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23 December 2019
On 23 April 2019 the National People's Congress of China adopted a revised version of the Trademark Law, modifying several articles. In particular, Article 4 now reads as follows:
Any natural person, legal person or other organization that needs to obtain the exclusive right to use a trademark for its goods or services during production and business operations shall apply for trademark registration with the trademark office. Any bad faith application for the registration of a trademark that is not intended for use shall be rejected.
The concepts of good and bad faith were originally referred to in several articles of the Trademark Law, including:
The Supreme People's Court has provided guidance (Judicial Interpretation of 2017) on how to assess whether a trademark applicant has used "other unfair means" under Article 44 of the Trademark Law – namely, it is necessary to consider (for example) the cited trademark's reputation, the applicant's reason for filing the litigious trademark and the trademark's use status.
The above points concern situations where a trademark applicant acts in bad faith to the prejudice of a prior trademark owner (whether registered or not).
According to the revised Article 4 of the Trademark Law, rather than being connected to any prior rights holder, the concept of bad faith is linked to a lack of intention to use a trademark, which can be construed as an extension of the concept of 'need', added in the preceding sentence by the previous revision.
The questions that inevitably arise include:
On 16 October 2019 the State Administration for Market Regulation (SAMR) published Certain Provisions for Regulating Applications for Trademark Registration. Article 8 of the regulations, which focuses on how to ascertain whether a trademark application breaches Article 4 of the Trademark Law, distinguishes three categories of fact that the trademark authority should consider:
This third category refers to relative grounds (ie, situations normally handled via opposition or invalidation procedures based on Article 33 or 45 of the Trademark Law).
However, it is unclear whether each of the above categories should be considered separately or combined. For example, it seems that a large number of trademarks filed by a person who has no business activity should be sufficient, but should the additional circumstances described in the second and third categories also be proven?
In any event, what is definitively new is that the examiner of the National Intellectual Property Administration now has the power to refuse, ex officio, the registration of trademarks that obviously fall under the above definitions.
Further, under the revised Article 4 of the Trademark Law, any person may request the invalidation of such a trademark at any time if it can be argued that the trademark has been filed "in bad faith without intention to use". Since the words 'any person' cover prior rights holders, such owners should now be able to initiate invalidation proceedings – in addition to Article 45, which restricts the possibility for invalidation to five years after the registration of the trademark unless the prior rights holder owns a well-known trademark and the trademark to be invalidated was registered in bad faith.
Recent cases before the European Court of Justice (ECJ) have dealt with similar issues and provide for an interesting comparison.
On 16 October 2019 – the same day as the promulgation of the SAMR regulation – the ECJ Advocate General Evgeni Tanchev delivered an opinion in Sky International AG v SkyKick UK Limited (C-317/18). The case concerned whether Sky International's application to register the word 'Sky' as a trademark designating an entire category of computer software has been made, at least partially, in bad faith, despite the company's intention to use the mark on only some of the products listed in this highly diverse category.(1)
Tanchev clearly considered that Sky International's application to register a trademark covering a large range of products, without intending to use the trademark for all the products, constituted bad faith: "the applicant is improperly seeking a monopoly to exclude potential competitors from using a sign he has no intention of using. That amounts to an abuse of the trademark system" (Paragraph 114).
However, the ECJ's conclusion was slightly less affirmative:
In certain circumstances, applying for registration of a trade mark without any intention to use it in connection with the specified goods or services may constitute an element of bad faith, in particular where the sole objective of the applicant is to prevent a third party from entering the market, including where there is evidence of an abusive filing strategy, which it is for the referring court to ascertain. (Emphasis added.)
China is facing a proliferation of trademark filings, while the European Union deals with relatively few individual conflicts between trademark applicants. However, a comparison of Chinese and EU case law shows that, despite the use of the same terms, the two jurisdictions take quite different approaches to bad-faith trademark applications. Nevertheless, recent ECJ clarifications on this matter will be useful when assessing future conflicts in China.
Bad faith should be assessed objectively, keeping in mind that it is a subjective factor. Therefore, it is necessary to determine an applicant's intention.
For instance, filing a trademark designating products or services for which the applicant has no intention of exploiting does not automatically mean that their intention is to abuse the trademark system. The applicant may legitimately wish to prevent competitors from taking advantage of their trademark's reputation – whether said mark has already been acquired or will be acquired in future – by occupying categories of products or services relating to the trademark's core activity. This is the concept of 'defensive trademarks', which remains useful as long as the core trademark's reputation is not sufficient to claim the status of a well-known trademark.
Even Tanchev seems to agree:
the fact that the applicant has applied for registration of the trade mark in respect of a broad range of goods or services is not sufficient to demonstrate bad faith if the applicant has a reasonable commercial rationale for seeking such protection in the light of his use or intended use of the trade mark. (Paragraph 109; emphasis added.)
Of course, he said also, when an applicant files an application for registration of a trade mark without any intention to use it, the rationale for the application for registration falls away. (Paragraph 110.)
The EU appears to adopt a stricter criterion in assessing bad faith, leaving little room for the practice of defensive trademarks. In China, the defensive practice appears to be a guiding factor when determining the legitimacy of a trademark application, but said trademarks remain subject to cancellation in case of non-use. The main challenge is the bad-faith strategy of applying to register many different trademarks without the aim of using them. In this respect, the recent revision of the Trademark Law gives hope that such a highly prejudicial phenomenon will be progressively eradicated.
For further information on this topic please contact Hui Huang or Paul Ranjard at Wanhuida Intellectual Property by telephone (+86 10 6892 1000) or email (email@example.com or firstname.lastname@example.org). The Wanhuida Intellectual Property website can be accessed at www.wanhuida.com.
(1) A few weeks before the Sky decision, the ECJ had adjudicated Koton Magazacilik Tekstil Sanayi v Ticaret AS and M Joaquin Nadal Esteban (C-104/18 P) which, among other things, provided a clear definition of what constitutes bad faith in a trademark application:
Consequently, the [bad faith] applies where it is apparent from relevant and consistent indicia that the proprietor of an EU trade mark has filed the application for registration of that mark not with the aim of engaging fairly in competition but with the intention of undermining, in a manner inconsistent with honest practices, the interests of third parties, or with the intention of obtaining, without even targeting a specific third party, an exclusive right for purposes other than those falling within the functions of a trade mark, in particular the essential function of indicating origin recalled in the previous paragraph of this judgment (par.46). The intention of an applicant for a trademark is a subjective factor which must, however, be determined objectively. (Emphasis added.)
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