Fair use of a trademark means that others can use another party’s trademark in the course of production and business without obtaining the right holder’s permission and without paying trademark royalties. The principle of fair use of trademarks is an important part of trademark law, and it is a limitation on the rights of the trademark owner. The purpose of this principle is to balance the legitimate rights and interests of trademark owners and others as well as social public interests.

For the “fair use” of trademarks, some people believe that it actually refers to the use of a non-trademark meaning, and the object of use is not the trademark at all but a symbol that has the same appearance as the trademark, and if the object of use is someone else’s trademark, it will not be reasonable. According to the current trademark legislation and judicial practice, the trademark fair use defense is frequently used in trademark infringement litigation.

With the emergence of more and more cases involving the trademark fair use defense, we have indeed seen a lot of positive effects, and more positive views of the fair use defense are emerging. More and more people have begun to realize that fair use in trademark litigation plays a role in protecting the rights and interests of consumers, promoting market competition and upholding the principle of fairness. On the premise of ensuring the reasonable exercise of trademark rights, the fair use defense can protect the legitimate rights and interests of market participants and delimit the reasonable boundary of the rights of trademark owners to prevent the improper use of their rights to affect normal operation and competition. This article briefly discusses how to use the defense of fair use of trademarks to gain the initiative in trademark infringement litigation.

“Fair use” is a defense against trademark infringement accusations specified in trademark law. Generally speaking, it constitutes fair use when one’s use of a mark similar to another party’s registered trademark satisfies the following three requirements:

• The use of the mark belongs to legitimate use in good faith.
• The mark is not used as a trademark for one’s goods or services.
• The use is solely to indicate or describe one’s goods or services.

To determine good faith, one should consider the intent, timing, method, and objective effects of the use, which could be demonstrated if the accused infringer prominently uses its own registered trademark, trade name and address to make a clear distinction, thereby showing a lack of motive for free-riding or infringement.

To determine whether a mark has not been used as a trademark, there must be no trademark use in the sense of trademark law. Article 48 of the Trademark Law stipulates the definition for trademark use and emphasizes the trademark’s function to identify the source of goods. When the accused mark does not serve as an identifier or function as a trademark in the legal sense, such use shall not be regarded as trademark use.

Fair use shall solely describe or indicate one’s goods or services. Therefore, it is generally considered that fair use includes “descriptive use” and “nominative use”.

Descriptive use

Descriptive use means using the mark to describe the features of the goods or services. According to the first paragraph of Article 59, descriptive use refers to the use of a generic name, design or model of the goods or directly describes the quality, main materials, function, purpose, weight, quantity and other characteristics of the goods, or containing a geographical name.

Generic name

A generic name is commonly used by manufacturers or consumers in a specific area to refer to a product, service or other object. It includes full names, abbreviations, acronyms or common names. Generic names include those defined based on legal requirements, national or industry standards, and those commonly accepted names.Suppose the public widely recognizes a name as representing a type of product or service, that name could be recognized as a widely accepted generic name. Names listed in professional tools and dictionaries can be references for determining commonly accepted generic names, which are generally judged based on the common understanding of the public nationwide.

To meet the requirements for descriptive use not constituting trademark infringement, it is necessary to prove that the generic name is used for the goods it designates. In the Da Fu Weng (Monopoly) case, the plaintiff is the owner of the trademark Da Fu Weng registered covering the service “providing online games on computer networks”. The defendant is using the Sheng Da Fu Weng & device mark for a game. The function of the game is to roll the dice to advance, aiming to defeat business rivals by engaging in activities such as buying properties and building houses to become a Monopoly. The court holds that Da Fu Weng (Monopoly) is a name for a game that simulates real-life business through dice-based movement. The defendant’s use of Sheng Da Fu Weng & device constitutes fair use describing the services of the associated game variety. The plaintiff could not stop the defendant’s fair use of the basic meaning of Da Fu Weng (Monopoly) as a game name.

Geographical name

The Supreme People’s Court indicates that the trademark owner does not have the right to prohibit others’ legitimate use of a geographical name on the same or similar goods to indicate the connection between the goods and their origin, geographical location, etc. The court points out that while determining the use of “geographical name” as fair use, certain factors shall be taken into consideration, such as

• The purpose and manner of use of the geographical name,
• The reputation of the trademark and the geographical name,
• The classification of related goods or services,
• The level of attention of the relevant public when choosing such goods or services, and
• The specific context and circumstances of the use of the geographical name.

