China trade marks: Re-examining strategy on contentious registry matters
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China trade marks: Re-examining strategy on contentious registry matters

The 2013 amendments to the PRC Trade Mark Law implemented with effect from May 2014 brought increased hope for more consistent and positive results in actions against bad faith registry pirates. Unfortunately, the decisions issued over the past year by the Trade Mark Office (TMO) have so far generally failed to live up to the promises set out in the amended law.

The amended law removes the possibility of appealing unfavourable TMO opposition decisions. This leaves an aggrieved brand owner the option of filing an invalidation action with the Trade Mark Review and Adjudication Board (TRAB) to eliminate the pirate registration. Thus, unfavourable decisions from the TMO have generally resulted in greater cost to victim brand owners, and also to even higher demands by pirates for compensation for negotiated assignments.

Given the prevailing trend in TMO decisions, victim brands may in some cases want to consider foregoing oppositions and instead filing invalidations with the TRAB, the decisions of which over the last year have been more positive and consistent.

Hopes suspended

The amended Law was expected to assist victim brand owners in dealing more predictably with bad faith registration through several new provisions, including those that prohibit filings by parties with a prior relationship or business dealings with the victim brand and by trade mark agencies for other brands and outside the scope of the agency's services, and those offering added protection where the mark is connected to a copyright work. The Supreme People's Court (SPC) issued a set of draft provisions for public comment in October 2014 that would have clarified ambiguities in the amended law and also introduced clearer criteria for the application of public policy provisions against serial pirates (see Managing IP, December 2014). However, the SPC's draft provisions have not yet been issued, thus leaving the courts (and thus indirectly the TMO and TRAB, whose decisions would be appealed to the courts) without guidance on the handling of more difficult bad faith cases.

Unfavourable decisions are also seemingly the result in many cases of a lack of greater care in the review of arguments and evidence, caused in part by the arrival of many new staff members at the TMO and the imposition by the new law of twelve-month deadlines for deciding cases in the first instance.

Given the foregoing, pirates appear to be continuing to file applications for marks of others with abandon. The only exception relates to bad faith applications by trade mark agencies, but it is now just assumed that they are using proxies to file while controlling the mark behind the scenes.

Foregoing oppositions?

The PRC Trade Mark Law mandates that if a mark is opposed unsuccessfully, a registration certificate will be issued and the registration could then be invalidated within five years. To minimise costs, and in light of the inconsistency in recent TMO decisions, some brand owners are now considering the strategy of foregoing oppositions and instead are filing invalidations directly with the TRAB soon after the pirate mark registers.

This strategy makes particular sense if there are clear indications that the pirate is not likely to use the mark, or sell it to another who might. It also makes sense if the victim brand owner does not need to eliminate or purchase the registration to support its own immediate business needs.

It should of course be remembered that oppositions can help in deterring use by pirates, both in the short and long term. Thus, it is typically advisable to have an investigator visit the pirate to help in assessing the risk of use commencing in the absence of an opposition.

Help on the way?

SPC officials recently indicated that work is continuing on the drafting of the above-mentioned provisions on bad faith registrations. While the October 2014 draft is not a panacea, and although the SPC cannot in fact legislate, the provisions should help to a degree in eventually improving the quality and consistency of TMO (as well as TRAB) decisions, which probably only will happen after the TRAB has lost a number of judicial review cases in the courts.

Planning for court appeals

The TRAB has enjoyed a reputation for more careful and professional handling of bad faith cases as compared to the TMO. However, the current backlog of cases and lack of guidance on the handling of bad faith registrations has created pressure on the TRAB and affected the consistency of its decision-making as well.

As a result, trade mark owners will need to be prepared to file appeals of TRAB decisions to the Beijing Intellectual Property Court, and to budget accordingly. Alternatively, consideration can be given to filing fresh invalidations in response to unfavourable TRAB decisions, provided however that the victim brand is able to present new (and persuasive) arguments and/or evidence. Such new arguments may well be available once the SPC issues the final version of the provisions on bad faith cases.

SIPS Hong Kong

Lockhart Road No 3

Wanchai, Hong Kong

China

mail@sips.asia

Tel: +852 2866 6400

Fax: +852 2866 6408

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