Inadequacies of the trademark law

According to Dr. Lin Hua, protection of virtual characters under the trademark system satisfies the requirements and characteristics of merchandising of characters. Trademark protection has its own advantages compared with copyright protection. Firstly, trademark registration can be renewed in every country in the world, at least in theory a registered trademark can have an infinitely extended period of protection. Secondly, as China adopts the dual-track IP protection system, namely through both judicial and administrative means, right holders may ask the Administration for Industry and Commerce (AIC) to investigate and handle trademark infringement. The AIC obviously has greater human and material resources than copyright enforcement agencies. Thirdly, calculation of damages of trademark infringement lies in the value of goods or services for use by a trademark, rather than separately in copies of infringing works, such as packaging. The calculation method accords with the nature of the infringement and actual results of the infringement, which is more conducive to protection of the right holder of commercialized virtual characters.

Some believe that since Chinese law does not have any provision on the newly emerged merchandising rights, in practice objects of the right such as a real person’s name and likeness, name and role of works, special names of works and other special signs, are protected by the trademark law. However, merchandising is a special type of act and the trademark law also has its own characteristics. Many rules in the trademark law are not targeted to resolve merchandising problems. Therefore, the trademark law is not able to provide comprehensive protection for the merchandising rights.

Liu Shijie said that if we combine external identifying factors of the merchandising rights with external elements to form a trademark and develop commercialization from the perspective of the trademark law, then trademark protection will not be a problem. However, there are some shortcomings in the trademark protection.

The first is limitation on the scope of objects, such as sounds and long phrases like “dances with wolves, a great hero,” which have merchandising value, but cannot be used to register as trademarks. Such applications would not proceed past the preliminary stage. It should be noted that during the latest revision of the trademark law that sounds have been added and now qualify for trademark registration. This is a step forward in protection of the merchandising rights in every slip law in the absence of separate legislation on the merchandising rights.

The second is the plight of the application for three-dimensional trademarks, such as images of Pleasant Goat and Big Big Wolf. Currently merchandisers can only file for two-dimensional trademarks. However, it is obvious that the trademark law cannot extend its reach when it comes to protection ranging from two-dimensional to three-dimensional images. At present the door remains shut for applications for three-dimensional trademarks, but the new trademark law advocates a step forward.

The third is limitations on objects of use. As we know, objects of use for a registered trademark are limited to approved goods and don’t extend to similar goods and services. If we seek broader protection, we need to file for separate applications. However, the cost is high for trademark applications. Though the fee is 1,000 yuan for a trademark with no more than 10 goods or services within subcategories, often times a category has more than 10 subcategories, an additional 100 yuan will be charged for each additional subcategory. As a result, if we seek full-round protection of the merchandising rights, we have to apply for all categories in the classification of goods and services and the cost will amount to several hundred thousand yuan.

Then comes limitation on continued use. Trademarks will be canceled if they have not been used for set number of consecutive years. Certainly, the merchandising rights cannot be easily canceled as they are natural rights.

Finally there is the difference of criteria over infringement. The criteria over infringement lie in the possibility of confusion that may be caused, but the criteria for protection of the merchandising rights are identifiable. All characters and virtual images, well-known or not, have the natural merchandising rights, but whether they can be commercialized and profitable, or the amount of profits is another issue. In case of infringement, if we demand high amount of damages arising from the merchandising rights, we are obliged to prove that the right has a high value or an equivalent value.

Inadequacies of the patent law

Can the merchandising rights seek patent protection by filing for design patents?

Sun Cheng, a lawyer from Shanghai DeBund Law Offices, held that the merchandising rights for virtual characters may be protected by applying for a design patent. The positive protection of virtual characters from the patent law lies mainly in the fact that the creator of virtual characters may obtain exclusive protection by applying for design patents for use in goods bearing the images of virtual characters. However, judgment of the substantial sameness involved in design patent protection is only limited to identical or similar goods. In practice, it is obviously uneconomical and unrealistic for the creator to seek design patent protection of virtual characters by applying for all goods in all sub-categories in International Classification for Industrial Designs. Therefore, generally creators seek the exclusive right of exploration for design patents for use in a limited number of goods. While the negative protection of virtual characters in the patent law is mainly reflected in the fact that the creator may prohibit others from applying for design patents of its virtual characters on the ground of ownership of copyright to the images of virtual characters in accordance with the third paragraph of Article 23 of the Patent Law.

According to Niu Shijie, the protetion provisions on merchandising rights and design patent in the Patent Law have something in common. However, there are a number of reasons why it is clear that there is almost no feasible way to use the design patent law for protection. Firstly, the application for design patents must satisfy the requirements of novelty, but if we want the merchandising rights to realize the value, we must continue to make the rights known to gain more value. In so doing, the novelty is lost and it is not possible to apply for a design patent. Secondly, even if the novelty is not lost, objects of the merchandising rights such as titles of the work, actions and names of well-known characters may lose their external impressions and fail to obtain a design patent due to lack of the condition. Thirdly, the application process for a design patent is costly, time-consuming and laborious, but the protection period is limited. What’s more, the process involves application fees and high maintenance fees, which will hinder the ability of holder of the merchandising rights to commercialize and develop the right.