The advertising slogan “Xiao Can Tea Masterpiece” of Xiao Can Tea has always been controversial. Previously, Xiao Can Tea officials responded that “masterpiece” actually refers to products representing master-level tea-making techniques, not masters' hand-frying.2024 On June 25, Xiao Can Tea's founder Du Guoying took the initiative to apologize to the public for the incident and announced that he would disclose 135 patents on tea-making to the public without compensation, which triggered widespread concern.
Advertising carries the important mission of publicizing goods and services, shaping brand image and expanding market. Businesses generally want to attract attention and capture the hearts of consumers through advertisements. In addition to unique advertising slogans, naming (usually in the form of a trademark) is also crucial. An appropriate name is a kind of advertisement in itself, which can effectively convey the product information. A good trademark name can bring many advantages to an enterprise, because the name is the first element of the product to be shown to the public.
As an intellectual property attorney, I am more concerned about the legal risks that may exist in the advertising and trademark application of Small Can Tea. This article will provide you with some professional advice to help you better avoid the related legal risks.
I. Risks of Advertising Violations and Compliance Suggestions
The Advertising Law of the People's Republic of China (hereinafter referred to as the “Advertising Law”) is the legal cornerstone of China's advertising industry, which establishes clear and strict rules for the compliance review of advertising content.
The basic principles of China's Advertising Law are truthfulness, legality, honesty and trustworthiness, and fair competition. According to the relevant provisions of the Advertising Law, advertisements shall not contain false content and shall not mislead consumers. In the past, Xiaokan Tea has been using the words “made by masters” for publicity, but in fact, the masters do not make the products themselves, but only participate in the formulation of product standards and production supervision. Such behavior may constitute false advertising, and once discovered by consumers or regulatory authorities, the company may face legal risks such as administrative penalties or even civil damages.
We recommend that companies conduct compliance reviews before publishing advertisements to ensure that the content of the advertisements is legally compliant. Below are several common advertising violations and related legal liabilities.
(I) Several common advertising violations
Common advertising violations include, but are not limited to, false propaganda, misleading statements, violating good social customs, infringing on the rights and interests of others, and so on.
1. Absolute Prohibition of Advertising
Trademark registration exists in the absolute prohibition of registration, that is, due to the violation of national interests and social public interests and absolutely not allowed to register. Similarly, in the field of advertisement, there are prohibited areas that are not allowed. Article 9 of the Advertisement Law regulates the value orientation of advertisements, specifying that advertisements shall not contain any situation that hinders public order or is contrary to good social morals. In addition, Article 15 of the Advertising Law stipulates that no advertisements shall be made for special drugs such as narcotic drugs, psychotropic drugs, toxic drugs for medical use, radioactive drugs, drug-type easy-to-control poisonous chemicals, as well as drugs, medical devices and treatments for drug rehabilitation.
2. False advertisements
Advertisements that deceive or mislead consumers with false or misleading content constitute false advertisements. The advertisement mainly contains information that the advertised goods or services do not exist at all, or that the advertised information about the performance, function, origin, use and quality of the goods, or the content, provider, form, quality, price, sales status, honors and so on do not correspond to the actual situation, or that the advertiser uses fictitious, forged or unverifiable scientific research results, statistics, survey results, abstracts, quotes and so on, to prove that the goods or the advertised services are not in accordance with the actual situation, and that the advertiser fictionalizes the use of the goods or the acceptance of the goods. False advertisements are not only subject to the provisions of the Advertising Law, but are also subject to the provisions of the Law of the People's Republic of China on False Advertising.
False advertisements are not only regulated by the Advertising Law, but also Article 8(1) of the Anti-Unfair Competition Law and Article 20(1) of the Law of the People's Republic of China on the Protection of Consumers' Rights and Interests (hereinafter referred to as the “Consumers' Rights and Interests Protection Law”), which stipulate that an enterprise's publicity of its commodities and services should be truthful and comprehensive, and that enterprises shall not make false or misleading publicity. No false or misleading publicity shall be made.
Truthfulness is a basic requirement for advertising, and enforcement of false advertising by regulatory authorities is most common. Enterprises should resolutely avoid false advertisements, otherwise they will not only face high fines, but also seriously damage their reputation.
