[Inclosure 3—Extract.]

Minister Reinsch to Consul General Sammons.

No. 971.]

Sir: I take occasion to supplement herewith the telegraphic instructions which I addressed to you on February 18 in reply to your despatch No. 374 of the 2d instant.

In order to clear up certain misconceptions by which the issues in this case appear to have been confused, I would point out that it is the general principle of the American and other Western systems of law that a trade-mark is a property right growing out of the use of a particular distinguishing device adopted for the purpose of trade, and accruing to the user of such an identifying mark independently of any formal act such as registration—such formalities being recognized not as creating new rights but only as attesting and furnishing evidence (of a presumptive force determined by the laws under which the formalities are established) of the existence of a proprietary right in the device. It is believed that the concept of a property right originating in the mere fact of the adoption and use of an identifying device in trade is common not only to the legal systems of the West but also to that of China.

In the nature of the case, however, the protection and enforcement of the rights as recognized give rise to many questions in actual practice, in view of the difficulty of establishing by evidence in each case the duration and extent of use, and the nonexistence of a similar use by other traders. To minimize the practical difficulties thus presented, the system of registration of trademarks [Page 240]has been adopted in most countries, in order to obviate the difficulties of proving industrial property rights, by establishing registration as a more readily available form of evidence in such cases. As indicated above, the degree of presumptive force attaching to registration varies in the several existing systems of registration; in some, notably the Japanese, so much weight is attached to the fact of registration as to give it almost the effect of a presumption of law; but it is understood that even in the Japanese system the principle of proprietary right growing out of priority of use is recognized to the extent of providing means for the cancellation of registrations which infringe upon trade-marks already in use by other traders.

So much general discussion of the subject has seemed necessary in order to dispel the apparent misconception that registration in Japan or elsewhere creates ipso facto a right in any mark for trade in China. In the view of the Legation, the question of the ownership of any trade-mark in China is one of fact as to priority of use and adoption for the trade in China; the essential facts in such cases are determinable in accordance with the legal system and institutions applicable by the jurisdiction to which appeal must be made in order to establish and protect those rights in this country. It is in this connection necessary to envisage the possibility of infringements of American trademarks by those subject to the jurisdiction of the United States, to that of China, and to that of countries (other than the United States) enjoying extraterritorial jurisdiction here.

With reference to the law applicable in cases of infringement by other Americans, the question is one in regard to which comment by the Legation would be superfluous inasmuch as the matter is not of diplomatic but of judicial competence.

So far as concerns protection or redress against persons or firms subject to the jurisdiction of China, I would reiterate the belief that the legal concepts of the Chinese recognize the principle of a property right accruing from the use of trade-marks or chops. As a matter of practical administration, however, it has been found desirable to establish by Article IX of the Commercial Treaty of 1903 an administrative procedure by which the owners of American trademarks may entitle themselves to protection by the Chinese Government against infringing, imitating, or knowingly passing off imitations of their trade-marks. This treaty stipulation imposes upon the Chinese Government, subject to the formalities of registration and proclamation, the obligation to protect within its territories and against its nationals the following three categories of American trade-marks:

Those to the exclusive use of which in the United States the American owners are entitled;
Those which, they have adopted and used within the territories of China; and
Those which they intend to adopt and use exclusively within the territories of China as soon as registered.

It would appear that the owners of the Vaseline trade-mark (which belongs alike to the first and to the second of the above categories) have fully entitled themselves to the protection of this trade-mark by the Chinese Government under the terms of the treaty, having registered the trade-mark and obtained for it the proclamation of the appropriate authorities. It may incidentally be noted that—at any rate in a case involving no contest as to the relative value of registrations as between two or more claimants of a trade-mark—the so-called “provisional registration” of a trade-mark with the Customs at Shanghai must be considered as fulfilling the condition precedent to Chinese protection, stipulated in that regard by the Treaty of 1903. For although the Chinese Government has not yet established offices for the granting of registration “after due investigation by the Chinese authorities and in compliance with reasonable regulations” (as contemplated by our treaty), or “in accordance with the provisions of the regulations to be hereafter framed by the Chinese Government for the purpose of protecting trade-marks” (as contemplated by the Sino-Japanese Treaty of 1903), it has nevertheless established an office for provisional registration under the control of the Maritime Customs at Shanghai, in pursuance of Article VII of the Sino-British Treaty of 1902; and inasmuch as the system of provisional registration thus established affords to American traders the only means hitherto available to them to comply with the treaty requirement of registration with the appropriate Chinese authorities, it seems preposterous to suppose that it is open to the Chinese (or [Page 241]to others for them) to plead that registration under that system does not suffice to fulfil the requirement upon which the obligation of protection by the Chinese Government is conditioned. Under such circumstances the Legation considers that the duty of the Chinese authorities to protect the Vaseline trademark as against their own nationals is a matter of treaty obligation by China to the United States; and it fails to understand on what ground a third party can claim to intervene against the enforcement of that obligation.