In the Xinghe Bay case, the second instance court issued the non-infringement judgment mainly because Xinghe Bay had been approved as a geographical name on April 10, 2006, according to the Administrative Regulations on Geographical Names issued by the State Council. The court held that the defendant’s use of Xinghe Bay at the entrance of its real estate was the use of a geographical name, which does not constitute trademark infringement. However, when the Supreme People’s Court reviewed the case, it considered the usage and popularity of the plaintiff’s registered trademark Xinghe Bay. The Supreme People’s Court pointed out that since 2001, the plaintiff has been promoting Xinghe Bay real estate, which has received honours and gained significant popularity among the relevant public. The defendant’s use of Xinghe Bay for its real estate would cause consumers confusion and constitute trademark infringement.

Describing the characteristics of a product or service

It is generally considered that when a registered trademark is descriptive, the third party in good faith can use it to explain or objectively describe product or service features within necessary limits. If the use does not confuse the public into mistaking it for a trademark, it is a legitimate use. Factors like good faith and necessity, including industry practices, can be considered.

In Gourmet Master Co., Ltd. v. Bright Dairy Co., Ltd., Gourmet Master claims it established the 85°C brand in 2003. It has four registered trademarks for 85℃ in China, and its registered trademark in Class 43 for coffee shops and cake shops was recognized by the China Trademark Office as a well-known trademark in 2014. Gourmet Master sued Bright Dairy for its use of 85°C on the packaging of milk products.

The first instance court supported Gourmet Master and considered Bright Dairy’s use of 85°C as trademark infringement. The Shanghai IP Court, the appellate court, found that the defendant had a factual basis for using 85°C on the accused infringing product packaging. Although the font size of 85°C on the accused packaging was more significant than other text, this 85°C was not isolated but was accompanied by phrases like “Freshly Pasteurized Milk at 85°C”. The manner of use indicates that the defendant’s use of 85°C represents a temperature and is solely for expressing the temperature. The court determined that the defendant’s use of the accused infringing products was merely to explain the process characteristics of their pasteurization technology to the public, falling within the reasonable description of their business product features and not constituting trademark infringement but a legitimate use of temperature expression.

Nominative use

Nominative use refers to using someone else’s trademark in good faith to convey genuine information about the related goods or services. In businesses like automobile repairs and spare parts sales, operators can use a third party’s trademarks to explain the origin of their goods or the scope of their services to consumers. However, they must follow the rules for reasonable use, such as not distinctively using the registered trademark nor misleading the consumers about their relationship with the owner of the registered trademark. The use of the trademark should remain reasonable and not harm the legal rights of the trademark owner.

No specific provisions regarding nominative use are in trademark laws and regulations, leading to conflicting views in theory and practice. Generally speaking, the criteria for nominative use include not causing confusion or misidentification among the relevant public regarding the goods and services and demonstrating the necessity of use within reasonable limits. In this article, we discuss two kinds of nominative use.

Explaining the use of components or accessories of goods

In the Volvo case, the court explained the criteria for judging nominative fair use. In this case, the plaintiff owns the Volvo trademark, while the defendant declared 50 boxes of filters for export to Syria to customs, with the filters prominently displaying the words “For Volvo”. The outer packaging of the filters did not contain the manufacturer or customer name. The defendant argued that their use of the words “For Volvo” was to inform consumers that the filters are suitable for Volvo brand vehicles. The court held that the defendant’s use is not nominative use and constitutes trademark infringement. The court pointed out that the defendant failed to indicate the manufacturer’s name or any mark that could identify the origin of goods, and prominently used “For Volvo” which contains the plaintiff’s registered trademark. This use could lead consumers to mistakenly associate or link the defendant with the plaintiff, exceeding the scope of fair use and not constituting nominative fair use.

Reselling the purchased goods

Whether distributors’ resale of genuine products after repackaging constitutes trademark infringement has led to vastly different judgments in current judicial practice. The following two cases have different results.

In the Chung Hwa pencil case, the plaintiff used to produce Chung Hwa pencils in packs of four but later switched to packs of 10. For ease of sale, the supplier Wenxing Company continued to repack the plaintiff’s products in packs of four and supplied them to the two defendants. The court considered that such use does not constitute trademark infringement. The reason for their decision was that the two defendants are using the trademark owner’s trademark in good faith and reasonably indicate information about the goods, which can be regarded as nominative use, leading to no confusion among the relevant public or harming the legitimate rights of the trademark owner.

However, the judgment in the Fujiya candy case is totally different. In this case, the defendant purchased boxes bearing the trademark Fujiya and repacked genuine Fujiya candy using these boxes. The court considered that the repackaging activities might diminish the reputation of the goods associated with the trademark and undermine the trademark's function of reputation-carrying, thus causing damage to the right to use a registered trademark exclusively and constituting trademark infringement.