3. Failure to indicate the source of quoted content or inaccurate labeling
Article 11 of the Advertising Law stipulates that advertisements using data, statistics, survey results, abstracts, quotes and other cited content should be true and accurate, and indicate the source. If the cited content has a scope of application and expiration date, it should be clearly indicated.
Enterprises in advertising, in particular, should pay attention to clearly labeled data sources to enhance the credibility of advertising content to avoid misleading consumers. At the same time, the data and rationale used in the advertisements should be archived, so that they can respond quickly when the supervisory authorities carry out verification.
4. Illegal claims that products have medical effects
Article 17 of China's Advertising Law stipulates that, except for advertisements for medical treatment, medicines and medical devices, it is prohibited for any other advertisements to involve the therapeutic function of diseases, and that no medical terminology shall be used, or terminology that is likely to confuse the goods being promoted with medicines and medical devices.
Article 18 of the Advertising Law stipulates that health food advertisements shall not assert or guarantee the efficacy or safety of the products, or involve disease prevention or treatment functions, or claim or imply that the advertised goods are necessary for the protection of health, or compare them with medicines or other health food products, or utilize advertisement spokespersons to make recommendations or certifications. Advertisements of health food products should be clearly labeled that the products cannot replace drugs.
5. Containing “the best”, “the best”, “the highest level”, “national” and other absolutist terminology
In foreign countries, “world-class”, “best-selling” and other publicity terms are more common, but in China's advertising law is not allowed. The author has come across a company that was reported by a competitor to the local administration for industry and commerce for using “cutting-edge” to describe the mine ventilation software of an Australian brand that it represented.
With respect to the enforcement of absolute terms in advertisements, on February 25, 2023, the State Administration for Market Supervision and Regulation (“SAMSAR”) issued the Guidelines for Enforcement of Absolute Terms in Advertisements (“Guidelines”). The absolute terms used in advertisements referred to in the Guidelines include “national”, “highest”, “best” and other terms with the same or similar meaning as stipulated in Article 9(3) of the Advertising Law. other terms with the same or similar meaning. At the same time, the Guide also specifies the circumstances in which the provisions of the Advertising Law on absolute terms are not applicable, which is of important reference value.
6. Comparative advertising constituting unfair competition
Comparative advertising, as a business promotion strategy, does not necessarily constitute a violation of the law per se. However, comparative advertisements may violate the law if they contain content that discriminates against or disparages competitors and makes unfair or misleading comparisons.
For example, Article 13 of the Advertising Law stipulates that advertisements shall not disparage the goods or services of other producers or operators. Article 16 stipulates that advertisements for medical treatments, medicines and medical devices shall not be compared with the efficacy and safety of other medicines and medical devices or with other medical organizations, and Article 18 stipulates that advertisements for health food shall not be compared with medicines or other health food.
7. Risk of celebrity endorsement rollover
Celebrity endorsement rollover incidents are common. Article 38 of the Advertising Law stipulates that an advertising spokesperson who makes recommendations or proofs of goods and services in advertisements shall do so on the basis of facts and in accordance with the Advertising Law and relevant laws and administrative regulations, and shall not make recommendations or proofs of goods that he or she has not used or services that he or she has not received. A natural person, legal person or other organization that has been administratively punished for less than three years for making recommendations or certifications in false advertisements shall not be used as an advertising spokesperson.
8. Violation of the Advertising Law's special protection for minors
As the physical and mental development of minors is still immature, the Advertising Law gives special protection to minors. Article 38 of the Advertising Law stipulates that minors under the age of ten may not be utilized as advertising spokespersons. Article 40 stipulates that advertisements for medical treatment, medicines, health food, medical devices, cosmetics, alcohol and beauty care, as well as advertisements for online games that are not conducive to the physical and mental health of minors, shall not be published in mass media targeting minors. Advertisements for goods or services for minors under the age of 14 shall not contain content that persuades them to ask their parents to purchase the advertised goods or services, or that may cause them to imitate unsafe behaviors.
9. Advertising infringes on the legal rights of others
When conducting advertising campaigns, enterprises should ensure that the contents of the advertisements do not infringe upon the prior legal rights or interests of others, including the prior exclusive right of others to use registered trademarks, the right to name, the right to portrait, the right to reputation and the right to privacy, etc., in order to avoid legal disputes and potential liabilities.
