Michael Jordan, New Balance Victories: Optimal Timing for Foreign Brands in China?
Published: June 1, 2020
Albert Tsui Dentons
March 2020 was a victorious month for two long-troubled foreign brand owners in China. Within one month, the Supreme People’s Court of China delivered two heavyweight trademark judgments, both in favor of foreign intellectual property (IP) rights owners.
China has been accused in the past of favoring local copycats at the expense of foreign brands. As both successful parties, Michael Jordan and New Balance, are American, people cannot help but wonder if it is just a coincidence, or has China changed its IP rights policy to tip the scales in foreigners’ favor? Has China succumbed to American pressure on IP rights protection since the start of the trade war? And the ultimate million-dollar question for those brand owners that have been facing IP problems in China for years would surely be this: riding on these successful cases, is now perhaps the best time to take IP enforcement actions in China?
The Michael Jordan Case
The saga between Michael Jordan, five-time NBA most valuable player, and Qiaodan Sports (Qiaodan), a Chinese sportswear maker, can be traced back to the late 1990s. That is when a sports company in Fujian province adopted the name “Qiaodan” and began registering a series of trademarks, including Michael Jordan’s surname translated into Chinese, a silhouette holding a basketball that allegedly resembled him, his retired jersey number 23, and later, and more notoriously, Chinese transliteration of the names of Jordan’s two sons, Jeffrey and Marcus.
The trickiest part of the case lies in the name “Qiaodan” itself. When Michael Jordan became well-known in China in the late 1980s, the Chinese media referred to him as “乔丹”, which is the transliteration of the word “Jordan” and can be “romanized” in Chinese “Pinyin” as “Qiaodan.” While Jordan claimed that Qiaodan stole his name and made illicit profits from his fame, Qiaodan rebutted, claiming that “乔丹” was only one of many ways to translate the word “Jordan” into Chinese. There is support for this claim: media in Taiwan and Hong Kong, both predominantly Chinese-speaking, would refer to Jordan differently as “喬登” (Pinyin: Qiaodeng) and “佐敦” (Pinyin: Zuodun).
Michael Jordan’s legal battle began in 2012. He claimed Qiaodan was a free-rider on his goodwill and misled Chinese consumers into believing that it was related to Michael Jordan or otherwise endorsed by him. Damage resulting from confusion is not far-fetched. As early as 1984, Michael Jordan had endorsed Nike to sell Air Jordan, a sub-brand that bears his name and uses his silhouette to create the famous JUMPMAN logo.
|The mark in dispute: Qiaodan’s “乔丹 and silhouette” mark (China Trademark No. 6020578, registered in Class 25 on April 21, 2010)||Air Jordan JUMPMAN Logo|
Qiaodan fought back by suing Michael Jordan and Nike for defamation, trademark infringement, and unfair competition. In defense against Michael Jordan’s invalidation attempts, Qiaodan’s lawyers creatively argued that what the athlete in Qiaodan’s silhouette logo holds in his left hand is not a basketball, but instead a ping-pong paddle. Furthermore, they argued “乔丹” does not refer to Michael Jordan, but in fact carries different meanings.
Since the dispute began, the parties have filed more than 80 claims and counterclaims. Mr. Jordan successfully reclaimed some of his rights, particularly in a 2016 Supreme Court judgment (Case No.: (2016) Zui Gao Fa Xing Zai 27 Hao), which upheld his naming right in “乔丹”. The judgment stated:
“‘乔丹’ has enjoyed fame in China and is famous among Chinese public. In China, the public usually use ‘乔丹’ to refer to Michael Jeffrey Jordan. ‘乔丹’ and ‘Michael Jeffrey Jordan’ have maintained a stable referential relationship.”
But Michael Jordan has lost many cases as well, the most significant being in 2017, when the Supreme Court upheld Qiaodan’s right to use its black-and-white silhouette logo without the word “乔丹”. Case No.: Zhi Xing Zi Di 332 Hao.
The latest Supreme Court verdict (Case No.: (2018) Zui Gao Fa Xing Zai 32 Hao) concerns Qiaodan’s “乔丹 and silhouette” mark (China Trademark No. 6020578, registered in Class 25 on April 21, 2010. See above left.). On October 31, 2012, Michael Jordan applied to China’s Trademark Review and Adjudication Board (TRAB) for trademark invalidation on the grounds that the mark infringes Michael Jordan’s name and portraiture rights.
