A decision was made by Beijing High Court on 2 August 2015 to support DreamWorks Animation L.L.C.’s opposition against a third party’s trademark application for “KUNG FU PANDA” covering goods in Class 12, with recognition of DreamWorks’s merchandising rights to its Kung Fu Panda movie and the animation cartoon movie character – “Kung Fu Panda”.

On 28 June 2010, DreamWorks Animation L.L.C. (“DreamWorks”) filed an opposition against trademark application No. 6806482 for “KUNG FU PANDA”, which was filed by an individual named HU Xiaozhong in Class 12 on goods including cover of car seats, articles for interior decoration in cars, safety seats for children used in cars, etc.  China Trademark Office (“CTO”) made a decision in February 2012 against DreamWorks, so DreamWorks filed an application for review on the opposition to China Trademark Review and Adjudication Board (“TRAB”).

DreamWorks claimed, among many legal grounds, its “merchandising rights” to the name and characters in its animated cartoon “KUNG FU PANDA” as “other prior rights” provided in Article 31 of China Trademark Law of 2001.  TRAB made a decision on 11 November 2013 affirming the decision made by China Trademark Office, refusing to recognize “merchandising rights” as a kind of “other prior rights” provided in Article 31 of China Trademark Law of 2001, because it held that “merchandising rights” are not legal rights stipulated in laws and DreamWorks failed to define the subjects and boundary of protection for the claimed “merchandising rights”.

DreamWorks appealed to Beijing No.1 Intermediate Court, insisting on its claim of “merchandising rights” to the name.  The court made a decision affirming the TRAB decision, holding that only the rights stipulated in laws with clear definition on terms of generation of the rights and definition on subjects and boundary of protection of the rights should be recognized as a kind of “other prior right” under Article 31 of China Trademark Law of 2001.

DreamWorks filed an appeal to Beijing High Court on 4 June 2015.  In addition to its claim of “merchandising rights” to the name in its animated cartoon “KUNG FU PANDA” as “other prior rights” provided in Article 31 of China Trademark Law of 2001, DreamWorks also alleged that HU Xiaozhong filed the application in bad faith, because the same person had also filed a number of trademarks which are copies of the names of famous movies.

Beijing High Court found that animated cartoon “KUNG FU PANDA” was produced by DreamWorks. with the shooting started from September 2005, and the movie was first released in mainland China on 20 June 2008, and the pre-release publicity was conducted at various media including Beijing Morning Post, Netease website and Tencent Website.  Beijing High Court holds that the “other prior rights” provided in Article 31 of China Trademark Law of 2001 should include not only those statutory rights provided in existing laws, but also other legitimate rights that should be protected by General Principles for Civil Law of People’s of China and other laws.  It is true that the “merchandising rights” to the name in the animated cartoon “KUNG FU PANDA”  claimed by DeamWorks are not statutory rights stipulated in any existing laws in China, nor are they any types of civil law rights stipulated in the laws.  However, when a movie’s name or a movie character’s name is so well-known that when it is spun off from the movie and used with a certain merchandise or service, the audience will transplant the recognition of and affection to the movie to the name of the movie or name of the movie character that is used on the merchandise or service, and thus bestow on the right holder commercial interest and transaction opportunities independent from the movie, then the movie name, or the image/name of the movie character should be regarded as “merchandise rights” and thus subject to protection as a “prior right” under Art.31 of 2001 China Trademark Law.

Beijing High Court further holds that if “merchandise rights” were excluded from civil law rights subject to protection by laws, it would not only encourage free riding on the movie names or movie characters’ images/names, but also likely to cause damage to normal order of competition in the market, and this is obviously contradictory to the purpose of stipulation of Trademark Law.  Therefore, Beijing High Court recognized DreamWorks’ “merchandise rights” to the name of its namesake animated cartoon “KUNG FU PANADA”, and decided to remand the TRAB decision.

Actually it is not the first time that a Chinese court recognized merchandising rights related to a movie as legal rights enjoyed by the lawful right holder.  In August 2011, Beijing High Court made a final decision to remand a TRAB decision on the trademark opposition filed against “Bond 007 & Chinese characters for Bond” by Danjaq, LLC with support of Danjaq’s claim of its merchandising rights to the names of the “007” movie series and the related characters.