Ultimate prize for foreign companies is a ruling recognising that their brand names are well known
Encouraged by a landmark court ruling last summer, more foreign companies are taking cybersquatters to court in China to get greater protection for their trademark brand names.
Legal experts say the foreign companies' ultimate prize is not to get the domain names back, but recognition from China's courts that their brand names are well-known.
While cybersquatting disputes involving top-level domain names ending with .com, .org or .net are resolved by the Internet Corporation of Assigned Names and Numbers (ICANN), local courts have jurisdiction over secondary domain names such as those ending with .com.cn or .net.cn.
Neither the China Internet Network Information Centre nor China International Economic and Trade Arbitration Commission keeps figures on the number of cybersquatting cases in China over the past several years.
Lawyers point out that most domain name disputes in China and elsewhere are settled out of court.
But 20 cybersquatting cases are now being heard in Beijing Number Two Intermediate Court and about two-thirds of them involve foreign companies, according to Judge Wang Fanwu, who is deputy presiding judge in the court's Intellectual Property Division.
Most of China's cybersquatting cases are heard at the court, partly because it has jurisdiction over where many Internet companies in Beijing are located.
Another reason is that in 1999, the Swedish furniture chain IKEA became the first foreign company to take a cybersquatter to court in China to reclaim the ikea.com.cn domain name.
The defendant in the case was Internet service provider (ISP) Beijing Cinet Information, also known as Beijing Guowang, which has registered nearly 5,000 English-language domain names ending in '.cn'.
The case was heard in Beijing Number Two Intermediate Court and last June the court ruled in IKEA's favour.
'It has certainly made people more confident. Any organisation which has been concerned about cybersquatting has felt much more positive about going forward after IKEA,' said Jessie McDonald, associate at Freshfields, Bruckhaus Deringer.
But the significance of IKEA's legal victory was not limited to domain names.
For the first time, a court referred to parts of the International Union for the Protection of Industrial Property (Paris Convention) and deemed that a foreign trademark was well-known.
'For a lot of the multinational corporations and foreign enterprises who come to court now, getting back the domain name is not the most important thing. They want the court to recognise that their trademark is well-known,' said Judge Wang, who also heard the IKEA case.
Before the IKEA ruling, well-known foreign trademarks were determined by a list of heavily pirated trademarks drawn up by the State Administration for Industry and Commerce.
'You can imagine how useful and powerful that is because once a court says that you're famous you can use that for other purposes in the future. That's why a lot of clients started sitting up and saying, 'Hey, let's do this then',' said Tan Loke-Khoon, partner at Baker & McKenzie.
Baker & McKenzie is helping French cosmetic company L'Oreal, among others, in court against Beijing Guowang over the rights to the www.loreal.com.cn domain name.
Beijing Guowang has a different take on the increasing number of foreign companies taking it to court for cybersquatting.
'Now, a lot of foreign companies are taking a short cut. It takes a lot of time to go through the procedures to register a trademark in China.
'They can take a small company to court in China and sue us for the trademark,' said Zhang Jie, one of Beijing Guowang's co-founders.
For example, Mrs Zhang says that when Beijing Guowang first registered the www.loreal.com.cn domain name in 1997, L'Oreal had not even entered the Chinese market.
L'Oreal says it registered the LOreal trademark in 1981.
But it did not really have a presence in China until 1996, when it set up a joint-venture production plant in Suzhou. It did not formally set up branches in Shanghai, Beijing and Guangzhou until 1997.
But L'Oreal's case also underscores why foreign companies are eager to have the Chinese courts recognise their trademark as well-known.
Often a Fortune 500 multinational company's brand may be well-known in the West, but virtually unheard of by a majority of China's population.
Trademarks designated well-known by Chinese authorities enjoy greater protection.
'A well-known trademark suggests that your product is good. If you try to break into a new market, it will be much easier,' Judge Wang said.
Ironically, cases pending in Beijing Number Two Intermediate Court may not be resolved quickly due to the IKEA case, which is being appealed in a higher court.