1.1 Research Background

China is now the world's second largest economic entity and the world's largest exporter ^[1] ，and is an important market for the rest of the world． For both foreign and domestic business companies，a high profitable economic atmosphere cannot be created without a well－established and effective intellectual property（hereinafter referred to as‘IP’）system． ^[2] In an industrializing country，the state（and/or important interest groups within the state）at first may see IP as an impediment to development．In China，this tension seemed worse by the fact that the country had only relatively moved towards becoming a market economy since the 1990s．Surprisingly，China has put considerable emphasis on protecting intellectual property rights（hereinafter referred to as ‘IPRs’）since it implemented‘Reform and Opening－Up’（hereinafter referred to as R＆O） policy in the late 1970s． ^[3] Since then，the Chinese government has regarded IP as one of the most important pillars of its science and technology and economic development programmes and treated IP laws as an important part of the Chinese socialist legal system．The Chinese government has not only approved all major international treaties and agreements concerning trademarks， but also made bold strides to reform its domestic intellectual property legislation，and thus making its shores safer for trademarks，patents，and copyrights．China has owed a legal obligation to protect well－known trademarks at the international level since it ratified the Paris Convention in 1985， and the Chinese authorities promulgated laws，administrative regulations and judicial interpretations to protect well－known trademarks since the 1990s．However，there is criticism in the US that the extensive promulgation of IP laws in China，especially those aimed at protecting well－known trademarks，are inadequate．This book aims to challenge this criticism through the legal analysis of certain issues related to well－known trademark protection in China．

In China，a well－known trademark is a trademark well known by the relevant public． It has been given a higher level of protection against infringements than a general trademark．Chinese market may have held the largest number of well－known trademarks—including domestic and overseas owned trademarks—in the world． ^[4] A well－established well－known trademark legal framework can considerably benefit to protect interests of both domestic and foreign well－known trademark owners doing business in China against trademark infringements．

The US viewpoint about IP in China is particularly important for the following two reasons．Firstly，the US has played a significant role in accelerating IPRs reform in China． The prosperity of China in the past three decades heavily relied on its intimate relationship with its foreign trading partners，notably the US． Secondly，the actions conducted by the Chinese authorities with regard to the improvement of IPRs protection have been thought to be the result of external pressures from the US． For example，Yu has observed that the US Annual Special 301 Reports are hard to ignore for China and put heavy pressure on the Chinese government，which wishes to maintain and strengthen its international reputation．

The dissatisfaction expressed by representatives of the US is based on perceived deficiencies in China's well－known trademark system that purportedly creates a safe harbour for infringers．The US Annual Special 301 Report of 2011（hereinafter referred to as ‘2011 Report’）openly criticised China for failing to adopt a long－term solution to the problems of IPRs protection even after it joined the World Trade Organization （WTO）in December 2001． In a case where traders in the so－called Silk Market ^[5] were found to have infringed the rights in certain well－known trademarks and were consequently ordered to compensate the owners of the trademarks，the sum of compensation ordered to be paid was considered by many as too ‘trivial'to prevent repeating infringements． This case illustrates how some Chinese infringers view fines or damages imposed on them as‘merely a cost of doing business’． The rather fragile protection of well－known trademarks in China has become one of the biggest challenges the holders of IPRs face when doing business there．

To a certain degree，the conventional view held in the US makes sense．For example，the definition of a well－known trademark was once problematic，leaving unregistered trademarks unprotected．The proceeds of the infringer rather than the value of genuine goods were once used to decide whether there is criminal liability in the case of infringements． Since infringers'proceeds from selling counterfeits are normally lower than the losses of genuine goods owners，this calculation method has proved to be ineffective in deterring the infringements of trademarks． There is a view that the misunderstanding about the conceptual meaning of well－known trademarks is still profound and the regulatory measures taken to correct this misunderstanding are still inadequate．However，this view is not necessarily accurate，as it is based not so much on comprehensive legal analysis over the past two decades（1996—2015）as on the data mainly collected from interested parties on the US side， whether they are companies or government officials．

