China Merchandising Rights: Legal Victory for Dreamworks on “Kung Fu Panda” Trademark

Not long ago, the Beijing Higher People’s Court ruled against a trademark squatter, Hu Xiaozhong (胡晓中), who had attempted to register the phrase “Kung Fu Panda” for a variety of automotive-related products such as children’s carseats, seat headrests, and steering wheel covers. The basis of the decision was that the film Kung Fu Panda was so well known in China that the trademarked phrase “Kung Fu Panda” had inherent “merchandising rights” – that is, prior rights such that (1) the public identified the trademark (“Kung Fu Panda”) with a specific business entity (Dreamworks Animation SKG) and (2) that entity derived additional commercial value from such identification. These “merchandising rights” applied even to classes (such as Class 12, the class for autos and auto-related products) not covered by Dreamworks Animation SKG’s registered trademark for “Kung Fu Panda.”

The decision is a strong move by the Beijing Higher People’s Court, and foreign trademark holders should view it with some optimism. Nevertheless, the decision should not change anyone’s trademark strategy in China.

First, Kung Fu Panda was a huge hit in China and was well known by the Chinese public at the same time that it became famous in the rest of the world. Many other supposedly famous foreign marks (like “Star Wars”) are not actually famous in China. So it’s not as if the “merchandising rights” argument will be widely deployed.

Second, China is not a common law country, so this decision has no value as a precedent. In fact, the court’s ruling has some detractors for having declared a heretofore unrecognized trademark right.

Third, it took more than five years— and four different adjudications— for Dreamworks Animation to gain this legal victory. Most companies do not have the time, money, or energy for such a fight. This is the first time a Chinese court has recognized “merchandising rights” as a trademark-related prior right. Indeed, before this ruling the Chinese Trademark Office, the Trademark Review and Adjudication Board, and the Beijing Number One Intermediate People’s Court had all explicitly rejected Dreamworks’ opposition to Hu’s trademark, on the basis that Chinese law did not recognize merchandising rights.

So once again: if you’re doing business in China, register your trademark now — and in every class that you care about — before someone else does it for you.

A more complete writeup of the Beijing Higher People’s Court decision is available over at the Anjie Law Firm’s blog (h/t Mark Cohen’s excellent China IPR Blog).

—A version of this article was first published on the China Law Blog.