Clarifying questions of use
Fabio Giacopello of HFG Law & Intellectual Property explains what brand owners need to know about trade mark use in China
The new Trade Mark Law of the People Republic of China (TML), which was promulgated in August 2013 and entered in force on May 1 2014, provides for several circumstances in which the use (or non-use) of a trade mark has legal relevance.
As a general point we have observed that the TML has enlarged and deepened the relevance of use or non-use, either to add certain special rights to intensively used trade marks or to eliminate certain rights for non-used trade marks.
It is worth mentioning that for several years under the old Trade Mark Law, the first-to-file principle (in contrast with the principle of first-to-use) applied with little mitigation. Filing and registration was the king, while little relevance was given to use. The new TML enlarges the circumstances in which use is regarded as relevant.
"The new TML enlarges the circumstances in which use is regarded as relevant"
First of all, attention shall be paid to Article 48 of the TML, which describes what should be regarded as use of a trade mark in China. The article has been newly added to the Law, but is not new to the trade mark system. A similar provision was already contained in Article 2 of the old Implementing Regulations to the Law. What is definitely new within Article 48 is the sentence "as to distinguish the origin of goods":
The use of a trade mark, as referred to in this Law means the use of the trade mark on goods, packages or containers of the goods or in trading documents or the use of the trade mark in advertising, exhibition or any other business activities so as to distinguish the origin of goods.
Without trying to list and examine all the circumstances in which use is relevant, we will briefly review a few provisions which have recently come to our attention.
1) The trade mark shall be applied and used in good faith (Article 7 TML).
2) Use as key factor in determining well-known trade mark status (Article 13-14 TML).
3) Trade marks that have already been used by a different party (Article 15.2 TML).
4) Trade marks filed on the same day (Article 31 TML).
5) A trade mark not being in use for three consecutive years (Article 49 TML).
6) Rights of prior use with certain influence (Article 59 TML).
7) Trade marks not in use are not awarded with damages (Article 64 TML).
8) Trade mark used only for manufacturing and export (OEM).
Use in good faith
Many observers noticed that the new law introduces into the Chinese trade mark system –explicitly and for the first time – the concept of good faith. Fewer people have commented on the fact that such good faith, which is never precisely or even roughly defined in the law, is required not only at the moment of application but even when using the trade mark. Article 7 states: "When applying for the registration of a trade mark and using a trade mark, the principle of good faith shall be followed."
This provision is often regarded as a general clause which cannot be directly applied by judges or administrative authorities. In any case, this provision can clarify and strengthen the protection provided by other articles of the law.
Use and well-known status
When the trade mark becomes well-known to the public it enjoys certain additional rights that a normal (not well-known) trade mark does not enjoy. In particular, it is worth highlighting that weight is given to the use of the trade mark in the assessment of its well-known status.
According to Article 14 of the TML, reputation, use, publicity, protection and records are the four key factors to consider when judging whether a trade mark is well-known. In addition to the explicit mention of use, publicity might be considered a form of use, enforcement is a form of use and reputation is definitely created by use. In other words use is the key to becoming a well-known trade mark. Article 14 states:
The following factors shall be considered in determining a well-known trade mark: (1) reputation of the trade mark in the relevant sector of the public; (2) duration of use of the trade mark; (3) duration, degree, and geographical scope of any publicity for the trade mark; (4) history of protection of the trade mark as a well-known trade mark; and (5) other factors contributing to the reputation of the trade mark.
Trade marks that have already been used
Article 15.2 of the TML states that if a subject that is related to another subject who has used a trade mark on a prior date files a trade mark for registration, the trade mark shall not be granted and use is prohibited:
Where a trade mark for which a registration is applied is identical or similar to a prior used trade mark of another party that is not registered, in respect of the same or similar goods, and where the applicant being of contract, business or other relationship except the relationship referred to in the preceding paragraph, is fully aware of the existence of the trade mark owned by the other party, the trade mark shall not be registered, if the other party raises an opposition.
It is important to note that the trade mark filed for registration by a related subject needs to have been in use at a prior date to enjoy the statute of right provided for in Article 15.2 of the TML.
Moreover, according to Article 18 of the Opinions on Several Issues Concerning the Trial of Administrative Cases Involving the Authorisation and Determination of Trade Mark Rights issued by the Supreme People's Court in 2010, such use shall be qualified by having obtained a certain influence. Article 18 of the TML states in full that:
According to the Trade mark Law, an applicant may not adopt illicit means to maliciously register a trade mark which has been used by others and has certain influence. If an applicant tries to do so when he is fully aware of or should have known the fact that the trade mark has been used by others and has certain influence, it shall be deemed that illicit means have been adopted. A trade mark which has been actually used and is known by the relevant public in a certain range in China shall be determined as one which has been used by others and has certain influence. A trade mark can be determined as having certain influence if there is evidence to prove that it has been used for a certain period of time or in a certain area or has a certain sales volume or number of advertisements. For a trade mark which has been used and has certain influence, it is not appropriate to protect it on dissimilar goods.
Trade marks filed on the same day
According to Article 31 of the TML, where two or more applications for identical or similar trade marks in respect of identical or similar goods are filed in the same day, the trade mark which is used the earliest shall be accepted and published.