[1] C．Fred Bergsten et al．， China ’ s Rise ： Challenges and Opportunities （Peter G．Peterson Institute for International Economics，2009）

[2] Keith E．Maskus， Intellectual Property Rights in the Global Economy （2000）200－203；J．H．Reichman，‘Intellectual Property in the twenty－first century：will the developing countries lead or follow？’（2009）46 Hous．L．Rev．1115，1118．（China's third amendment of its patent law in 2008 expressly reflects‘the needs of development of China herself，’which requires‘the promotion of．．．independent innovation and the establishment of an innovation oriented country．’）See also Art．1，Chapter I General Provisions of China's Trademark Law，as amended in 2001，which provides that‘［t］his law is enacted for the purposes of improving the administration of trademarks，protecting the exclusive right to use trademarks，and of encouraging producers and operators to guarantee the quality of their goods and services and maintaining the reputation of their trademarks， with a view to protecting the interests of consumers，producers and operators and to promoting the development of the socialist market economy’．

[3] In 1978，the third plenary session of the 11 ^th CPC（‘Communist Party of China’）Central Committee decided to implement Reform and Opening－Up（R＆O）policy，to end decades of China's seclusionism and highlight the pivotal role of technology and science in developing China's modernised industries．Since then，intellectual property has been seen as an essential means to boost China's economic，social and technological reform．

[4] Qi Er，‘Dilemma and Pathway of Well－Known Trademarks in China’（2011）1 Journal ofDongbei University ofFinance and Economics 76，78；Well－known trademarks in this book mean those officially recognised by the competent administrative or judicial authorities in China．The majority of them are owned by the Chinese．However，it is impossible for this book to show the accurate data on the number of well－known trademarks officially recognised in China，as the People's Courts have no publication system of well－known trademarks．

[5] Silk Market is locatedin Beijing，China．The new Silk Market opened on 19 March 2005 after replacing the old one in January 2005．The Silk Market，which had more than 2，000 booths and attracted about 15 million consumers annually（90 percent of them were foreign visitors），had been seen as an infamous market of selling a wide variety of counterfeits with well－known trademarks．One of the most famous judgements concerning the liability problems of ‘Silk Street’ （the precursor of‘Silk Market’）in terms of‘counterfeiting goods'released in the winter of 2005．In its judgment，Beijing No．2 Intermediate People's Court ruled that Xiushui Company（the operator of both‘Silk Street'and ‘Silk Market’）was liable for not preventing its vendors from selling trademark infringing products．The court ruled desist order and monetary remedy （although the damage remedy was widely criticized as‘insufficient’）for the plaintiffs（including several famous luxury brands，such as‘LV’‘GUCCI’‘BURBERRY’‘PRADA'and‘CHANEL’）．The ‘Silk Street'case was selected by the Supreme People's Court as one of the‘Top 10 Typical Civil Cases in 2006’．For more details，see Xiaobing Zhou，‘ASeries of Cases Concerning the Silk Street：Foreign Brands Attacking Chinese“Counterfeit Goods”and the Liability Problem’Issue 18，June 2007， China Intellectual Property ，〈http://www.chinaipmagazine．com/en/journal－show．asp？id＝158〉accessed 5 July 2013．On 29 November 2011，its own brand—‘XIU SHUI’（Chinese characters for ‘Silk Market’）—was certificated as‘well－known trademark'by the State Administration for Industry and Commerce（‘SAIC’）．‘“Xiu Shui”trademark has been recognized as a well－known trademark in China’〈http://www.silkstreet．cc/templet/default/ShowArticle．jsp？id＝8365〉accessed 5 July 2013． UKPXquQ04ILS2v3SwAWDd7KQJ2fOlgmjndf5kuGLovbU2T/2jGXtnpV0ZZXtD4/V