Typical cases related to merchandising rights in recent years

By Kevin Nie, China IP,[Comprehensive Reports]

Since the 1980s, cases related to merchandising rights frequently arose in judicial practice. Especially in recent years, the number of civil and administrative disputes involving merchandising rights shows an increasing trend. Following are three case summaries which typify the sort of merchandising rights issues arisen in recent years.

Case I: The Liu Xiao Ling Tong portrait case

Linekong (Beijing) Technology Co., Ltd. Typical Cases Related to Merchandising Rights in Recent Years □ By Kevin Nie, China IP (Linekong) used the image of Monkey King on its official website and the online game “Journey to the West” without authorization or compensation. Zhang Jinlai (stage name as Liu Xiao Ling Tong), actor of Monkey King in the CCTV version of Journey to the West, brought Linekong to court, claiming that using his Monkey King image without authorization when selling the online game for profits violated his right of portrait. He asked the court to order the company to stop using the image, to make a public apology, and sought 1 million yuan in damages.

Liu Xiao Ling Tong is a famous and uniquely-shaped actor and his image is well known to the public in his role as Monkey King. Also, he was born in a family of “monkey play,” so that it can be said Liu Xiao Ling Tong and his family are closely linked to the image of Monkey King. In most cases, the mere mention of Monkey King causes audiences to naturally think of Liu Xiao Ling Tong. However, the focus of the case is whether the image of Monkey King played by Liu Xiao Ling Tong could be protected as portrait right. It is not only a big issue for film culture, but also a question for legal circles.

Different communities hold quite different views on the attribution problem of Monkey King’s portrait. Some think that Zhang Jinlai owns the portrait right to Monkey King while some believe that the image is jointly owned by Zhang Jinlai, figure designers and makeup artists. Some hold the view that the image belongs to the producer of the TV series Journey to the West and some even suggest that the owner should be the original author of the novel Journey to the West - Wu Chen’en.

Beijing Xicheng District People’s Court was the court of first instance. It found that the portrait right referred to the exclusive right owned by a natural person over reproductions of his own image objectively and was limited to the image reflecting the features of a true person. The image of Monkey King played by Zhang Jinlai was not a portrait of him in his natural state and consequently Linekong’s use of the Monkey King image in its online game did not constitute a violation of Zhang Jinlai’s actual portrait.

Zhang Jinlai was not satisfied with the first instance verdict and appealed. In the second instance trial, the two parties had very different understandings on whether the image of Monkey King played by Zhang Jinlai was subject to protection of portrait right. Lawyers for Zhang Jinlai believed that 80% of the image of Monkey King in CCTV 1987 version of Journey to the West was shaped according to the facial contours of Liu Xiao Ling Tong, and Zhang Jinlai was entitled to legal protection under the performer right, portrait right and trademark right for the character he played. But Linekong’s behavior of using the image without permission violated his portrait right. Lawyer of Linekong said that the company created the image of Monkey King based on the original description of the novel Journey to the West, which was completely different from the Monkey King played by Liu Xiao Ling Tong. The company also stressed that the artistic image created as a character was not the same as Zhang Jinlai’s actor portrait in his natural state. Zhang Jinlai was only the actor of Monkey King in TV series, and he owned the portrait right for his own face but not the portrait right for the character Monkey King.

Beijing First Intermediate People’s Court gave a full explanation on the concept of portrait right in the second instance verdict. The Court believed that the reason why law protects the right of portrait is that the spirit and property interests embodied in portrait are inseparable from personality. When an image can fully reflect the individual’s physical characteristics and the public can establish a direct one-to-one correspondence between the image and the individual, the dignity and value reflected by the image then become the personality interests related to the portrait of the natural person. Monkey King played by Zhang Jinlai has a complete one-to-one correspondence with him, that is, identifiability is established between the image and Zhang Jinlai. In a relatively stable period of time and for a certain range of audience, people can recognize Zhang Jinlai when seeing the image of Monkey King played by him and the connection is unique.

The Court adopted the “extended interpretation” of portrait right in the second instance. The Court found that the legislation of China’s Tort Law fully supports the property interests embodied in personality rights and protects the interests of property inherent in personality rights. The law recognizes the commercial value generated from the image with personal investment and efforts. Unauthorized use of the image would not only violate the human dignity embodied in the portrait, but also infringe on the property interests of the portrait owner. This would damage the economic returns, dampen the right holders’ spirits of creation and finally affect the public welfare. Therefore, when a character image can reflect the physical characteristics of the actor and become identifiable with the actor, the image should be protected as the portrait of a natural person, which is the premise for preventing infringement on the merchandising of the right of personality.