(ii) Legal Liability for Illegal Advertisements
The legal liability for illegal advertisements is mainly reflected in several important laws, such as the Advertising Law, the Anti-Unfair Competition Law, the Consumer Rights and Interests Protection Law and the Trademark Law. From the point of view of the nature of violation, advertising violation mainly involves administrative liability, civil liability and criminal liability.
1. Administrative Liability
Administrative liability is the most common legal liability faced by enterprises for advertising violations. Once an advertisement is found to be in violation of the Advertising Law, it will mostly be subject to administrative penalties imposed by the regulatory body, including warnings, fines, confiscation of unlawful income, orders to suspend the publication of advertisements, elimination of influence, revocation of business license, revocation of the approval documents for examination of advertisements by the advertisement examining authority, and non-acceptance of its application for examination of advertisements for a certain period of time.
It is worth noting that Article 69 of the Advertising Law also stipulates that the legal representative of a company or enterprise whose business license has been revoked for violating this Law shall not be allowed to serve as a director, supervisor or senior manager of the company or enterprise for three years from the date of the revocation of the business license of the company or enterprise if he or she is held personally liable for the violation of the law.
2. Civil liability
Advertising violations may also entail civil liability. When the content of an advertisement infringes on the legal rights of others (e.g., the right to name, portrait, reputation, privacy, etc.), the victim has the right to file a lawsuit with the court and demand that the advertiser, the advertisement operator, the advertisement publisher and the advertisement endorser bear the corresponding civil liabilities, such as making an apology, eliminating the influence, and compensating for the damages, etc. The civil liability may include financial losses, moral damages, and other damages. Compensation may include economic loss, moral damages and so on. If the false advertisement constitutes consumer fraud, according to the provisions of Article 55 of the Consumer Protection Law, if the operator provides goods or services with fraudulent behavior, it shall increase the compensation for the loss suffered by the consumer in accordance with the consumer's request, and the amount of the increase in compensation shall be three times the price of the goods purchased by the consumer or the cost of the service received by the consumer; and the amount of the increase in compensation is less than five hundred dollars, it shall be five hundred dollars. If the law provides otherwise, it shall be in accordance with its provisions.
Article 56 of the Advertising Law also stipulates the joint and several liability of the advertisement operator and advertisement publisher. If an advertiser publishes false advertisements in violation of the provisions of the Advertising Law, deceiving or misleading consumers, so that the legitimate rights and interests of consumers who purchase goods or receive services are harmed, the advertiser shall be held civilly liable in accordance with the law. If the advertisement operator or advertisement publisher cannot provide the real name, address and effective contact information of the advertiser, the consumer may request the advertisement operator or advertisement publisher to compensate first.
3. Criminal Liability
Under certain circumstances, serious advertising violations may involve criminal liability. Article 222 of the Criminal Law of the People's Republic of China provides for the crime of false advertising, i.e., if an advertiser, advertisement operator or advertisement publisher violates state regulations and uses advertisements to make false propaganda for goods or services, and the circumstances are serious, he or she shall be sentenced to fixed-term imprisonment of not more than two years or criminal detention, and shall be subject to a concurrent or single punishment of a fine.
If a person violates the provisions of the Advertising Law by refusing or obstructing the supervision and inspection of the market supervision and administration department, which constitutes the crime of obstructing public service as stipulated in Article 277 of the Criminal Law, he or she shall be sentenced to fixed-term imprisonment of not more than three years, criminal detention, control or a fine.
After discussing and analyzing the circumstances and legal liabilities of illegal advertisements, we remind enterprises that when advertising, they should objectively and truthfully reflect the characteristics of their products and services, and avoid the use of exaggerated, ambiguous, and potentially misleading or controversial terms. At the same time, enterprises should also retain relevant supporting materials in case they are challenged or investigated in the future. Only advertising based on facts can better convey product or service information, maintain corporate image, and win the trust and love of consumers.
Second, the legal risks of trademark registration and use and preventive measures
According to the public information, Xiaoban Tea Company has successfully registered the trademark of “Xiaoban Master” in the 30th category of tea goods, and the trademark of “Xiaoban Tea-Masterpiece” has been rejected in the 30th category of tea goods, but it has been registered in the 43rd category of teahouse and other services. The trademark “Master Handmade” was also rejected in Class 30 for tea, but was registered in Class 21 for food warming containers and other goods and Class 43 for services such as teahouses. The company subsequently applied for registration of the trademark “Master Handmade” in Class 30 for tea, but the application was rejected by the State Intellectual Property Office.
