This content is from: China (PRC)

Determination of bad faith in malicious trademark registrations

Jie He, Jingjing Wu and Xia Zheng of AFD China Intellectual Property Law Office discuss trademark registrations and the obstacles to overcome to establish a successful trademark environment

Trademark serves as an identifier of the source of goods or service and reflects the reputation of a business and the quality of the products and services.

The increasing awareness for brand establishment and protection has stimulated the demand for trademark registration applications and the trademark trading market has boomed. However, there are also some people, who are not business operators, but usurp this opportunity to rush register and hoard trademarks of others for profit.

In practice, normal business operators, the true brand owners and right holders, often found that trademark applications were being blocked by malicious registrations, meaning that a lot of time and money was spent overcoming the obstacles of the prior rights of these registrations.

In China, the criteria for determining malicious trademark registration was set in the Standards of Trademark Examination and Adjudication as early as 2009. However, at that time the standard was relatively high, requiring "sufficient evidence" to prove that "the trademark registrant knew or should have known that the trademark it applied for has been prior used by others, that its conduct has violated the principle of good faith, infringed on the legitimate rights of others and disturbed the market order of fair competition".


"The increasing awareness for brand establishment and protection has stimulated the demand for trademark registration applications"


To succeed in the claim of bad faith, the true right holder would need to submit sufficient evidence to prove that the registrant was acting in malice or negligence when applying for the trademark.

However, in most cases, the true right holder knows nothing about the registrant or his subjective status. Therefore, it was very difficult to meet the standard of proof of bad faith, unless the true right holder could obtain evidence of malice or negligence through some specific relationships with the registrant, e.g. agency relationship, trade contacts.

The unreasonably high standard of proof made it quite difficult for the true right holders, especially foreign applicants, to safeguard their rights in China.

Foreign brands emerging in overseas markets, but are not yet known to the Chinese public, are the easiest targets of malicious registrants. Since these foreign brands have not yet gained popularity in the relevant Chinese markets, it is difficult to say that rush registrations of such brands constitute an act of "registration by improper means of a trademark already used by others that has certain influence" under Article 32 of the Chinese Trademark Law. Therefore, foreign applicants often find themselves caught in a dual dilemma.

On the one hand, applicants are not able to register trademarks without first removing the obstacle of prior malicious registrations. While on the other hand, due to the high standard of proof, it is difficult to remove this obstacle in a legal manner, i.e. opposition or declaration of invalidation procedure.

In view of the above difficulties, it is recommended that true right holders collect all types of evidence that might indicate the subjective state of the malicious registrant.

For example, if a domestic applicant applies for a number of trademarks in foreign languages with strong distinctiveness, then the applicant is probably suspected of plagiarising foreign brands. If an applicant applies for or transfers a large number of trademarks in a short period of time, or applies for trademark in various international classes, then the applicant probably does not intend to use the trademarks but to hoard them for sale.

To prove the mental state and improper means of the malicious registrants, the true right holders are also advised to prove that the bad faith behaviour would have 'adverse effects' under Article 10(1)(8) of the Trademark Law.

Case analysis

In opposition against the trademark 'Arran Aromatics' (No.6786641), the opposed party applied for over 600 trademarks designating goods and services in more than 20 classes. A large number of trademarks contain words in different foreign languages, similar to many foreign brands including the brand of AFD's client.

However, as AFD's client's trademark was not widely known in China, the Trademark Office found that there was a lack of sufficient evidence of malicious plagiarism or imitation of trademarks previously used by others with certain fame.

In the subsequent review procedure, AFD emphatically demonstrated the irrationality of the act of the opposed party by referring to its historical registrations, which clearly indicated an intention of seeking unlawful profits.

AFD referred to the "adverse effects" of the applicant's behaviour that it has seriously disturbed the order of trademark registration and would have a continued negative impact on society. In the final decision, the Trademark Review and Adjudication Board accepted AFD's claim on "adverse effects" and ruled that the opposed trademark was not approved for registration.

