China trade marks: How to protect what’s yours

Although the amended Trademark Law has a new provision on "the principle of honesty and credit" under Article 7, by nature of its generality and flexibility, it is generally not taken as a direct basis for making rulings on opposition and invalidation cases, but is subject to discretion in practice. Article 41 (1) contains the provision on "…obtaining registration through other improper means," but applicable scope was not legally defined. We need to find additional supports from typical cases or guiding opinions by the High Court or judicial interpretation of the Supreme Court. China is not a case law country, at the stage of administrative examination before the Chinese Trademark Office (CTMO) precedent cases are not persuasive, let alone binding. Therefore, facing many obvious pirate applications/registrations, the true owners are not able to find quick recourse before CTMO. Since there has yet to be effective and efficient methods to get back their rightful rights other than by trade mark assignment, if they do not opt to pay exorbitant fees as compensation they have to rebrand for the Chinese market resulting in a heavy burden. This has become a big issue against judicial efficiency and justice, and also has perplexed many American and European trade mark owners thus far.

We observed that pirate applications/registrations are not always vulnerable in China for at least the following three reasons:

1. Principle of "first-to-file" without any requirements as to actual or true intention-to-use. Marks of others may be approved for registrations so long as they conform to application procedures only.

2. In determining whether a pirate mark was illegal, CTMO takes too much into account of whether the pirated mark has become well-known before the pirate mark's filing date.

3. The law does not prohibit or limit re-filing for a pirate trade mark which is already subject of a going-on opposition or other legal procedures. When we are fighting against a pirate trade mark, it is quite possible that the exact same mark, which is applied for registration again, would have been approved for registration by the Trademark Office without being noticed.

Under the circumstances, how can the true owners make effective use of legal settings, seek legal supports and fully protect its rights? In general, the following two ways can be effective at present:

1. Do not stop at the opposition proceeding before the CTMO, but go up further to take full advantage of appeal and judicial proceedings

The feature of administrative management and control is mostly reflected at the stages involving the Trademark Office, i.e. setting up limitation requirement on quantity of opposition evidence, specifically, key evidence may be submitted in paper, but must be limited to within 200 pages; other evidential materials must be submitted in electronic form. However, examiners have at the same time clearly expressed that internal electronic system of the Trademark Office is not advanced enough to support convenient reading and perusing electronic evidence. Apparently, the opponents are not encouraged to submit too much evidence, which is highly administrative management and control in nature. In this context, it is hard to expect fair rulings that go beyond the basic principle of first-file and sub-class protection which would not require more evidence to consider.

However, when it comes to appeal and judicial proceedings, balance between the principle of first-file and sub-class protection and respect for "honesty and credit" are factored in, legislative intent and standard of application of law as well as the reasoning in adjudication of similar precedent cases would be taken into account so that rulings have become fair in a sense of better combination of legal rational and common people's perception in real world. Therefore, the right to appeal before judicial courts should not be waived in order to acquire protection for what's actually yours. In reality, having been frustrated with the impartiality in opposition decisions, most true owners have chosen not to enter the judicial proceedings, which is actually voluntary giving up good chance of probable success.

In light of the above, different from the legal practice in US and European countries of encouraging amicable settlement before court proceedings, in China, fairness and justice oftentimes are realized after entering into judicial proceedings.

2. Taking full advantage of 3-year non-use cancellation proceedings

In most cases, pirate registrations aim not for true and actual use, but to hoard and then offer for sale. Therefore, true owners may choose to initiate the three-year non-use cancellation action instead of invalidation proceedings claiming bad faith. In non-use cancellations, onus of providing use evidence is totally with the trade mark registrant. This is a more efficient way with high success rate.

It is noteworthy that trade mark pirate may lodge malicious infringement prosecution in three-year period before it opens for cancellation. In such cases, the true owners should not necessarily panic, because they may establish a reasonable defence based on the nature of bad faith registration. Even if the infringment was affirmed, there would be no compensation and/or penalty to the true owners due to absence of actual uses by pirate.

Yuguang Wei

Liu Shen & Associates10th Floor, Hanhai Plaza (1+1 Plaza)10, Caihefang Road, Haidian DistrictChinaTel: +86-1068681616Email: mai@liu-shen.com