TRAB struck down the invalidation request in 2014. Michael Jordan initiated an administrative litigation at the Beijing First Intermediate Court to review TRAB’s decision. Upholding it, the court ruled that “乔丹” is just an ordinary American surname, and that the evidence was not sufficient to establish an association between “乔丹” and Michael Jordan.
Michael Jordan subsequently lost his appeal at the Beijing High Court, and his final chance was a request for re-trial at the Supreme Court. His request for re-trial was approved, and the Supreme Court sided with him.
This landmark case sets a precedent for foreign celebrities whose translated Chinese name has been registered by someone else in China. To enforce one’s naming right against a Chinese trademark hoarder, as set out in the 2016 judgment, the celebrity first needs to establish a “stable referential relationship” alone between the celebrity’s actual name and the celebrity’s translated Chinese name in a particular profession in which the celebrity is famous. In the current case, “乔丹” and “Michael Jordan” constitute a “stable referential relationship” in basketball or sports in general, but “乔丹” is still a mere Chinese translation of an English surname in other areas.
Proving a “stable referential relationship” does not suffice. A celebrity also needs to prove two more elements, namely “confusion” (among consumers if the natural person’s name and the mark of the translated Chinese name coexist) and “bad faith” (in the registrant of that Chinese name). In the current case, bad faith has been found, as Qiaodan failed to give a consistent, convincing explanation why it chose “乔丹” as a trademark without any intent to free-ride on Jordan’s fame in sports.
The New Balance Case
The legal battle between New Balance, a famous American athletic shoe maker, and the alleged Chinese counterfeiters has also dragged on for years. But where Michael Jordan has one primary archrival, New Balance faces many Chinese challengers, big and small, that took advantage of New Balance’s delay in registering its Chinese name, as well as the company’s difficulty in defending its perhaps rather simple “N” logo which arguably lacks distinctiveness.
One of the challengers is a company called Qierte, which owns two “N logo” marks in China. New Balance holds prior registrations for its own “N logo” marks, which form the basis for its application to TRAB for invalidation of Qierte’s marks.
|Qierte’s Two Marks in Dispute||Selected New Balance Marks|
|(Registration No. 8520182)||(Registration No. 175151)|
|(Registration No. 7976207)||(Registration No. 3933149)|
|(Registration No. 4308423)|
|(Registration No. 4170999)|
|Examples of Qierte’s Shoes||Examples of New Balance’s Shoes|
TRAB held the marks were dissimilar. On appeal, the first instance court compared New Balance’s evidence of fame with Qierte’s evidence in distinguishing its marks from those of New Balance. On the merits of the evidence, the court decided in favor of New Balance. Qierte appealed to the Beijing High Court, which overturned the first instance decision on the grounds of dissimilarity. New Balance requested a Supreme Court retrial.
New Balance emphasized Qierte’s bad faith in the retrial. In Qierte’s actual use of the two “N logo” marks in dispute (see comparison table above for “Examples of Qierte’s Shoes”), it intentionally weakened the “wave” design inside the “N logo” by using the same color, which made Qierte’s “N logo” even more visually similar to the New Balance shoe logos. The Supreme Court agreed there was bad faith. Toward the end of New Balance’s winning judgment (Case Nos.: (2018) Zui Gao Fa Xing Zai 2 Hao; (2018) Zui Gao Fa Xing Zai 3 Hao), the Supreme Court stated Qierte’s behaviors “can hardly be in good faith.”
And then, less than a month after the Supreme Court ruling, another court (Shanghai Pudong New District Court) awarded New Balance RMB 10 million (US 1.4 million) for damages in trademark infringement. Just seven years ago, a Guangdong court ordered New Balance to pay record-breaking damages of RMB 98 million (US $14 million) to a purported trademark squatter in China, and a public outcry ensued. But New Balance now has two trademark victories in a row. So, what changes have been made in China’s Trademark Law in the ensuing seven years which resulted in such a remarkable contrast in the judicial treatment of New Balance?
The Latest Trademark Law Amendment
While some accusations of China’s half-hearted attitude in IP rights protection are arguably true, the reasons behind it are perhaps more unintentional or inherent in China’s Trademark Law. Take the Michael Jordan case as an example—despite his latest win, Michael Jordan had previously failed in numerous attempts to invalidate Qiaodan’s marks because they had been registered for more than five years. According to China’s Trademark Law, a registered mark cannot be revoked if it is more than five years old, unless two elements are proven: (1) the mark was filed in bad faith; and (2) it copies a well-known trademark.