This may reflect that even if an enterprise already owns the relevant trademark, it may still face the risk of rejection if the content of the trademark does not correspond to the actual situation. Therefore, when applying for a trademark, enterprises need to give full consideration to whether the content of the trademark faithfully reflects the characteristics of the product, so as to avoid the registration being rejected for being deceptive and easily causing the public to misunderstand the quality and other characteristics of the goods or the place of origin.
The following are some common legal risks in trademark registration and use and their preventive measures.
1. Failure to register a trademark
Failure to register a trademark usually leads to the following four types of risks:
(1) Lack of legal protection: the rights of an unregistered trademark are usually not protected by law. However, if the unregistered graphic trademark meets the conditions for protection of artistic works, it can obtain copyright protection under the Copyright Law of the People's Republic of China.
(2) Easy to be robbed: China's Trademark Law implements the principle of first-to-file trademark application, i.e., when two or more trademark registration applicants apply for registration with the same or similar trademarks on the same or similar commodities, the Trademark Office will give priority to the examination and announcement of the trademark that is filed first. If an enterprise's trademark is not registered, once it is seized by others, the enterprise may not be able to continue to use the trademark, wasting the cost of publicity paid for it.
(3) Infringement of others' trademark rights: If the unregistered trademark used by an enterprise is identical or similar to a trademark registered by another person for the same or similar goods, it may constitute infringement. Once the infringement is recognized, the enterprise needs to stop using the infringing trademark and may face high economic compensation.
(4) Inability to form intangible assets: Trademark rights can be an intangible asset of an enterprise. However, if the enterprise has not registered the trademark, it can not enjoy the exclusive right of trademark, and thus can not form the related intangible assets.
After the trademark is registered, the right to use the trademark belongs to the registrant, and the enterprise may not be able to use the trademark again. This will greatly affect the brand value and influence of the enterprise's existing products. If the enterprise wishes to re-register the trademark, it may face lengthy IP litigation. As a result, enterprises are often forced to take the risk of paying a high price for the trademark, or are forced to replace their original corporate name and trademark.
2. Unregistered Defense Marks and Peripheral Goods
In order to save costs when registering a trademark, some enterprises often register only one trademark without registering the related neighboring goods. Once the peripheral goods are registered by others, it may lead to two risks: firstly, it may cause confusion and misrecognition among the relevant public; secondly, if the trademark is registered by an enterprise with poor quality, the image and reputation of the enterprise may be damaged as a result. It is often necessary to pay a large economic and human cost to restore a good market image and reputation.
Therefore, we suggest that enterprises take the following measures: first, timely supplementary registration, on the basis of the registered trademark, extend the registration of classes related to the business of the enterprise or the direction of potential development, in order to achieve more comprehensive protection; second, defensive trademark registration, selective registration of trademarks that are very close to the registered trademark in terms of appearance, meaning and pronunciation, which are likely to lead to confusion among consumers or, although the enterprise will not use, but if used by others may lead to confusion among consumers, the enterprise may not be able to use the trademark. The second is to register defensive trademarks that are very close in appearance and meaning to the registered trademarks, which may lead to confusion among consumers, or the trademarks that may lead to negative associations if used by others even though the enterprise will not use them.
3. Failure to Avoid Trademark Prohibition and Disqualification Clauses
In the current market, in order to attract consumers' attention and enhance the popularity of their products, enterprises often make efforts on the originality of their trademarks. Some applicants create gimmicks by rubbing the wrong way through vulgar and suggestive trademark logos, but such trademarks are easily recognized as harmful to socialist morals and ethics, and thus rejected and prohibited from use.
To guard against such risks, enterprises should consider various factors such as socio-economic, cultural and value factors when determining whether a trademark may be harmful to socialist morals and ethics. While maintaining fair competition in the market, it is also necessary to take into account the maintenance of good social morals and the standardization of cultural inheritance. Enterprises should seek a balance between the originality of trademarks and compliance with good social morals, and guide trademark planning and logo design with advanced culture.
Trademarks generally include words, graphics, letters, numbers, three-dimensional signs, color combinations and sounds, as well as combinations of the above elements, which can be applied for registration as trademarks. The trademark applied for registration shall meet the following requirements stipulated in the Trademark Law:
(1) It shall have distinctive features, be easily recognizable, and shall not conflict with the legal rights acquired by others in advance.