In this connection the Japanese Consul General at Shanghai, in his letter addressed to you on the 17th instant, quoted in your No. 392 of February 17th, takes the position that it would constitute a violation of Article V of the Sino-Japanese Treaty of 1904 (doubtless that of 1903 is intended) if the Mixed Court were to “prohibit the sale by Chinese of any merchandise by sole reason of bearing the trade-marks possessed by Matsumoto”; and from the context it appears that the clause “possessed by Matsumoto” is to be interpreted as meaning registered in Japan by Matsumoto.

The treaty provision upon which your Japanese colleague relies would appear to be that contained in the first paragraph of Article V of the Sino-Japanese Treaty of 1903, reading as follows:

The Chinese Government agree to make and faithfully enforce such regulations as are necessary for preventing Chinese subjects from infringing registered trade-marks held by Japanese subjects.

But this provision would sustain his contention only if it were assumed that the phrase registered trade-marks field by Japanese subjects refers to registration in Japan rather than in China. That such is not the true meaning of the provision, however, is to be inferred from the terms of mutuality in which the fourth paragraph of the same article provides for the protection by the Japanese Government of trade-marks “properly registered according to the provisions of the laws and regulations of Japan.” But even if the terms of the Japanese treaty did not so manifestly contemplate registration in China as a condition precedent to the protection of Japanese (as of American) trade-marks, I should find it impossible to reconcile myself to the assumption that registration in Japan—a unilateral domestic act involving no consent or even cognizance on the part of either Chinese or Americans—could have the effect of nullifying rights accruing to Americans in China and protected by treaty between China and the United States, or could make the right to protection in such cases subject to determination by judicial procedure in Japan. Although other elements of the problem would have to be taken into consideration if the case presented a rivalry of registrations by Americans and by Japanese in China, it seems clear that the actual facts of the case involving the infringement of the Vaseline trade-mark allow no room for the supposition that by reason of a registration in their home trademark office the Japanese claimants are entitled to oppose the proceedings which the Chinese Government is obligated by treaty to take against such persons under its jurisdiction as violate the rights of the American owners of the trade-mark.

Such cases as this, involving prosecutions against Chinese infringing or dealing in infringements, are to be carefully distinguished from cases involving such action by persons subject to the jurisdiction of nations (other than the United States) possessing extraterritorial jurisdiction in China. In cases of the latter sort, in view of the fact that each extraterritorial court applies to its own nationals a system of law based upon its domestic law, the United States has, by exchanges of notes with various powers and by a treaty with Japan concluded May 19, 1908,68 agreed to accept registration, in the appropriate office of the nation whose jurisdiction is appealed to, as determining the right to sue for infringements in that nation’s extraterritorial courts. That rule is one of convenience rather than of principle, designed to furnish the reasonably convenient procedure by which American owners of trade-marks may, for example, protect themselves against infringements by Japanese of their rights in China; the application of that rule is to be confined strictly to the cases for which it is provided, and cannot be construed as establishing, vis-à-vis Japan or any other nation with which we have a similar agreement, that we accept the principle that an absolute property right is created by the mere fact of registration in the appropriate office of the other nation.

The fundamental error in the position taken by the Japanese Government in the present case seems to lie in the assumption that registration of trade-marks [Page 242]in Japan does not merely constitute a basis for judicial procedure in Japanese domestic or extraterritorial courts, but creates in favor of its nationals an abstract and absolute property right enforceable even under Chinese jurisdiction without regard to the requirements of Chinese law. The Legation considers that if this contention were conceded it would render potentially subject to Japanese law and jurisdiction the claim of Japanese subjects to use in China any American trade-mark which they might find it expedient to adopt by registration at home and would effectually annul the only protection for American industrial property rights which now exists in China.

The Legation is therefore instructing you to refuse to concede the right of your Japanese colleague to oppose any obstacle to the prosecution in the Mixed Court of the Chinese dealing in infringements of a trade-mark to the protection of which the American company is entitled by the Commercial Treaty of 1903. You should accordingly withdraw any objections which you have made to the Chesebrough Company’s prosecuting this case against the Chinese dealers.

In forwarding to the Department a copy of the present instruction, the Legation is endorsing your recommendation that an effort be made to bring to the attention of American exporters to this market the practical necessity of registering their trade-marks in Japan as a safeguard against infringements originating there.

I am [etc.]

Paul S. Reinsch.