Non use of trade marks
According to Article 49.2 of the TML, where a registered trade mark has not been used for three consecutive years without justified reasons, anyone may ask the Trade Mark Office to cancel the registered trade mark.
The three years are calculated starting from the date of filing the request for cancelation. The non-use shall be uninterrupted; therefore if during the relevant period the owner of the trade mark can prove a certain use even if for limited time, the trade mark shall not be cancelled.
Observers have noted that the aim of the provision is not to punish the owner who has not used the trade mark. The purpose of the law is to keep records clean in the registry from trade marks which have no chance of being used and therefore to give space to other entrepreneurs to use these trade marks.
Trade marks used only for export
In recent years a highly debated issue has concerned whether the use of a trade mark on goods manufactured in China and then exported to other countries, without any real circulation in commerce in China, should be regarded as use of a trade mark in the meaning of Article 52 (infringement) and Article 49.2 (non-use cancellation).
In relation to the first aspect, on December 4 2015 the Supreme People's Court took a clear position in the sense that the use of a trade mark on goods that shall be exported and not marketed to end consumers in China should not be regarded as trade mark infringement in the meaning of Article 52 of the TML. The case is known as Focker Security International v Zhejiang Yahuan Lockset or the Pretul case and is regarded as milestone case.
"Use is the key to becoming a well-known trade mark"
The reasoning of the Supreme Court was founded on the fact that in such OEM cases there is no circulation of the product in the Chinese consumer market and therefore the trade mark does not fulfil its main function, which is to distinguish the industrial source (as stated in Article 48 of the TML). But there is no clarity about whether a trade mark used in China for OEM shall be maintained or cancelled if another party files a revocation due to 3 years consecutive non-use.
We have read decisions from CTMO and TRAB in recent months which maintained that the trade marks were used only for OEM and not used in commerce to consumers. But we are aware of a decision from Beijing Court in which the judges clearly took a different stand.
The judge thought, according to Article 48 of Trade mark Law: "for the purposes of this Law, use of a trade mark means using a trade mark on goods, on the packages or containers of goods, in the trade documents of goods, or for advertisements, exhibitions, and other commercial activities for the purpose of identifying the origin of goods".
In addition the judge clarified that use of a trade mark should meet the following conditions: the user should be the right owner or a licensee; the trade mark use should consist of public market circulation; it should be used legally; the purpose of the use should be identifying the origin of the goods; the use should be normative (use the same trade mark in designated commodities).
The Pretul case will surely influence future decisions on trade mark infringement through OEM, but we will probably still see uncertainty in relation to OEM and non-use cancellations.
Rights of prior use
A previously used trade mark with certain influence on the relevant public can continue to be used within the original scope. This provision is newly included in the trade mark system by Article 59 of the TML and it represents an important mitigation of the strictly applied principle of first to file. Article 59.3 states:
Where, before a trade mark registrant applies for the registration of a trade mark, another person has used a trade mark that is identical with or similar to the registered trade mark in respect of identical or similar goods and has a certain influence, the proprietor of the exclusive right to use the registered trade mark shall have no right to prohibit the person to continue to use the said trade mark within the original scope. However, the proprietor of the exclusive right to use the registered trade mark may require the other person to add a proper distinguishable sign on his goods.
Refusal of damages
According to Article 64 of the TML, when a trade mark, for which an infringement action has been initiated, has not been in use in the previous two years then the defendant can ask to ascertain the circumstances and damages may not be imposed:
When the proprietor to exclusively use a registered trade mark requests compensation, but the accused infringer makes a defence on the grounds that the proprietor to exclusively use a registered trade mark fails to use the registered trade mark, the People's court may require the proprietor to exclusively use the registered trade mark to provide evidence that he has actually used the registered trade mark for three years before the legal proceedings is initiated. Where the proprietor fails to prove his actual use of the registered trade mark in the previous three years and fails to prove that he has suffered other losses from the infringing act, the accused infringer shall not be held liable for damages.
Fabio Giacopello is a co-managing partner of HFG Law & Intellectual Property, a Chinese law firm and IP agency. He has been widely recognised as one of the most valuable IP practitioners in China. He is the winner of a Client Choice Award by ILO in 2013, he is a 2015 IP Star according to Managing IP, a Notable practitioner by Chambers and Partners (trade marks & patents), lawyer of the year – Intellectual Property – China by Global 100 and he is a recommended lawyer in the Legal 500.
Fabio is a member of the Internet Committee at INTA and an arbitrator at the Shanghai International Arbitration Center (SHIAC, formerly CIETAC Shanghai). He has substantive experience in trade mark portfolio management, trade mark disputes and litigation and enforcement, including anti-counterfeiting. Fabio’s practice includes technology transfer, patent and trade secret litigations, and arbitration in relation to disloyal behaviour by employees.
Founded in 2003, HFG counts over 100 professionals distributed in Shanghai, Beijing and Guangzhou and represents clients at various levels before all state-level agencies, administrative and judicial authorities. HFG is a recommended practice by Legal 500 (no 1 in Shanghai) and by Managing IP.