However, there are some differences between the Monkey King image used by Linekong and the character played by Zhang Jinlai. Monkey King image of Zhang Jinlai is so popular that the audience can distinguish the differences immediately. They can find that the Linekong’s Monkey King is not the one played by Zhang Jinlai, and can not establish direct link between the image and Zhang Jinlai. Thus, the court of second instance held that the Linekong’s Monkey King image did not directly reflect the facial features of Zhang Jinlai, so that it did not constitute violation of portrait right. Accordingly, Beijing First Intermediate People’s Court upheld the first instance verdict and dismissed Zhang’s appeal.

It is learnt that this is the first time for the court to clarify the relationship between character image and portrait right of the natural person. Experts from related fields expressed different views on the case.

Feng Xiaoqing, Vice President of China Intellectual Property Law Research Association and professor of China University of Political Science and Law, pointed out in his article How to Protect the Interests of Monkey King that although courts in this case dismissed the claim of Zhang Jinlai (Liu Xiao Ling Tong) twice on two different grounds, it does not mean that the image of Monkey King played by Zhang Jinlai (Liu Xiao Ling Tong) is not protected by law. The feasible approach may be including character image into the objects of protection by legislation, or formulating judicial interpretation to guide judicial practice.

Professor Feng holds a positive view on the second trial since the court noticed the lag in written law and the passivity problem in adjusting social relations. He believes that, when the laws lack clear provisions on merchandising of character images, the second trial is trying to extend the scope of protection for “portrait right” to solve the current problems related to the merchandising of character images. The second trial covered this character image under the portrait right protection, which was a brave innovation. However, it is still debatable whether character images should be directly included under portrait protections, judging either from the viability of the legal concept and connotation of portrait rights or from theory and practice for protecting the merchandising rights of character images applied in foreign countries.

Professor Feng further points out that the character image can neither be equated to the portrait of a natural person nor be directly included in the scope of portrait right protection. China’s law has no provision related to image protection, while the image should be protected by law from either a legal or practical point of view. In fact, the court of second instance was fully aware of this issue. The question now is whether this protection has to be included in the category of rights covered by the portrait right.

Linekong, the defendant in this case, did not agree with the view of introducing merchandising rights protection. The company believed that merchandising rights did not match with China’s existing civil law system and structural pattern of civil rights. If the court overprotected the plaintiff’s rights on this ground, the broad interpretation will limit the prosperity of the cultural market.

Professor Feng believes that with the diversified development of media and entertainment, disputes involving character images will increase in number. However, we do not have to extend the outreach of a legal concept so as to cover it under the portrait protections, because there are some obstacles in both theory and practice in the field of image rights and merchandising rights. A feasible approach would be recognizing character images as objects protected by legislation, or formulating judicial interpretation to guide judicial practice. Under the current legal system, the plaintiff may claim legal protection against unfair competition.

Case II: “Yao Ming” personality rights and unfair competition disputes

The merchandising of the right of personalities has been a hot spot discussed by legal theorists and practitioners. Personality rights, with names and portraits of certain persons as the outward signs and its characterization as the content, especially a celebrity’s name and portrait, have tremendous commercial value in the commodity economy and society.

The personality right infringement and unfair competition dispute between Yao Ming and Wuhan Yunhe Sharks Sporting Goods Co., Ltd. (Wuhan Yunhe) had drawn much attention from media and the public because of Yao Ming’s influence.

Paragraph 2 of Article 6 of the Interpretation by Supreme People’s Court on Several Issues on Application of Laws in Hearing Civil Cases of Unfair Competition provides that “the use of name of natural person on commodity business shall be identified as the ‘name’ provided in Paragraph 3 of Article 5 of Anti-Unfair Competition Law.”

The name of a natural person protected by the Anti-Unfair Competition Law, different from the general sense of personal right, is a commercial mark to distinguish between different market players. Any business or individual, without authorization or license, using other’s name, portrait, signature and its corresponding signs for commercial use and making false promotion, should be stopped immediately and strictly prohibited, because the acts not only damage the interests of right holders, but also harm the interests of consumers and disrupt social economic order. The case not only solved the dispute between the parties, but also applied Anti-Unfair Competition Law and its judicial interpretation in determining the appropriate amount of damages, which will provide references for future hearings involving such disputes over personality rights and unfair competition.

As a professional basketball player, Yao Ming has established a good social image and enjoyed a high reputation because of his outstanding performance in professional basketball field and contributions to social welfare and charity. Wuhan Yunhe, without the consent of Yao Ming, used his name and portrait on “Yao Ming Generation I” products. This act violated Yao Ming’s personality right and constituted unfair competition. The plaintiff asked the court to order the company to stop the infringing acts immediately, to award damages of 10 million yuan, and to publish an apology statement in the China Business News and other media outlets to eliminate the negative effects.

