by Conor Stuart.