(2) The following signs shall not be used as trademarks:
(a) The same or similar to the national name, national flag, national emblem, national anthem, military flag, military emblem, military anthem and medals of the People's Republic of China, as well as the same as the name, emblem, name of a specific place of the location of the central state organs, or the name or graphic of a landmark building;
(b) The same or similar to the name, flag, coat of arms, military anthem, etc. of a foreign country, except with the consent of the government of that country;
(c) The same as or similar to the name, flag, emblem, etc., of an international intergovernmental organization, except with the consent of that organization or if it is not likely to mislead the public;
(d) The same as or similar to an official sign or seal of approval indicating control or assurance, except where authorized;
(e) is identical with or similar to the name or emblem of the Red Cross or Red Crescent;
(f) Be ethnically discriminatory;
(g) Deceptive and likely to mislead the public as to the quality or other characteristics of the goods or their place of origin;
(h) Harmful to socialist morals or having other adverse effects;
(i) Geographical names of administrative divisions at or above the county level or foreign geographical names known to the public shall not be used as trademarks. However, except where the name of a place has other meanings or is a component of a collective mark or a certification mark; a registered trademark using the name of a place shall continue to be valid.
(3) The following signs may not be registered as trademarks:
(a) Those which only have the common name, figure or model of the goods;
(b) Those which only directly indicate the quality, main raw material, function, use, weight, quantity and other characteristics of the goods;
(c) Other lack of distinctive features;
(d) Where a trademark applied for registration in respect of the same or similar goods is a copy, imitation or translation of a well-known trademark of another person not registered in China, which may easily lead to confusion, the trademark shall not be registered and its use shall be prohibited;
(e) Where a trademark applied for registration in respect of non-identical or non-similar goods reproduces, imitates or translates a well-known trademark of another person which has already been registered in China, and misleads the public, so that the interests of the registrant of the well-known trademark are likely to be jeopardized, the trademark shall be refused registration and its use shall be prohibited.
4. The registered trademark has not been used for three consecutive years without justifiable reasons.
If a registered trademark is not used for three consecutive years without justifiable reasons, any unit or individual can apply to the State Intellectual Property Office to revoke the registered trademark.
In addition, when the trademark owner sues a third party for trademark infringement and requests for compensation, if the alleged infringer defends that the right holder has not used the registered trademark, the people's court may require the right holder to provide evidence of the actual use of the registered trademark within the previous three years. If the right holder can not prove the actual use of the registered trademark within the previous three years, and can not prove that the infringement of other losses, the alleged infringer does not bear the responsibility for compensation.
In order to avoid the risk that a registered trademark will be revoked for failure to use it for three consecutive years, an enterprise should actively use the trademark and retain evidence of such use. Effective evidence of trademark use should generally meet the following requirements:
(a) reflect specific time and location information; if used to defend against a trademark revocation application by others, the time of use should be within three years and the place of use should be within mainland China;
(b) Use in the open commercial sphere, making it possible for the public to be aware of the existence of the trademark, such as evidence of use formed in the goods, packaging of goods, instructions, places of service, transaction instruments and documents related to the goods, the media, exhibitions, advertisement campaigns and other commercial activities;
(c) Authentic use;
(d) Forming a chain of evidence of trademark use as far as possible and avoiding reliance on a single piece of evidence of use;
(e) Avoiding unauthorized alteration of the trademark design or use of the registered trademark beyond the approved scope of registration;
(f) The scope of use of the goods of the registered trademark includes the authorized goods, goods that are essentially the same as the goods for which the registered trademark is authorized to be used, or goods for which the actual use of the goods is a subordinate concept to the authorized goods.
If it is found that there exists in the market any unauthorized use of the registered trademark of the enterprise by a third party, infringement of the right of enterprise name, unfair competition, or malicious trademark snatching and other behaviors damaging to the legitimate rights and interests of the enterprise, legal actions should be taken in a timely manner in order to safeguard the legitimate rights and interests of the enterprise.
In general, in the process of brand building and marketing, enterprises should always be cautious, not only to keep up with market trends, but also to strictly abide by laws and regulations, and strive to build a benign business ecology. Only in this way can enterprises continue to develop healthily and provide consumers with quality products and services.
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