Wuhan Intermediate People’s Court of Hubei Province, the court of first instance held that, Yao Ming has had a significant influence on the majority of consumers because of his achievements in professional basketball and good social image, hence the related interests should be protected by law. Wuhan Yunhe repeatedly used Yao’s portrait and name in promotional processes and associated its production and marketing activities with Yao Ming. Taking advantage of Yao Ming’s good social image and consuming influence, the company made misleading publicity for its products, which confused the consumers. The company’s act infringed Yao Ming’s name right and portrait right, and also constituted unfair competition. Since the evidence was insufficient to prove that Yao Ming had suffered the economic losses of 10 million yuan due to Wuhan Yunhe’s infringement, the court evaluated the infringement facts and Yao’s inputs in lawsuit, and determined that compensation for economic losses should be 300,000 yuan. And the first instance verdict ordered the company to immediately stop using Yao Ming’s name and portrait and unfair competition actions and to publish an apology statement on China Business News and other newspapers to eliminate bad effects. The company should also compensate 300,000 yuan to Yao Ming for economic losses. After the first trial, Yao Ming made an appeal on the grounds that the amount of compensation was too small.

Hubei Higher People’s Court for second instance upheld the view that, without the authorization or license from rights holder, enterprise or individual can not use a person’s name, portrait, signature and related signs for commercial use. As an operator in market, Wuhan Yunhe went against business ethics and principle of good faith. Its behaviors not only seriously damaged the legitimate interests of the rights holder, but also caused damages to the legitimate interests of consumers. The company’s acts seriously disrupted social and economic order and should be prohibited immediately. When determining compensation amount, the first trial did not fully consider the nature of infringement, consequences, duration and other factors. Moreover, after Yao Ming published the official statement on Sina.com in March 2010, Wuhan Yunhe continued its infringement and ignored its subjective fault. To this end, though the infringed losses suffered due to the infringements or the benefits from infringements were difficult to determine, the court fully considered the above factors and ruled that Wuhan Yunhe must pay damages (reasonable expenses included) totaling 1 million yuan. The judgment was based on the nature, consequences, duration and subjective fault of the infringing acts based on the principles articulated in Article 20 of Anti- Unfair Competition Law and Article 17 of Interpretation by Supreme People’s Court on Several Issues on Application of Laws in Hearing Civil Cases of Unfair Competition.

The case solved the problem in application of laws when personality rights and unfair competition law compete with each other and set a successful example for handling cases of this kind. Since the focus of the second trial was not on the recognition of violation acts, the second instance court combined with the judgment of the first instance court on personality right violations and unfair competition to make the final decision. The court applied Article 150 of Opinions of Supreme People’s Court on the Implementation of Civil Law (Trial), Article 20 of Tort Law, Article 20 of Anti-Unfair Competition Law as well as Article 17 of Interpretation by Supreme People’s Court on Several Issues on Application of Laws in Hearing Civil Cases of Unfair Competition, so that the court found precise legal basis on determining the amount of damages. The case not only solved the dispute between the two parties, but also provided a typical example for future cases by selecting to apply Anti-Unfair Competition Law simultaneously for cases in which the personality rights and unfair competition claims are competing.

Case III: “007 BOND” trademark administrative dispute

This dispute involved a trademark application filed by a third person to the Trademark Office of State Administration for Industry and Commerce (Trademark Office) on March 22nd, 2002. Its application number was No. 3121466 and the specified commodity was Category 10: cervical caps, condoms and non-chemical contraceptives. Prior to this application, Danjaq, LLC., the distribution company for 007 films, had applied to register the trademark for “007 and its picture” and “JAMES BOND” (the cited trademark) for Category 28 and 41 in 2001. During the objection period, Danjaq submitted a trademark objection application to the Trademark Office, requesting denial of trademark. On October 8th, 2007, the Trademark Office ruled on the trademark objection application and found that copyright protected the form and content of the works rather than the name itself. Danjaq did not apply or register the cited trademark for the related category, so that the reason for the objection (malicious plagiarism and copyright infringement) was not established. Therefore, the opposed trademark was approved for registration.

