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Tackling Bad Faith Trademark Applications or Registrations in China – Part I

2021-06-04

Tackling Bad Faith Trademark Applications or Registrations in China – Part I

by Yan Zhang, Miao Tian & Austin Chang

In this series, we are going to share our insights on how to best deal with bad faith trademark applications, a constant headache for foreign brand owners due to China’s first-to-file system. We will begin with the relevant stipulations in the Chinese Trademark Law of China (2019 Version) (“Trademark Law 2019”), the required factors when applying the laws, the current trend in tackling bad faith trademark applications or registrations, and finally demonstrate how to tackle the bad faith trademark applications or registrations with our successful cases.

1. Overview of the relevant stipulations in the Trademark Law 2019

We will start with an overview of the relevant portions of the provisions in the Trademark Law 2019.

Article 4

A malicious application for trademark registration not filed for the purpose of using the trademark shall be refused.

Article 7.1

The good faith principle shall be upheld in the application for trademark registration and in the use of trademarks.

Article 44.1

A registered trademark shall be declared invalid by the Trademark Office if […] its registration is obtained by fraudulent or other improper means. Other entities or individuals may request the Trademark Review and Adjudication Board to declare the aforesaid registered trademark invalid.

These are the key articles that shall be applied when the CNIPA (“China National Intellectual Property Administration,” formerly the Trademark Office and Trademark Review and Adjudication Board) and the courts (Beijing Intellectual Property Court and Beijing High People’s Court) establish a bad faith case.  Typically, at the opposition stage, examiners tend to apply Articles 7, while Article 44.1 is commonly invoked in invalidation actions; and we expect to see more application of Article 4 after the amendment of the Trademark Law 2019 that explicitly added the requirement of “intention to use” for filing trademark applications. Different from the CNIPA, the courts tend to apply Article 44.1 not only to invalidate registered trademarks, but also against applications pending in opposition proceedings. In recent years, there has been an increasing reliance on Article 44.1 in cases where the applicant squatted quite a number of others’ famous marks.

2. The required factors when applying the bad faith clause

Following the relevant laws regarding bad faith trademark applications and registrations, we will move onto the required factors when applying the bad faith clause.

First, the Beijing High People’s Court Guidelines for the Trial of Trademark Right Granting and Verification Cases specify what constitutes a bad faith application without intent to use provided in Article 4 and “other improper means” provided in Article 44.1 of the Trademark Law 2019.

Section 7.1 – Application of Article 4 of the Trademark Law

If any trademark applicant obviously lacks the true intent to use and falls into any of the following circumstances, this applicant may be determined to violate the provisions of Article 4 of the Trademark Law 2019:

(1) applying for registration of the trademark identical with or similar to that of various subject with certain popularity or higher distinctiveness, which is regarded as a serious circumstance;

(2) applying for registration of the trademark identical with or similar to that of the same subject with certain popularity or higher distinctiveness, which is regarded as a serious circumstance;

(3) applying for registration of the trademark identical with or similar to any other commercial signs other than trademarks of others, which is regarded as a serious circumstance;

(4) applying for registration of the trademark identical with or similar to any name of place, scenic spot, building and others with certain popularity, which is regarded as a serious circumstance; or

(5) applying for registration of a large number of trademarks without good reasons. If the trademark applicant above claims that he has the true intention of use, but fails to present the relevant evidence, this claim shall not be supported.

Section 17.3 – Determination of specific circumstances of “other improper means” relating to the application of article 44 of the Trademark Law 2019

A trademark under any of the following circumstances may be determined to fall under the circumstances that “the registration is obtained by other improper means” provided in Article 44.1 of the Trademark Law 2019:

(1) the trademark applicant in dispute applies for multiple trademark registrations which are identical with or similar to others’ trademarks with higher distinctiveness or popularity, including the application for trademark registrations of different owners on identical or similar goods or services and also the application for trademark registrations of the same owner on non-identical or dissimilar goods or services;

(2) the trademark applicant in dispute applies for multiple trademark registrations which are identical with or similar to any other corporate names, names of social organization, the names, packaging, decoration and commercial signs of goods with certain influence; or

(3) the trademark applicant in dispute sells the trademark, or file an infringement lawsuit against the users of the prior trademark after failing to transfer at a high price.

The guidelines explicitly provides that bad faith will be inferred where a squatter targets different trademarks belonging to a particular trademark owner. This will significantly improve the applicability of Article 44.1 and turn it into a powerful weapon against those “sophisticated” squatters who copy various trademarks owned by a particular trademark owner instead of different owners.

Second, the State Administration for Market Regulation also published Several Provisions for Regulating Applications for Trademark Registration, which set parameters for determining bad faith practices and bad faith applications for trademarks that are not intended for use, such as number of trademarks applied, classes of trademarks applied, transaction records of trademarks, business operation of the applicant, effective rulings on infringement or bad faith registration, and among other things.

To sum up, if the owner or applicant of a target mark fits any or all of the below circumstances, it is recommended that brand owners considering taking actions safeguarding valuable intellectual property assets.

  • hoarding of massive trademarks in various un-related classes;
  • applying for many trademarks identical with or similar to multiple business signs with certain popularity or high distinctiveness;
  • applying for a large number of trademarks within a short period of time and obviously beyond reasonable; or
  • having been found of being a squatter in earlier trademark cases.

Note, however, among the said circumstances, there is not yet a definition for “a large number” or “severe circumstances.”

In practice, we find that when performing a comprehensive assessment in establishing bad faith, some interdependence among the said relevant factors usually occur.  For instances, a relatively small number of trademark filings may be offset by 1) a greater degree of earlier marks’ distinctiveness, 2) a greater degree of the proprietaries’ fame; 3) a closer distance of two parties’ domicile, 4) a closer relatedness of the two parties’ lines of business, 5) a higher level of association of the professionalism of the designated goods or services, etc.

Further, the CNIPA published in March 2021 the Notice on Special Initiative on Cracking Down on Malicious Trademark Squatting (“Notice”), which states that the CNIPA is striving to combat the seven circumstances of malicious trademark squatting which aim at obtaining improper interests, disturbing the trademark administration order, and causing detrimental social impacts. One of the methods to reject bad faith applications is adopting a “fast rejection mechanism” when there are suggestive indications that the applications was filed in bad faith during the trademark application process. Likewise, during oppositions and cancellations, if there are suggestive indications of bad faith, these cases would be prioritize or joined for expedited examination to reject or invalidate those marks.

The Notice shows the CNIPA’s firm standpoint to combat squatting, and from the recent opposition and invalidation decisions, we see a trend in compliance with such determination.

While we will share CNIPA decisions and court judgments applying the bad faith clauses, we set here some drops in the bucket. Spoiler alert!

  • At substantial examination stage, the CNIPA refused an individual’s applications by finding that his behaviors of filing fifteen applications in two days, totaling thirty applications as “obviously exceeding regular business needs” and “should be considered as malicious trademark applications not for the purpose of use”;
  • In an opposition case, the CNIPA found the opposed party “in violation of the legislative intent of securing registration by improper means” when the opposed party has four marks in total;
  • In an invalidation action, after the CNIPA already supported the proprietor under Article 30 of the Trademark Law 2019 (similar marks used on similar goods/services), it further invoked Article 44.1 and affirmed the applicant’s bad faith because it domiciled close to the proprietor and had applied seventeen marks similar to the proprietor’s mark.

Enough for this week, follow us and stay tuned for more cases in the upcoming issues!

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