17 Trademark Protection on the Internet- with a Focus on a Comparison between Japan and China -（*）
Research Fellow: Chen Siqin
With the continuing development of Internet technology, new types of trademark protection havebecome necessary for trademarks used in cyberspace. For example, the service widely known as “searchadvertising” has stirred up disputes about possible trademark infringement by search keywords. Users of
this service who have registered other parties’ trademarks or any part thereof as search keywords havebeen sued by the trademark holders for alleged trademark infringement. It should be noted that thetrademark holders have held liable not only the parties that have allegedly committed a direct infringementof their trademarks in the course of using the service but also the Internet Service Providers (ISPs) as
contributory infringers for providing for such service. In China, there has been a series of such lawsuits
against Google (China) and Baidu, which is the largest search engine in China. Due to the lack of statutory
provisions, court judgments vary from one to another. This is problematic from the perspective of legal
stability and predictability, making it difficult to protect trademarks and prevent disputes. Some academic
papers suggest that the same problem exists in Japan. However, detailed study has not been sufficiently
conducted.
The abovementioned new types of cases represent disputes over trademark protection on theInternet. In this research, a comparative study was conducted on the current laws of Japan and China with afocus on the liability of both direct infringers and ISPs as contributory infringers.

Introduction
With the spread of the Internet and theadvancementofinformation
technology,
businesses have increased the use of trademarkson the Internet. Consequently, disputes havearisen over the possible infringement oftrademarks used online. The dispute that firstcame to light involved the issue of possible
infringement of a trademark by a domain name.
This issue has been solved to a certain extent
thanks to many court decisions made both inJapan and China and the legal reforms made toaddress this issue. However, in addition to suchdomain-related lawsuits, new types of disputes
have arisen over possible trademark infringementon the Internet. Some of these disputes havebeen brought before courts both in Japan and
China. Such trials held in China are abundant interms of number and variety of subjects.
The report of this study will present someof these trials in China and discuss thecircumstances in Japan. The purpose of this study
is to make a comparative study between China
and Japan with regard to the current trademark
protection on the Internet and to identify
problems and recommend solutions.
(*)

Ｉ Laws Concerning Trademark
Protection on the Internet, Major
Types of Disputes, and Legal
Reforms
A comparative study of relevant laws of Japanand China, i.e., the trademark law and the unfair
competition prevention law, with a focus on theprovisions concerning trademark protection on
the Internet, has revealed that major differences
between the two countries are as follows:1

An act of trademark infringement and an
act of unfair competition

Under the Chinese legal system, trademark
infringements are divided into nine specific types
under the Trademark Law, the Trademark
Regulations, the Interpretation by the Supreme
People's Court of Several Issues Relating toApplication of Law to Trial of Cases of Civil
Disputes over Trademarks (hereinafter referred
to as the “Interpretation”). Furthermore, Article
52, item (v) of the Trademark Law has been
established as a basket clause for trademark
infringement. Any act that falls under any of theseThis is an English translation of the summary of the report published under the Industrial Property Research
Promotion Project FY2009 entrusted by the Japan Patent Office. IIP is entirely responsible for any errors in
expression or description of the translation. When any ambiguity is found in the English translation, the original
Japanese text shall be prevailing.
● 1 ●IIP Bulletin 2010

“use of a trademark,” it is rather rare for a court
to question the applicability of the concept, “useas a trademark” to a trademark infringement case.
On the other hand, the Trademark Act of Japan
does not stipulate various types of trademark
infringements. Instead, Article 2, paragraph (3) of
the Trademark Act defines “use of a trademark”
and lists specific examples of acts that constitute“use.” If any person other than the holder of a
trademark conducts any of such acts, the person
will be found to be infringing the trademark
holder’s right to exclusively use the trademark(Article 25). Moreover, under the Trademark Act
of Japan, an act of using a mark would be regarded
as a trademark infringement only if the use
constitutes “use as a trademark,” which requires
a trademark to be used in such a way that it
performs the function to distinguish the goods ofthe trademark holder from those of other parties.
Therefore, even if an act of using a trademark
technically constitutes trademark use specified in
Article 2, paragraph (3), the use would notconstitute trademark infringement as long as theuse of the trademark has not caused any
confusion about the source.
With regard to an act of unfair competition,
the Law against Unfair Competition of thePeople’s Republic of China, like the Trademark
Law, has a provision describing applicable cases.
Any act that does not fall under any of these cases
would be subject to a general provision, Article 2,paragraph (1). On the other hand, the Unfair
Competition Prevention Act of Japan, which does
not have a general provision, only has a provision
describing applicable cases in detail.
The two countries are also different in termsof which law, the trademark law or the unfair
competition prevention law, provides protection
for famous trademarks. To protect famous
trademarks under the Japanese legal system,
Article 2, paragraph (1), item (ii) of the Unfair
Competition Prevention Act defines as an act of
unfair competition an act of using an indication of
goods or business that is identical or similar toanother person's famous indication of goods orbusiness. The Trademark Act of Japan merely
specifies the system to register defensive marks.
Since said item does not require the act inquestion to have caused confusion, the primary
purpose of said item is to restrict an act ofdiluting or free-riding on a famous indication of
goods or business. On the other hand, under the
Chinese legal system, a provision concerning theuse of a mark similar to a famous trademark has
been established not in the Law against Unfair

Competition but in a regulation related to theTrademark Law. Article 1, item (ii) of theInterpretation is a provision concerning
protection for famous trademarks. Said item
requires misidentification on the part of the“general public,” which is a more comprehensive
concept than the “relevant public (consumers),”
which is a requirement for protection of regulartrademarks under item (i) of said Article. Item (ii)defines the use of an identical or similar
trademark for unidentical or dissimilar goods as
an act of trademark infringement.
2

An act of trademark infringement and an
act of unfair competition on the Internet

In recent years, Japan revised the Trademark
Act and the Unfair Competition Prevention Act inorder to deal with the development of theInternet. As a result of the revisions, both Acts
have come to contain a provision describing what
constitutes an act of trademark infringement or
an act of unfair competition on the Internet. In
contrast, China has not taken any measures
except for the establishment of a domainname-related provision in the Interpretation. Thismeans that the conventional provisions including
the basket clause of the Trademark Law and thegeneral provision of the Law against Unfair
Competition should be applied to an act oftrademark infringement and an act of unfair
competition on the Internet.
In both countries, new provisions havebeen established to handle issues related todomain names. The two countries are almost thesame in that protection will be provided under the
trademark law if a trademark is used in a domainname in such a way that it functions as atrademark (Article 1, item (iii) of theInterpretation of China, Article 2, paragraph (3),item (vii) of the Trademark Act of Japan). Under
the Japanese legal system, which treats famous
trademarks and regular trademarks in the samemanner, an act of unjustly acquiring, owning, orusing a domain name for the purpose of acquiring
an illicit gain or causing injury to another person
would constitute an act of unfair competition.
Under the Chinese legal system, a simple act ofregistering a domain name similar to a famous
trademark without any justifiable reason would befound to be malicious. In this sense, China
protects famous trademarks more heavily thanJapan does.

● 2 ●IIP Bulletin 2010

Ⅱ Indirect Liability of Operators ofCybermalls, etc., for Trademark
Infringements Committed by Online
Shops, etc.

possible infringement mentioned in a notice of
infringement sent from a trademark holder.

1

Under the tort law and the provider liability
limitation law (Act on the Limitation of Liability
for Damages of Specified Telecommunications
Service Providers and the Right to Demand
Disclosure of Identification Information of theSenders), cybermall operators would be held
liable for joint tort if the operator distributed
information concerning online shops’ act ofselling goods that infringe a trademark either
knowingly or by negligence. To understand themeaning of “knowingly or by negligence,” itwould be useful to refer to the trademark
guidelines issued by a private organization whose
members
includeproviderassociations.
According to the guidelines, a provider is
expected to take measures to prevent data
distribution if there are reasonable grounds to doso such as a notice of trademark infringement
sent from a trademark holder. Under theguidelines, the notice is not required to containevidence for the infringement. Furthermore, theguidelines require each provider to voluntarily
take measures to prevent data distribution before
receiving a notice from a trademark holder if theprovider finds any product information or
advertisement that clearly infringes a trademark.
Therefore, any cybermall operator that does nottake these measures would be considered to have
distributed information for the sale of infringing
goods either knowingly or by negligence. It is still
unclear whether there are any other cases wherea cybermall operator is considered to be negligent
due to its failure to exercise due care and whatkind of liability for ex-ante examination theoperator is required to bear.
While it is difficult to speculate exactly
what kind of ex-ante examination a cybermall
operator is required to conduct in order to beconsidered to have exercised due care, it would
be useful to examine the court judgment for a
fraud case involving Internet auction, though saidcase did not directly involve a trademark
infringement. In the fraud case, the court heldthat the level of due care that the Internet auction
operator was expected to exercise shall be
determined based on a comprehensive evaluationof various factors including social circumstances,
relevant laws, technical level, cost and effect, andusers’ convenience. This court interpretation will
help us define the duty of due care that the tort

Liability of operators of cybermalls, etc., in
China

In China, lawsuits have been filed for
trademark infringements committed by online
shops, etc., through the sale of counterfeit goods.
In many of the lawsuits, the trademark holders
asserted that the operators of cybermalls, etc.
(hereinafterreferredtoas“cybermall
operator(s)”) assisted online shops to commit
direct infringements because the cybermall
operator provided online shops with the means of
e-commerce without fulfilling the liability tovoluntarily examine goods for sale before
receiving a notice from a trademark holder (theliability for ex-ante examination) and the liability
to delete infringing information after receiving a
notice from a trademark holder (the liability for
ex-post remedy). However, such claim that thecybermall operator should be held liable for joint
tort was often found to be groundless by the
court.
In most of such lawsuits, the court foundthat the cybermall operator should be held liable
if the operator knowingly distributed information
for the sale of goods that infringe trademarks.
However, the court denied the cybermall
operator’s liability for ex-ante examination basedon the grounds that the enormity of the amount ofgoods on sale made it unrealistic to expect thecybermall
operatortoconduct
ex-anteexamination. Furthermore, the court found thecybermall operator to be not liable for ex-post
remedy either by holding that the operator should
not be held liable even if it fails to delete
information on infringing goods unless thetrademark holder identifies such information bysending the operator an evidence-based notice oftrademark infringement. In sum, these court
decisions indicate, in substance, that cybermall
operators have no liability to delete information
on possibly infringing goods unless the trademark
holder proves that the goods are, in fact,infringing. While this does not necessarily meanthat the court completely exempted the cybermall
operator from the duty of due care, the level ofdue care required of the cybermall operator was
rather low because the operator was found tohave neither the liability for ex-ante examination
nor even the liability to voluntarily examine

2

● 3 ●

IIP Bulletin 2010

Liability of cybermall operators in Japanlaw imposes on cybermall operators, which buildand provide necessary systems, and will also help
us discuss, from the aforementioned perspectiveof liability of joint tortfeasors, the liability for
ex-ante examination that operators are required
to fulfill in order to prevent online shops fromcommitting trademark infringements.
3

Comparison between Japan and China andthe conclusion

With regard to the liability of a cybermall
operator for trademark infringements committed
by online shops, a cybermall operator could beheld liable for joint tort in both Japan and China.
In China, there is no statutory provision that
directly concerns the liability of a cybermall
operator for trademark infringements committed
by online shops, etc. Furthermore, there havebeen cases where the court denied the cybermall
operator’s liability for ex-ante examination andfound that the operator was liable for ex-post
remedy only to a very limited extent. Therefore,
it is difficult to hold cybermall operators liable forjoint tort by negligence. Chinese courts areconcerned that the placement of the liability for
ex-ante examination on cybermall operators
would hinder industrial development since thegoods on sale in the cybermall and related
information are enormous in volume. This stancetaken by Chinese courts is similar to the one thatthey had taken toward the issue of copyrightprotection on the Internet until the establishmentof the Regulation on Protection of the Right to
Network Dissemination of Information.
However,thedifficultyof
ex-anteexamination, which could constitute one of thefactors that should be taken into consideration bya court when presuming negligence, would notprovide sufficient grounds for making exceptions
to the applicability of the negligence liability
principle unless special legislation is adopted.
This is exactly why the issue of copyrightprotection on the Internet led to various changes
made in the Chinese legal system and in the
stance taken by Chinese courts in relevant
lawsuits. On the other hand, Japan established theprovider liability limitation law in as early as 2001
and clarified that the negligence liability principle
is applicable to the liability of providers including
cybermall operators regardless of whether theliability is related to a copyright of a trademark
right. In this respect, Japan was more efficientand foresighted than China.
Since it is difficult to clearly define the levelof due care required of cybermall operators, thevoluntary rules created by operators themselves
would play an important role in preventing
disputes. In this sense, the trademark guidelines,
though they are not perfect, created by a privateorganization have contributed to the clarificationof the behavioral standards for providers. While
such guidelines are not absent in China, thoseguidelines were created by cybermall operators
for their own interests and have not contributed
to the prevention of disputes in reality.
One does not have to be a cybermall operator
or any other expert in the field in order to noticethefrequent
occurrenceof
trademarkinfringements on the Internet as a result of suchact as the sale of counterfeit goods. Therefore,
infringements are reasonably predictable in a
general sense. While it is true the amount of
information related to online transactions isenormous, the fact that such information exists
on the system built by cybermall operators
ensures, at least, that the operators would nothave difficulty in collecting the information.
Cybermall
operators
gain
incomefromtransactions made through their systems. The
greater the amount of information handled by thesystems, the larger their income will be.
Therefore, the enormity of the amount of
information should not be used as a justification
to limit the scope of examination liability imposedon cybermall operators. In view of the fact thatcybermall operators actually gain profits fromtransactions in which online shops sell goods that
infringe trademarks, cybermall operators shouldbe held liable, to a reasonable extent, as abeneficiary. Cybermall operators should bear theliability to prevent trademark infringements asmuch as possible because such infringements
would violate trademark holders’ rights anddeserve social condemnation.
On the other hand, unlike China, Japan has
not faced so many civil lawsuits concerning theliability of cybermall operators for trademark
infringements on the Internet. In fact, no court
decisions have been made for such lawsuits inJapan. This does not mean that operators do nothave to make such efforts as described above.
The infrequency of lawsuits is attributable not
only to the legal consciousness of Japanesepeople but also to effective infringement
detection activities by the police. In fact, in Japan,
detection of trademark infringements on theInternet seems to never end. Such detection
efforts funded by tax money are commendable tosome extent. However, it is cybermall operators● 4 ●IIP Bulletin 2010

that are supposed to be paying the costs of such
efforts. In the current situation where
infringement lawsuits are relatively rare, it might
be reasonable to limit the scope of examination
liability imposed on cybermall operators in orderto prevent trademark infringements. However,they should be held liable for ex-ante examination
to a certain extent at least.
It is unclear exactly what kind of ex-anteexamination a cybermall operator is required to
conduct in order to be considered to haveexercised due care. This issue will be addressedin the following Chapter as well.

Ⅲ Trademark Infringements
Search Keywords andLiability of ISPs
1

by
the

Analysis of lawsuits in China concerningsearch keywords, etc.

(1) Nature of an act of using another party’s
trademark as a search keyword andassociating it with oneself
Internet service providers (ISPs), which
operate search engines, etc., have beendeveloping new business models in order toincrease added value. In China, there have been
many lawsuits concerning various services
provided by ISPs. Those services are ultimately
very similar to each other in that they weredeveloped to meet the needs of companies thatare trying to make information on their goods orservices and their websites stand out from thesea of information on the Internet and to draw
special attention to such information fromInternet users who have a strong interest in
particular keywords. The services called“Internet Keyword” service and “Internet RealName” service match a search keyword with acertain piece of information or a certain link on a
one-on-one basis. In this sense, this service issimilar to the conventional domain name service.
On the other hand, more recent services called“ranking auction” service and “Adwords” service
associate a search keyword with multiple pieces
of information or links on a one-to-multiple basis.
This service is more advanced and sophisticatedas a business model than conventional services.
From a technical viewpoint, however, the newservice has not made much progress.
In lawsuits concerning these services
except for the lawsuits where the use of the
trademark in question was found to be authorized,
the court judged the act of the users of theservice as an act of trademark infringement or an
act of unfair competition.
Academic theories pay more attention to the“ranking auction” service and the “Adwords”
service, which are still in use, than to the“operational Internet address” service and the“Internet actual name” service, which areconsidered to be old business models. Unlike thecourt decisions mentioned above, academic
theories are divided over whether an act ofpurchasing and using a trademark as a search
keyword constitutes an act of trademark
infringement. The controversy may boil down to aquestion of whether the use of a trademark as asearch word constitutes “use as a trademark.”
Under the Chinese legal system, acts of
infringements are categorized into nine specifictypes. These types are formulated forconventional trademark infringements. Therefore,
in lawsuits, the courts used to take “use as atrademark” for granted and had no need to
examine whether the act in question constitutes
such use. However, in some recent lawsuits
concerning new types of trademark infringementson the Internet, the courts examined the alleged
infringements from the perspective of “use as atrademark” in one way or another. This indicatesthat the provisions listing different types ofinfringements are not applicable to new types ofdisputes in some cases.
Some academic theories claim that the useof another party’s trademark as a search word
does not constitute “use as a trademark,”
whereas other theories claim that such use
constitutes “use as a trademark” because thetrademark is used for the purpose ofadvertisement even if the trademark is notdirectly used for goods. However, these theories
are not directly relevant to court decisions in thepast. In the “ranking auction” case, the trademark
in question was used on the linked website of theservice user as well. In the “Adwords” case, theadvertisement presented on the screen consistedof an indication of a trademark and an indication of
the company name of the service user. In thesecases, it is clear that the use of a trademark
constituted “use as a trademark” and therefore
was an act of trademark infringement.
On the other hand, it is difficult to answer
the question of whether the use of a trademark
constitutes “use as a trademark” and, thus, an actof trademark infringement or an act of unfair
competition in cases where a trademark is usedneither on the website of the service user nor inany text or advertisement about the website and● 5 ●IIP Bulletin 2010

is simply used to place a link to the websites ofservice users high in the list of search results (inthe case of ranking auction) or to put such a linkin the sponsor section of the screen of the search
results (in the case of Adwords).
To answer this question, some people havetaken a legislative approach and promoted theapplication of the initial interest confusion
doctrine developed based on U.S. law. This
question is considered from the perspective of thecurrent Chinese legal system as follows.
To understand the perspective of theTrademark Law of China, it is important to note
that, as mentioned in Chapter I, it is specified in
Article 1, item (ii) of the Interpretation, which
concerns famous trademarks, that the use of an
identical or similar trademark for non-similar
goods constitutes a trademark infringement aslong as the trademark misleads the general public.
The
term“generalpublic”
ismorecomprehensive than the term used for regulartrademarks. In other words, the Trademark Law
of China provides protection for a famous
trademark even if the act in question has notcaused any confusion but has simply diluted thefamous trademark. Therefore, in the case of anact of purchasing and using another party’s
trademark as a search keyword, even in cases
where the famous trademark in question is usedneither on the website of the service user nor inany text or advertisement about the website, if
the use of the famous trademark is commercial innature and is considered to be unauthorized, thetrademark use would constitute trademark
infringement because such use would dilute thefamous trademark. On the other hand, confusion
among consumers is required for protection ofregular trademarks. If the trademark in question
is not displayed, confusion would not occur inmost cases. Based on these grounds, the act ofusing a regular trademark should not be regarded
as trademark infringement.
It is also important to analyze theperspective of the Law against Unfair
Competition. In the “ranking auction” case, thecourt examined the nature of the ranking auction
service and found that said service should not be
regarded as an advertisement service. However,in Japan, the ranking auction service isconsidered as a type of service called searchadvertising. Furthermore, Article 2 of theAdvertisement
Law
of
China
defines
advertisement as activities in which anorganization, either directly or indirectly,
announces its goods or services through a certain

medium and format at its own expense. In light ofthese interpretations, the ranking auction service
may be regarded as a fee-based service thatmanipulates search results in order to advertise
the websites of service users to the Internet
users who have a strong interest in particular
keywords. Moreover, the text about the websitesof the service users is also displayed on thescreen of search results. Based on these grounds,
the ranking auction service should be regarded as
an advertisement service from an objective
viewpoint irrespective of how Baidu defines theservice.
According to the results of the analysis
described above, both the “ranking auction”
service and the “Adwords” service are an
advertisement service in nature. Article 9 of the
Law against Unfair Competition of China specifies
that an act of using an advertisement or any othermeans to give false “misleading” publicity
constitutes an act of unfair competition.
Therefore, an act of purchasing and using anotherparty’s trademark as a search keyword for asearch advertising service such as the “ranking
auction” service and the “Adwords” service may
be regarded as an act of unfair competition as longas said act is considered to give false“misleading” publicity even if the trademark is
not presented on the screen of the search results.
The term “misleading” in this context is morecomprehensive than “confusion about thesource.”According to the results of a survey on
Internet users in China about their habits, 65 to
70% of the users select a link from the top ten
search results and show a tendency to access alink placed higher in the list. Based on these facts,in the case of the “Adwords” service, which
presents advertisements in the sponsor sectionthat is reserved on the right side of the screen
apart from the list of search results,
advertisements are unlikely to cause confusion
among users as long as the trademark in question
is not displayed in the advertisements. On theother hand, in the “ranking auction” service,
which places advertisements on the top of the listof search results, if the trademark in question isused for the purpose of advertisement, those
advertisements are likely to cause confusion
among users and may be considered as an act of
free-riding on the goodwill embodied in the
trademark in substance. Therefore, in such a case,the use of a trademark is likely to be considered
as an act of unfair competition since theadvertisement gives false publicity.

● 6 ●IIP Bulletin 2010

(2) The nature of ISPs’ acts and their liability inproviding services involving search
keywords
An analysis of court decisions in China hasrevealed that the courts did not find ISPs’ act ofproviding services involving search keywords andselling another party’s trademark as a keyword as
an act of direct trademark infringement. Most
academic theories do not find ISPs’ act as
infringing either. Instead, the courts examined
whether ISPs were liable for joint tort for
negligently assisting service users to commit an
act of trademark infringement or an act of unfair
competition. ISPs, which are not competitors of
trademark holders, are unlikely to have aninterest in free-riding on the goodwill embodied
in the trademarks. Furthermore, an act of selling
famous trademarks as keywords does notnecessarily dilute them. Therefore, it is difficult
to find the use of a trademark as an act oftrademark infringement or an act of unfair
competition. It would be more natural to examine
whether ISPs have negligently contributed tosuch an act, i.e., whether ISPs have violated the
duty of due care that should be exercised whenservice users purchase or use search keywords.
This approach is similar to the one taken bycourts hearing cases about ISPs’ liability for
copyright infringements on the Internet and cases
about the liability of cybermall operators for
trademark infringements committed by online
shops, etc. This approach has been supported byacademic theories as well.
In the lawsuit between a trademark holder
and Google about the Google Adwords service,
which was referred by the Court of Cassation to
the European Court of Justice for a preliminary
ruling, the Advocates General has given theiropinion about Google’s act of allowing advertisers
to use trademarks as keywords and to display thetrademarks in their advertisements by saying thatsuch an act itself does not constitute an act oftrademark infringement and therefore should not
be prohibited and that Google might be held liablefor damages for having assisted advertisers tocommit trademark infringements.
2.

Discussion and analysis from theperspective of the Japanese legal system

In Japan, with regard to the use of anotherparty’s trademark as a keyword in connection
with the META tag service or the searchadvertising service, courts and academic circles
tend to find that such use does not constitute a

trademark infringement. The issue of visibility
seems to be unimportant in view of the fact thatthe instant presentation of the list of search
results and the section of advertisement after auser’s entrance of a search keyword into a searchengine inevitably makes the user perceive acertain connection between the keyword and thecontents displayed on the screen even if the
trademark corresponding to the keyword is not
displayed on the screen and the fact that such
perception is the very reaction that theadvertisers who have selected the trademark as a
keyword expect. Therefore, the focus of
discussion should be whether confusion could becaused with regard to the source of goods orservices. Since a user would not confuse thesource of goods or services associated with thetrademark with a company that uses thetrademark as a keyword even if the company isplaced high in the list of search results or thecompany’s advertisement is displayed in thesection of advertisement, it is usually difficult toconsider the use of a trademark as a keyword as
trademark infringement.
This does not mean that, as discussed in thesection on the Chinese legal system, complete
absence of regulation would be appropriate. It
would be necessary to seek a viable approach
under the Japanese legal system.
First, the liability of a direct infringer should
be discussed not within the framework of theTrademark Act but within the framework of the
Unfair Competition Prevention Act from theperspective of the regulation of the act of thedirect infringer. In the case where another party’s
famous trademark is used as a keyword, if thatparticular use of the trademark is considered tobe diluting or free-riding on the trademark, theuse would be regarded as an act of unfair
competition, more specifically, an act of illicitly
using another party’s indication of goods orbusiness as specified in Article 2, item (ii) of the
Unfair Competition Prevention Act. In the casewhere a trademark used as a keyword iswell-known, if the concept of confusion is broadlyinterpreted as the existence of some kind of
relationship between the user of a trademark andthe goods or business of the trademark holder,
Article 2, item (i) could be applicable to an act ofusing such service as the keyword META tag
service or the search advertising service in orderto place one’s own website high in the list of
search results.
Next, the liability of ISPs that selltrademarks as keywords should be discussed from● 7 ●IIP Bulletin 2010

the perspective of whether ISPs are liable forjoint tort for negligently assisting service users.
This approach, which is the same as the one taken
under the Chinese legal system, is desirable
because the approach to consider an ISP’s act as
an act of direct trademark infringement or an actof unfair competition is harder to apply to ISPs
than to a direct infringer, which directly uses a
trademark as a keyword. In particular, if an ISP
has sold a famous trademark as a keyword to athird party and consequently contributed to an actof trademark infringement or an act of unfair
competition, it would be possible to hold the ISP
liable for damages for a violation of the duty of
due care.
3

Comparison between Japan and China
and some observation

Based on the discussions presented above,
this section makes a comparison between Japanand China with regard to the issue of trademark
infringement by search keywords, etc., and ISPs’
liability, and makes some observations especiallyabout ISPs’ liability.
(1) Liability of a direct infringer
With regard to the “operational Internet
address” service, the “Internet actual name”
service, and the “META tag” service, which are
relatively old technologies or business models,and also the “search advertising” service, which
is a business model still in use, in cases whereanother party’s trademark is used as a search
keyword, if the keyword is displayed on the user’s
website or in the advertisement section of thescreen of the search results, such use of a
trademark would be regarded, both in Japan and
China, as an act of trademark infringement or an
act of unfair competition, as long as the trademark
is visible on the screen, regardless of whether the
trademark in question is a famous trademark or aregular trademark. In this respect, the difference
between Japan and China, if any, lies in how toregulate an act of diluting a famous trademark.
Such an act is subject to the Trademark Law inChina, whereas it is subject to the Unfair
Competition Prevention Act in Japan.
On the other hand, regarding cases where a
trademark used as a keyword is invisible, there
have been no lawsuits in China, while there was acase called the papaya case in Japan, in which thecourt found that the use of a trademark as a
keyword for the search advertising service did
not constitute trademark infringement. In my

opinion, in the case where a famous trademark isused as a keyword, if the famous trademark
suffers dilution or free-riding, such use should be
regarded, under the Chinese legal system, as anact of trademark infringement specified in Article
1, item (ii) of the Interpretation and, under theJapanese legal system, as an act of unfair
competition specified in Article 2, paragraph (1),item (ii) of the Unfair Competition Prevention Act.
This dissimilarity is ultimately attributable to thefact that, under the Chinese legal system, it is theTrademark Law that contains a provision
concerning dilution of a famous trademark.
Therefore, this dissimilarity does not indicate thefundamental difference between the Chinese legal
system and the Japanese one.
In cases where a regular trademark is used
as a keyword, if the trademark is invisible, theuse would not cause confusion about the source ofgoods or services. Since such act would notconstitute trademark infringement either under
the Chinese legal system or the Japanese one, it
should be subject to the unfair competition law.
An act of using a regular trademark as a search
keyword in order to display a link to the websiteof the direct infringer that has used the trademark
or in order to display an advertisement may be
regarded as an act of unfair competition inconsideration of the fact that such information isdisplayed in a specific section of the screen of thesearch results as long as such use causes
confusion in a broader sense (confusion among
the general public under the Chinese law).
(2) Liability of ISPs
Chinese courts have already clearly shownthat ISPs are liable for joint tort. While Japanesecourts have not made such judgments, academic
theories have pointed out that it is possible tohold ISPs liable for joint tort.
The adequacy of such liability of ISPs should
be examined from the perspective of whether it
would be excessively burdensome for ISPs toshoulder the duty of due care, more specifically,
the examination liability, and whether theexamination liability could hinder technicaldevelopment.
It would be reasonable to impose the duty of
due care, more specifically, the examination
liability, on ISPs for the following reasons. ISPs
have developed business models including thesearch advertising service for profit and havebeen engaged in the business of manipulating theorder of the list of search results and displaying
the advertisements of the purchasers of keywords.

● 8 ●IIP Bulletin 2010

Furthermore, in the course of selling keywords toservice users, ISPs could easily collectinformation on the identity of each purchaser, thepurpose of the purchase, and the keywords thatare selling well.
Furthermore, the concern that theexamination liability could hinder technicaldevelopment is groundless for the following
reasons. First of all, as pointed out in the
judgment for the appellate instance of the
Adwords case in China, such a concern would notjustify violation of a statutory provision. Secondly,
as mentioned earlier, the search advertising
service is more sophisticated, but not at alltechnically more advanced, than such services as
the “operational Internet address” service andthe “Internet actual name” service, which arerather conventional business models. This isbecause the search advertising service is a mere
mechanism that displays the links to advertisers’
websites or their advertisements in a specificsection of the screen of the results of a search
conducted based on a certain keyword, whereas asearch engine itself is a product of thedevelopment of highly complex technology.
A more important issue would be to what
extent ISPs should be held liable for conducting
ex-ante examination. In this respect, it would be
useful to take into consideration the judgment for
the ranking auction case where the court held
that, if multiple users purchase a famous
trademark as a keyword, it would clearly increase
the likelihood of infringing another party’s
trademark and therefore that ISPs’ examination
liability should be weighted. In short, the court
held that the level of ISPs’ examination liability
should vary depending on whether the trademark
in question is a famous trademark or a regulartrademark. A service user purchases anotherparty’s trademark as a keyword with the hope of
free-riding on the high consumer awareness ofthe trademark. Therefore, if examination isconducted primarily on the use of famous
trademarks as keywords in order to detect an actof trademark infringement or an act of unfair
competition, effective control of infringement
would be possible. For this reason, it would bemeaningful to discuss ISPs’ examination liability
from the perspective of whether the trademark inquestion is a famous trademark or not. On theother hand, there is an academic circle that claims
that the level of ISPs’ examination liability should
be decreased if the trademark in question is acommonly used term.
In any case, as discussed in the previous

Chapter, it is, in fact, very difficult to clearly
define the level of examination liability requiredof ISPs such as cybermall operators and searchengine companies in order for them to beconsidered to have fulfilled the duty of due care.
Such difficulty is attributable to the fact that the
duty of due care is subject to change according to
the circumstances involved in each dispute.
Usually, trademark infringements on the Internet
involve famous trademarks. Therefore, it would
be meaningful to tighten the detection system for
infringements of famous trademarks or establish
a system to collaborate with trademark holders
beforehand. In this way, ISPs are expected tomake continuous effort to improve their
examination system in consideration of the trends
in the actual trademark use by users. Even if
these measures are taken, it would be impossible
to prevent all infringements. However, if an ISP
fails to establish an examination system that is
objectively considered to be reasonable inconsideration of social circumstances andtechnical standards, the ISP should be held liable
for negligence for having failed to fulfill the dutyof due care.

Conclusion
The report of this study has addressed two
major issues. The first issue is related to theindirect liability of cybermall operators, auction
site operators, etc., for trademark infringements
committed by online shops and auctioneers
participating in cybermalls, online auction sites,
etc. The second issue is related to theinfringement of trademarks by search keywords
used in the search advertising service, etc. In
connection with this issue, special attention has
been given to the liability of ISPs that provide
such service. Regarding the first issue, theliability of contributory infringers that provide
transactional opportunities has been discussed on
the presumption that direct infringers’ acts
constitute trademark infringements. Regarding
the second issue, the nature of an act of a direct
infringer that uses a trademark as a keyword has
been discussed. Possible solutions are explored
not from a legislative perspective but from theperspective of the current trademark law and theunfair competition law of Japan and China withreference to Chinese court decisions for relevantcases, which are relatively abundant in number.
With regard to the liability of contributory
infringers, which provide services, this paper has
concluded that a contributory infringer should be● 9 ●IIP Bulletin 2010

held liable for joint tort for having negligently
assisted direct infringers to commit an act oftrademark infringement or an act of unfair
competition as long as the ISP has failed to fulfill
the duty of due care, more specifically, theexamination liability. Needless to say, an act oftrademark infringement and an act of unfair
competition should be regulated on the Internet
as well. The creation of an orderly Internet
community is important from the perspective ofprotecting consumer interests and the goodwillthat trademark holders have made continuous
efforts to build. For the creation of such
community, it would be reasonable to impose
certain responsibilities on contributory infringers
including such industry leaders as Google, Baidu,
and eBay, which were involved in the lawsuits
discussed in this paper.

● 10 ●IIP Bulletin 2010