Danjaq was not satisfied with the decision and submitted a reexamination application to the Trademark Appeal Board (TAB), claiming that 007 and JAMES BOND are the protagonist’s code and name in the series of films distributed by Danjaq. The code and name have originality and Danjaq enjoys its copyright, trademark right and character merchandising rights. 007, JAMES BOND and its related films have tremendous popularity and influence in China. They argued that the proposed trademark constituted malicious plagiarism and imitation of the cited trademark and violated Danjaq’s priority rights. As the opposed trademark constitutes similar mark with the cited trademark, the application of proposed trademark violates the provisions of paragraph 8 of Article 10 and paragraph 1 of Article 41 of the Trademark Law on “to obtain trademark registration by deception or other improper means.” In summary, Danjaq requested the TAB not to approve the registration of the trademark. On March 1st, 2010, the TAB issued the [2010] No. 04817 decision, which approved the registration of the opposed trademark.

Danjaq was not satisfied with the decision delivered by the TAB and brought the Board to the Beijing First Intermediate People’s Court. After hearing the case, the Beijing First Intermediate People’s Court supported the Board’s decision that the opposed trademark did not constitute trademark infringement or copyright infringement.

Beijing Intermediate People’s Court stated that on one hand, the available evidence indicated that before the opposed trademark was applied for registration, the public media had publicized the “007” films, and “007,” & “JAMES BOND” had been known by the public as famous movie character. On the other hand, the opposed trademark contained the Chinese characters for “Bond,” the number “007” and the English word “BOND.” “Bond” was not an inherent word in Chinese vocabulary and the third person did not give a reasonable explanation for the creation of the opposed mark. In view of the high visibility of “007” & “JAMES BOND” as the name of movie character, as well as the degree of approximation of the opposed trademark, the Court found it reasonable to determine that the third person may submit the registration application on the basis that he fully understood the popularity of “007” & “JAMES BOND” and the high commercial value brought by this visibility. However, the high visibility was obtained by others with labor and capital inputs, and therefore the commercial value and business opportunities should be entitled to the producers. The registration behavior of the third person violated the good faith principle and the opposed trademark belonged to the “marks having other unhealthy influences” provided by Paragraph 8, Article 10 of Trademark Law. The defendant had made an incorrect decision on whether the registration of the opposed trademark violated Paragraph 8, Article 10 of Trademark Law, so that the Court corrected the decision.

Accordingly, the Beijing Intermediate People’s Court ruled to revoke the defendant’s decision [2010] No. 04817 and required the Board to reexamine the application.

After the first trial, both the Trademark Appeal Board and the third person appealed against the recognition of “unhealthy influences.” Beijing Higher People’s Court overturned the judgment made by the Beijing Intermediate People’s Court and clearly pointed out: the socalled “unhealthy influences” should refer only to “the negative effects brought to China’s political, economic, cultural, religious, ethnic and other social public interests and public order, not involving private rights.” Beijing Higher People’s Court had different understandings on the infringement of “prior rights” and “merchandising rights.” Beijing Higher People’s Court held that: “007” & “JAMES BOND” have already enjoyed high reputation as the character name of Danjaq’s film series, and have been wellknown to the public. The reputation came from Danjaq’s creative work, thereby the business value and opportunities brought by the famous name should also be treated as the yields made by Danjaq with investments in labor and capital, and should be protected as priority rights. To this end, Beijing Higher People’s Court rejected the appeal but upheld the original judgment based on Article 31 of the Trademark Law which provids that the trademark application would infringe the prior rights held by Danjaq.

The case was widely acclaimed by the industry. In its judgment, Beijing Higher People’s Court explained the concept of “merchandising rights” for the first time, and incorporated it into “prior right.” This decision tried to define the concept of “merchandising rights,” and extended the scope of “prior rights.”

Chen Binyin and You Yunting, lawyers from Shanghai DeBund Law Offices, pointed out in an article that the highlight of the case was that Beijing Higher People’s Court established recognition of “merchandising rights” in the final judgment and protected it as prior right. In fact, “merchandising rights” is not an explicit legal right in China. According to the opinions of Beijing Higher People’s Court, the so-called “merchandising rights” is the exclusive right to the business value and opportunities brought by the specific roles or names in the creative works of the right holders, which are the output of the right holders’ efforts and enjoy high visibility in public. But it is worth noting that the only official definition of “prior right” at present is provided by the Trademark Examination Standards (Standards) formulated by the Trademark Office. According to the Standards, “prior rights refer to the rights obtained before the date of application for registration, including trade names, copyrights, design patents, names, portraits and other rights.” In addition to the general definition, the “standards” also give detailed judicial methods and standards for cases that are conflicting with the preceding six types of rights. In other words, the Trademark Office only listed six types of “prior rights,” while the decision of Beijing Higher People’s Court extended the normal scope of priority rights.

(Translated by Li Guanqun)

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