Article 43 of China's Trademark Law is the basic specification for trademark licenses. The first paragraph stipulates that a trademark registrant may authorize others to use its registered trademark by signing a trademark license contract. Once the licensee uses the trademark beyond the scope of the contract, it may constitute both a contract breach and a trademark infringement. When the liability for breach and the liability for infringement overlap, the licensor may choose to file an “action for breach of contract” or “action for infringement” based on the degree to which liability for breach of contract and tort make up for their losses. How to determine whether the licensee's use of the trademark is legal or infringing under the circumstance of a trademark license contract exists between the two parties, this article takes the "Weibo Classroom" case as an example for analysis.

[Case]

Sina Corp claims registered trademarks on the categories of online advertising, database access services, organizing education or entertainment competitions, providing online electronic publications, radio and television program production, all within the validity period.

On July 24, 2013, Tianlang Company and Microdreams Co.Ltd., an affiliate of Sina Corporation, signed the Tianlang Micro Classroom Cooperation Agreement which entitled Tianlang Company to develop and publish the online application "Tianlang Micro Classroom". According to the agreement, Microdreams Co.Ltd. provided the application with Sino Weibo platform service with the web portal address - ketang.weibo.com; "Tianlang Micro Classroom" could only use the payment system provided by Weibo platform to charge the user's payment fee; if Tianlang Company wanted to update its product, updating manual should be submitted in advance to Microdreams Co.Ltd. in written form to inform the updated content; in the development and production process of Tianlang Company, the ownership and intellectual property rights of the trademarks, materials, content, resources and other rights provided by Microdreams Co.Ltd. should still belong to its own. The agreement was valid for one year.

On January 6, 2017, Sina Corp found that the "Weibo Classroom" website (website: www.ketang.cn) overuse the aforementioned trademarks of Sina. This website was filed by Tianlang Company for ICP license. In the introduction content of “About Us”, “Weibo Classroom is Sina Weibo Online Education, which is operated by Tianlang and other companies. With the introduction of Sina Weibo’s massive customer traffic, strong brand credibility and technical support, we are committed to using the Internet as a way to break the problem of uneven regional distribution of education resources in China and the unequal supply and demand information, and carefully build a large B2C professional education service platform that integrates education information release, live interactive classrooms, recorded video teaching, and campus interactive platforms ... " The website also mentioned "Click confirmation after confirming the course name, enter Alipay to pay the course fee ..."

Sina Corp believed that Tianlang Company infringed the exclusive right to use the registered trademark and requested that it eliminated the impact and compensated for economic losses and reasonable expenses totalling 2 million yuan. Tianlang Company denied infringement with the main reason that ketang.cn was an alias of ketang.weibo.com, but both were the same website. The server used by this website was provided by Microdreams Co.Ltd. Tianlang Company could only edit the content on the website, but couldn’t delete or modify the relevant logo on this website. So its use of the trademark in question had been legally authorized. In addition to the Tianlang Micro Classroom Cooperation Agreement mentioned above, Tianlang Company submitted staffs’ emails between itself and Microdreams Co.Ltd. around June 2013. The email mentioned that "SQL injection bug exists in the third-party Weibo classroom projects, please hurry to fix it" and so on.

After the trial, the Court of the first instance supported Sina's claim, ruling Tianlang Company to eliminate the influence posed to Sina Corp and compensate the economic loss of RMB 900,000 and other reasonable expenses of RMB 80,00. At present, the second instance of the Beijing Intellectual Property Court upheld the original judgment.

There are many controversies in this case. This article only discusses the issue of how to identify the key points of trademark infringement when there is a trademark licensing contract.

Subject of Trademark License

A trademark licensing contract is a contract between a licensor and a licensee, and the contract is relative. Based on general business practices and the basic attention obligations of rational economic people in economic activities, the licensee should first check whether the licensor has the qualifications to authorize others to use the relevant trademark, and then conclude a license contract.

In the case, Tianlang Company claimed that the contract with Microdreams Co.Ltd. agreed that Tianlang could use resources such as Microdreams' trademark. But from the wording alone, the contract did not specify which trademark or trademarks were allowed. In general, Microdreams Co.Ltd. could only authorize the use of registered trademarks with exclusive rights to others; however, the owner of the trademark in question was not Microdreams Co.Ltd. Under normal circumstances, if Tianlang Company wanted to prove that it was a legal use of the trademark in question, it should make a clear statement in the contract, and Microdreams Co.Ltd. should present evidence that Sina Corp allowed it to sub-authorize others to use the trademark in question, or Tianlang Company could obtain the evidence that Sina Corp later confirmed its legal use. However, Tianlang Company could not submit any evidence. Obviously, even within the term of the contract, the contract could not be directly interpreted as that Tianlang Company had obtained the legal authorization from Sina Corp.

Duration of Trademark License

A trademark licensing contract usually specifies the period for which the licensee is allowed to use the trademark, and this period cannot exceed the validity period of the trademark right itself. A licensee can be regarded as an authorized legal act only if the trademark is used within the period agreed in the contract.  Any license that exceeds the time limit shall be deemed as an infringement unless there is a legal reason.

In the case, the Tianlang Micro Classroom Cooperation Agreement signed by Tianlang Company and Microdreams Co.Ltd. expired on July 23, 2014, and the two parties had not renewed the contract since then. Even though Microdreams Co.Ltd. and Sina Corp were affiliated companies, it was presumed that Sina also allowed Tianlang to use the trademarks involved in the contract during the contract period, but three years after the contract was terminated, Sina found that Tianlang was still using its trademarks. It obviously couldn’t be interpreted as a legally authorized use.

Scope of Trademark License

Although the Trademark Law does not provide the necessary provisions of the licensing contract from the legislative level for public reference, as the Copyright Law does, it is undoubtedly that the scope of the license is an important content of the trademark licensing contract. It is a clear boundary of the licensee's right to use the licensed trademark.

In the case, Tianlang Company asserted that Microdreams Co.Ltd. licensed the use of trademarks and other resources for the development and production of the online application "Tianlang Micro Classroom" and access to the Sina Weibo platform through the address ketang.weibo.com. Obviously, even if Sina Corp approved Microdreams Co.Ltd. to license Tianlang Company to use related trademarks, Tianlang Company only had the right to use it in ketang.weibo.com. Tianlang Company argued that the "Weibo Classroom" website (ketang.cn) and ketang.weibo.com were the same website, and the use of the trademark in the "Weibo Classroom" website was the act of performing a contract with Microdreams Co.Ltd. According to the characteristics of the Internet, there could be situations where multiple URLs point to one website at the same time, and this situation is not difficult to achieve from a technical level. Specifically in the case, Tianlang Company wanted to change the interface URL for the application that cooperates with Microdreams Co.Ltd. If it can be interpreted as an update of the product, then according to the contract, this should also inform Microdreams Co.Ltd. in writing form in advance; Even if it couldn’t be interpreted as an update of the product, loading specified cooperation content in the contract to other interface addresses was still a change to the contract agreement. According to the provisions of Article 77 of the Contract Law, the change should be agreed upon by all parties.

From the perspective of the address composition, ketang.weibo.com was clearly a second-level page on the Sina Weibo site operated by Microdreams Co.Ltd., and the "Weibo Classroom" site, i.e. ketang.cn, had nothing to do with Sina Weibo. In fact, the “Weibo Classroom” website was the website that Tianlang applied for ICP license in 2016. Under normal circumstances, only an independently operated website need to apply for record registration. While in this case, Tianlang Company’s website actively applied for record registration but pointed to another person's website, which can not be reasonably explained.

In this case, there were still more details confirming that Tianlang Company operated the “Weibo Classroom” website beyond the scope of the contract. For example, the contracted application name was “Tianlang Micro Class” but what actually being used was "Weibo classroom"; the contract stipulated that the payment method was a specific payment method provided by the Weibo platform, but Tianlang actually provided Alipay payment and so on. Therefore, the court did not support Tianlang Company's insistent use of Sina's trademark as a legally authorized defense.

Performance of Trademark Licensing Contract

If all the parties of a contract reach an agreement, it is relatively simple to verify whether the contract is objective and true. As long as the parties confirm that they are bound by the contract, and the contract does not violate the mandatory provisions of laws and regulations, the contract is undoubtedly legal and valid. Once the two parties have disputes over the contract, it is not easy to explore the original intentions when signing the contract. It can only be determined based on the relevant behaviors of the two parties during the actual performance of the contract. In fact, the performance of the contract by the two parties not only confirms the existence of the contractual relationship, but also reflects the expression of intention to change the contract agreement to a certain extent. For example, after the expiry of the contract, if one party continues to perform the contract as stipulated in the contract, and the other party receives and does not raise an objection, it can be deemed that the contract has been extended by actual action.

In this case, The evidence presented by Tianlang Company to prove the performance of the contract was only a few emails in 2013, and it could not be concluded that the emails were directed to the "Weibo Classroom" website, nor did it mention other substantive cooperation content. Based on this, the court's judgment did not confirm the actual performance of the contract between the two parties, and did not confirm that the contract was related to the "Weibo Classroom" website.

About the Author: 

Wu Zifang    Attorney

Beijing Rongtai Law Firm

Source: China IP Magazine, Issue 95