China: Can commercial use reconcile with fair use?

Fair use is an affirmative defence in trademark infringement typically including nominative and descriptive fair use.

Assuming the accused trademark is used merely for its existing meaning, Chinese courts will support a descriptive fair use defence relying on Articles 48 and 59 of PRC Trademark Law.

Specifically, article 48 defines “trademark use” as the designation of source, while article 59 prevents a trademark registrant from banning other uses of a mark if it contains generic terms or directly refers to the quality, key materials, functionality or other features of the products concerned.

By contrast, in cases relating to nominative fair use, the court frequently involves the “Doctrine of Exhaustion of Trademark Rights” to reject infringement claims.

In Qing Hua Jiao (2021 Chuan Zhi Min Zhong No. 2152, Sichuan High People’s Court), the court dismissed the infringement claim as the trademark concerned, “Qing Hua Jiao”, refers to a kind of green pepper and is the objective description of a flavour, other than as a designation of source. The Supreme Court of PRC selected this case as one of the 2022 Top 10 Intellectual Property Cases.

US fair use defence

In the US, fair use is a statutory defence for infringement claims, provided that the “term or device which is descriptive of and used fairly and in good faith only to describe the goods or services of such party, or their geographic origin” (15 USC § 1115 (b) (4)).

Such a defence is also available in dilution cases, where the statute provides that “a nominative or descriptive fair use, or facilitation of such fair use, of a famous mark by another person other than as a designation of source for the person’s own goods or services” shall not be actionable as dilution by blurring or dilution by tarnishment (15 USC § 1125(c)(3)(A)).

Case law made it clear that a fair use defence only applies to cases where the trademark concerned is not “a designation of source for the person’s own goods or services.” (Louis Vuitton Malletier SA v Haute Diggity Dog 507 F.3d 252 (4th Cir. 2007)).

In a highly controversial case, Jinri Toutiao v Jinri Youtiao (2022 Yue Min Chu No. 2332, Guangzhou Municipal Intermediate People’s Court), the court rejected infringement and dilution claims just because the trademark expresses “a certain level of mimic”.

The court discussed at length how to harmonise the protection of famous marks with the ultimate goal of IP legislation, which is to inspire innovation. Although the non-infringement conclusion might be, at least partly, correct (the court’s dismissal of the parallel unfair competition claims is unlikely to sustain), it turned a blind eye to the defendant’s blatant intent to take free-ride of the plaintiff’s goodwill and misplaced legal tests throughout the opinion.

By contract, the Supreme Court of US recently rendered a long-expected Jack Daniel’s v Bad Spaniels decision (Jack Daniel’s Properties v VIP Products, No. 22-148 (US)), pertaining to fair use arising out of the element of parody. The Supreme Court overturned the Ninth Circuit’s approach and pointed out that fair use cannot be used to shield the commercial use of a trademark.

This article intends to illustrate the key findings of the two cases from a comparative law perspective and attempts to propose a correct approach to adjudicate infringement claims for a trademark bearing parodic significance.

Jinri Toutiao v Jinri Youtiao

The plaintiff operates a popular internet news application called Jinri Toutiao (meaning “today headline”). This trademark de facto lacks inherent distinctiveness as “Jinri” means “today” and “Toutiao” means “headline” in Chinese, which as a whole has direct reference to the essential function of the mobile application. Nevertheless, it had acquired distinctiveness and is the number one internet news application.

The defendant uses “Jinri Youtiao” on a franchise restaurant selling breakfast featuring “Youtiao”, a traditionally fried food. The pronunciation of the last two charterers of the parties’ trademarks—“Youtiao” versus “Toutiao”—are highly similar, but the meaning of the two is significantly distinguishable. The defendant delicately exploited the homophony to express a “sense of humour”.

The defendant employed other similar features to imitate the plaintiff’s mobile application: