Merchandising rights and well-known trademark recognition are two strategic tools that enhance corporate core competitiveness. In China, they are intimately related and inform on the other’s legal protection. This article discusses their differences to provide practical advice for selecting the optimal strategy.
Merchandising is a key activity across various industries, including cultural entertainment, sports and commerce. In particular, the cultural entertainment industry stands out for its extensive and strategic merchandising efforts, which are largely attributed to the unique nature of its products, diverse profit models and the characteristics of intellectual property involved. Investment in merchandising has become increasingly vital for establishing trademark recognition.
Merchandising rights refer to the commercial use of elements (eg, literary and artistic works, titles, character names and character images) that possess public appeal. These elements are combined with goods or services to stimulate consumer demand through their popularity and recognition, thereby achieving economic benefits.
Merchandising rights are not explicitly defined as statutory rights in Chinese legislation. However, judicial practice has recognised merchandising rights as protected legal interests in case-by-case scenarios.
Well-known trademarks must meet the criteria outlined in China’s Trademark Law, which emphasises the degree of public awareness of the trademark in the Chinese market. The recognition of well-known trademarks adheres to the principles of case-by-case, passive protection, need-based recognition, and good faith.
Ramping up investment in merchandising can help a brand to build strong evidence for well-known trademark recognition by:
In China, the chances of a trademark being recognised as well-known increase with the level of its reputation. Various data and materials from a trademark’s merchandising activities can support an application for well-known trademark recognition. Examples include sales data of products derived from films and TV series;
They effectively demonstrate trademark’s public awareness, commercial value, and reputation. By demonstrating a strong connection between the trademark and consumer recognition, applicants can improve their chances of achieving well-known status.
In addition, merchandising can consolidate trademark distinctiveness. The scope of cross-class protection for well-known trademarks is closely linked to the trademark’s distinctiveness. A trademark with strong distinctiveness is more recognisable, which in turn broadens the scope of protection it enjoys. Cross-class use of trademarks often occurs during the merchandising process. For instance, the development of derivative products, advertising campaigns and consumer interaction activities can demonstrate the strong recognisability of a trademark and reinforce trademark distinctiveness.
Merchandising can also prove the duration of trademark use. Well-known trademark applications must provide evidence that the trademark has been registered for at least three years or has been continuously used for no less than five years. Therefore, sustained merchandising efforts (eg, records of derivative product development and five-year sales data) can demonstrate the trademark’s enduring presence in the market and the long-term accumulation of goodwill and public recognition.
However, over-merchandising can weaken trademark distinctiveness. Excessive merchandising can cause a trademark to be perceived as a generic symbol rather than a distinct identifier of a specific origin. When rights holders use the same trademark in too many unrelated fields, consumers may struggle to establish a stable cognitive link between the trademark and its core business. This severs the specific connection between the trademark and the original goods, ultimately undermining its distinctiveness.
For a trademark that has lost its distinctiveness due to over-merchandising, judicial and administrative authorities may impose higher thresholds to recognise it as well-known. This can create challenges for businesses, including:
China has no explicit legislative definition of the legal concept of “merchandising rights”, but protection pathways can be provided through copyright, trademark and anti-unfair competition law, the Civil Code (Personality Rights Section), and judicial practice.
Under the Trademark Law, protection for merchandising rights is primarily constructed based on Article 32, which states that “trademark registration applications shall not harm existing prior rights of others”. Thus, merchandising rights seek to safeguard the potential commercial value of a well-known IP asset and prevent others from freeriding on its market influence.
The substantive rules and procedural rules regarding well-known trademark recognition are clearly stipulated in the Trademark Law. The rationale behind this protection is to prevent trademarks activities that could exploit the reputation of well-known trademarks, which may lead to market confusion or public misidentification.
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Merchandising rights |
Well-known trademarks |
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Coverage area |
Limited to areas where commercial value can be extended. |
Protection can apply to different goods or services, but this does not mean all-class protection. The scope of protection must focus on whether the disputed mark would mislead the public. |
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Determination criteria |
Emphasises the correlation between commercial value and public recognition. |
Emphasises market awareness and the likelihood of confusion. |
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Legal certainty |
Relies on case-by-case judicial discretion, lacking unified standards. |
Has clear legal provisions and relatively unified judicial practice standards. |
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Strength of protection |
Has advantages in IP-derivative fields and new business models. |
Provides stronger cross-class protection in the vast majority of scenarios. |
Compared to the high standards of evidence and considerable costs required for well-known trademark recognition, seeking protection for merchandising rights has significant flexibility. By invoking the “prior rights” provision in the Trademark Law in individual cases, rights holders can combat trademark squatting on non-similar goods or services in a relatively low-cost manner, thereby achieving a cross-class protection effect that is similar to that of well-known trademarks in specific situations.
However, this flexibility also brings systemic challenges. It somewhat undermines the high threshold deliberately designed for well-known trademarks. The system for well-known trademarks ensures that the strong cross-class protection is only granted to trademarks that have undergone long-term market testing and enjoy absolute public awareness, thus maintaining a balance between rights and obligations. Yet, the advent of merchandising rights provides a means to bypass this strict procedure. This may weaken the rigour and authority of the well-known trademark protection mechanism.
For this reason, judicial authorities and the China National Intellectual Property Administration (CNIPA) exhibit a cautious attitude that limits protection for merchandising rights, despite acknowledging their legitimacy. In practice, when considering merchandising rights as a legal interest in individual cases, the scope and necessity of protection must be fully considered.
The courts have affirmed that the names of well-known films and fictional characters can be protected as objects of merchandising rights. Examples include:
However, the courts may decline to uphold merchandising rights where the rights holder’s area of fame substantially differs from the goods or services covered by the disputed mark. This was seen in the cases of 哔哩哔哩 BILIBILI [Beijing Administrative First Instance No 893 (2018)] and 机动战姬 JI DONG ZHAN JI [Beijing Administrative Final No 1133 (2020)].
In several recent trademark registration and validation cases, the CNIPA has refrained from evaluating or endorsing parallel claims based on merchandising rights, if a prior registered trademark already affords adequate protection. This approach has been applied in matters including:
In its decisions, the CNIPA explained that since a trademark has been registered to cover the derivative goods, the existing trademark system is fully capable of protecting the associated brand value. Thus, there is no need to invoke supplementary merchandising rights.
This reflects a deliberate preference by the CNIPA to resolve disputes within the established trademark framework, a practice that mitigates expansive interpretations of merchandising rights and helps to prevent overlapping protections and excessive protections.
In administrative and litigation procedures relating to cultural IP derivatives, it is possible to claim both merchandising rights and well-known trademark protection simultaneously.
Achieving well-known trademark recognition can be a challenging task. However, for established commercial brands, pursuing broader protection through well-known trademark recognition is generally more advantageous.
The protection of merchandising rights is confirmed by judicial and administrative authorities on a case-by-case basis, which introduces a level of uncertainty. Therefore, it is advisable for companies to proactively identify key derivative areas through trademark registrations.
For merchandising rights, the authorities focus on the cultural influence and commercial conversion ability of the trademarks. Evidence (eg, box office figures, derivative product sales data, media reports, market analysis reports, and actual confusion cases) can be highlighted to demonstrate the mark’s cultural influence and commercial value, and the necessity for cross-class protection. On the other side, the recognition and protection of well-known trademarks adhere to strict legal standards and evidence requirements, as stipulated in the Trademark Law and its regulations.
In China, there is a complex interaction between merchandising rights and well-known trademarks, where both synergistic effects and potential protection conflicts may arise. This dynamic balance requires businesses to establish an IP value assessment mechanism, which takes into account the characteristics of IP assets, weighs the costs and benefits of protection, and adopts different strategies to protect different trademarks, thereby avoiding excessive enforcement of rights.
This article was first published on WTR in October 2025.
Author: Vivian Tian