Even when Michael Jordan could prove bad faith on Qiaodan’s part, he failed the second limb of the test because according to China’s trademark law and practice (1) “Michael Jordan” is more like a name than a trademark; and (2) the degree to which it is well-known in America or anywhere outside China is of no relevance. Whether a mark is well-known is measured by looking at Chinese consumers during the relevant time. Often, trademark squatters take foreign brands and register them in China well before they are known in China.
The Chinese government tackled the issue by singling out the bad-faith element and creating another ground for invalidation based solely on malicious intent. According to the newly amended Article 4 of the Trademark Law, effective on November 1, 2019, “malicious trademark applications with no intent of use shall be refused.”
This amendment is welcome news for foreign brands that have ample evidence of their reputation in the home country and bad faith in their Chinese infringer, but fail to prove their fame in China, usually because they have not yet entered into the Chinese market. Since the law is new and precedential cases scant, it will take time to see how the Chinese Trademark Office interprets the new Article 4.
The China-U.S. Trade War and Its Impact
By supporting American IP interests, China might seem to be extending an olive branch to the United States, but the reality is likely more complex.
Looking at China’s legislation, China’s reform in IP rights legal framework has been underway even before the trade war. Since 1983, when the current Trademark Law was enacted, it has already undergone four big overhauls. The latest one in 2019 was allegedly propelled by U.S. pressure, but it was something that the Chinese government had already planned to do. At most, the American position accelerated the process.
Turning to the judiciary, rulings in favor of foreigners have never been uncommon in China. According to data released by the Beijing Intellectual Property Court (a court established in 2014 that specializes in IP cases, as part of China’s effort to enhance IP rights protection), between November 2014 and the first half of 2019, foreign entities won 68 percent of their cases (excluding cases when both plaintiff and defendants were foreigners).
Returning to the two brands at issue, it was not the first taste of victory for Michael Jordan or New Balance. The Supreme Court had declared victory for Michael Jordan once before, in 2016. And, in 2017, New Balance was awarded RMB 10 million (US $1.4 million) in a trademark case against five counterfeiters in China. But every case has its own circumstances. By simply looking at the numbers without going into details, it would be rather unfair to hail a supposedly impartial judicial system when a foreigner wins, or condemn it when a foreigner loses.
Since China’s legislative and judicial environment has been constantly evolving, it is hard to tell whether the China-U.S. phase one trade deal has made any immediate change. But the impact of the trade deal is far-reaching. Seeing the trade war positively, China can leverage it and transform its IP environment to create a level playing field for domestic and foreign players alike.
For instance, even without the trade war, documental formality and neglect of testimony (that is, overreliance on physical or documental evidence; calling witness and cross examination are rare in a Chinese court) have always been two big problems that indiscriminately upset foreign and domestic IP owners alike. Now, in Articles 1.30 and 1.31 of the Trade Agreement, China is asked to “streamline notarization and authentication procedures” and “afford a party a reasonable opportunity to present witnesses … and cross-examine any witness testifying in the proceeding.” With these measures now in place, Chinese brand owners will undoubtedly welcome the change too.
Is Now the Best Time to Act?
The answer is simple: it is always a good time to take swift action when rights are infringed in China. Brand owners should not wait for a better IP environment in China because it has been improving all along. The “best” timing for taking action is non-existent.
Michael Jordan’s case is a good lesson in timeliness. When Michael Jordan started enforcing his IP rights in China, most of Qiaodan’s core trademarks had been registered for more than the five-year threshold, thus being more difficult to attack. If he had understood this and taken action sooner, the Jordan-Qiaodan saga may have been rewritten.
Despite being able to keep its threshold-exceeding trademarks from invalidation for now, Qiaodan nonetheless has a heavy price to pay. Free-riding on Michael Jordan’s reputation for over some 20 years, Qiaodan grew from a small factory in Fujian into a full-fledged sports empire with an estimated capitalization of more than RMB 10 billion (US $1.4 billion). However, since the start of the trademark dispute with Michael Jordan, Qiaodan has postponed its initial public offering several times.
Qiaodan made a public statement shortly after the ruling, claiming that the invalidated mark was merely a defensive mark registered for less than five years. On the other hand, its 74 other marks, including “乔丹”, the basketball silhouette, and QIAODAN, have been registered for more than five years and survived Michael Jordan’s previous attacks. But with the newly enacted Article 4 of the Trademark Law, it remains to be seen whether Qiaodan can hold on to its remaining trademarks, not to mention when it may be finally listed on China’s stock exchange.
Although every effort has been made to verify the accuracy of items in this article, readers are urged to check independently on matters of specific concern or interest.
© 2020 International Trademark Association
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