However, since the "adverse effect" clause itself is also an umbrella clause, there lacks a specific standard of application and it was applied very cautiously by the trademark examiners in real practice. Therefore, in many cases, foreign applicants still have to overcome the malicious registrations by other means, such as a trademark assignment or cancellation based on non-use for three consecutive years.

Standards of Trademark Examination and Adjudication

In December 2016, the new Standards of Trademark Examination and Adjudication was jointly issued by the Trademark Office and the Trademark Review and Adjudication Board. This is the version currently in effect. The new criteria to determine malicious registration has been refined, and according to the new standard "improper means" can be presumed in the circumstances shown below.

  • Where the registrant applied for a number of trademarks that are identical, or similar, to other trademarks of strong distinctiveness;
  • Where the registrant applied for a number of trademarks that are identical, or similar, to trade names, business names, or unique names, packing and decoration of well-known goods of others;
  • Where the registrant hoards a large number of trademarks without genuine intention to use; and
  • Other circumstances which may be determined as improper means.

The above-mentioned provisions are still vague, for example, the terms "a number of" and "a large number of" do not have a scope, nor can be determined by reference to other criteria. However, they are much more specific than the 2009 criteria.

In AFD's experience, if the following circumstances are found during an opposition or invalidation procedure, the applicant or registrant is usually considered to have the subjective intent to imitate and plagiarise the trademark of others:

  • The applicant applies for registration of a number of trademarks similar to others, and many of its applications are refused by the Trademark Office or challenged by true right holders due to the high degree of similarity; or
  • The applied trademark is of strong distinctiveness and is substantially similar to a trademark previously used by others in China, even it is not well known in China, and the applicant is unable to provide a reasonable explanation on its purpose of application and inspiration of the design.

With the refinement of the standard of malicious registration, the new regulations provide a reliable legal basis for claiming bad faith of those applicants who applied for a number of trademarks but lack genuine intention to use the marks in business operation. There is strong support for the true right holders, especially owners of foreign brands, to safeguard rights and interests.

Amendment of the Trademark Law

In April 2019, the 10th session of the 13th National People's Congress issued a decision on the amendment of the Trademark Law, in which it added to Article 4 a provision stating that "trademark applications made in bad faith not for the purpose of use shall be refused".

The amendment reflects the legislator's firm belief on cracking down malicious trademark registrations and makes it that the fundamental purpose of registering a trademark is to 'use' it in daily business operations.

The added provision emphasises the distinction between the act of registering trademarks for the needs in production and business activities, and the act of registering trademarks not for use but for improper profits.

The regulation also requires the trademark authorities to move the timing of cracking down malicious registrations forward, i.e. to suppress malicious applications by placing stricter scrutiny at the examination stage.

It means that, in addition to the opposition and invalidation procedures initiated by the true right holders or interested parties, the Trademark Office can begin to take effective measures to monitor and crack down on malicious registration at the stage of trademark application examination. To a certain degree, it effectively curbs the rush registration of trademarks and significantly lightens the burden of the true right holders.


“the Trademark Office can begin to take effective measures to monitor and crack down on malicious registration at the stage of trademark application examination”


On December 1 2019, the Provisions of the Regulation on Trademark Application came into force. Under Article 3, the act of "applying for trademark registration not for the purpose of use" is listed as the first prohibited act that would result in refusal on application.

In a conference on the above-mentioned provisions, the Chinese National Intellectual Property Administration (CNIPA) demonstrated to the public the general practice of trademark registration authorities in determining malicious registrations.

Examiners take into consideration various factors such as using the trademark examination system to inquire about the applicant's historical applications, trademark transfers and other related matters; screening for well-known trademarks and items prohibited for registration; inquiring about the business records of the applicant in the enterprise information publicity systems to detect illegal activities.

In addition, if the examiner considers that the applicant is suspected of maliciously applying for or hoarding trademarks, the examiner may ask the applicant to provide an explanation on its suspicious behaviour.

To better exercise the notion of the new law, in practice AFD tries to report clues of malicious applications to the CNIPA when they are still pending examination. This practice can help the examiners identify and refuse registration of the malicious applications at the examination stage, thus providing a faster solution for the true right holders whose trademarks could potentially be blocked by these malicious applications.

AFD's attempt accords with the legislator's purpose of cracking down on malicious registration at an earlier stage, and it helps to reduce the administrative burden.

In addition, in practice a trademark application is often linked to other related cases, of which the outcome depends on the status of the trademark. Therefore, to ensure that a malicious application is refused at the stage of examination is very beneficial to the fact determination in the related case. It could help avoid lengthy subsequent procedures or even administrative proceedings, lightening the burden on the relevant parties by reducing the excessive consumption of time and expenses.

In the network era, data retrieval is getting easier and the trademark examination system is much more advanced. Loopholes from the past have been fixed making it more difficult for malicious registrants. However, as the Chinese idiom goes, "virtue goes one feet up, the devil goes ten". To circumvent the examination, bad faith applicants are getting more 'sophisticated' and the malicious applications are becoming harder to detect.

For example, the applicants pick foreign brands that have not yet entered the domestic market of China as a target. Trademarks are registered under the names of relatives, friends or affiliated companies, so the total number of applications would be diluted. The fact that the original application is made in bad faith would be concealed by assigning the trademark to different parties for multiple times. Some malicious applicants also slightly modify the trademark of others, or add some commonly used non-distinctive elements to form a new trademark, so as to increase the difficulty of a similarity check.

In summary

To eliminate the malicious registrations that are overlooked, it is still necessary for the right holders or interested parties to timely initiate an opposition or declaration of invalidation against them.

It takes the efforts of both administrative authorities and the relevant public to maintain a healthy and stable order of the trademark registration. Administrative authorities should carry out duties actively to improve the administrative efficiency, while the right holders are better to firmly hold the weapons of law to safeguard legitimate rights and interests.

As long as we constantly say 'no' to unlawful activities, AFD's experience accumulated through law practice will continuously influence on legislation, which in turn will curb the malicious trademark registration in a more comprehensive way.

By increasing the cost of violation, defining the illegal behaviour precisely, and shrinking its boundary, market conditions will continuously improve. Also, if full play is given to the role of public supervision and enhance the law-abiding consciousness of citizens, there will be no hiding from illegal acts.

It is AFD's hope that through the continuous efforts of the whole society, registered trademarks can truly represent the value and vitality of business enterprises and become the symbol of trustworthiness.

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Jie He

Associate
AFD China Intellectual Property Law Office
T: +86 10 8273 0790
E: info@afdip.com

Jie He is an associate at AFD China Intellectual Property Law Office. Her areas of expertise include legal research, dispute resolution, and IP consultation for a diverse array of domestic and overseas clients.

Jie received her bachelor's degree from the China University of Political Science and Law. She obtained a JD degree from Lewis & Clark Law School.


Jingjing Wu

Manager
AFD China Intellectual Property Law Office
T: +86 10 8273 0790
E: info@afdip.com

Jingjing Wu is a manager at AFD China Intellectual Property Law Office. She specialises in patent prosecution, trademark prosecution, protection and enforcement, other IP protection related to domain name, trade secret, anti-unfair competition and copyright, and IP administrative lawsuits and litigation.

Jingjing is a member of the All China Patent Attorneys Association and a patent litigation attorney, admitted before the Supreme People's Court of China in 2013.

Jingjing graduated from Tianjing University with bachelor degrees in chemical engineering and LLB, and began practicing IP law in 2002.


Xia Zheng

President
AFD China Intellectual Property Law Office
T: +86 10 8273 0790
E: info@afdip.com

Xia Zheng is president and founder of AFD China Intellectual Property Law Office. She is a patent attorney, trademark attorney and attorney at law specialising in IP strategy, prosecution, post-grant proceedings and IP-related litigation.

Xia participates actively in the industry and is recommended as leading practitioner by numerous publications. She was named as a National IP Talent in 2016, Beijing Outstanding Patent Attorney of 2014 and an Excellent Legal Professional of Haidian in 2012.

Xia has a master's degree in IP from the University of New Hampshire.

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