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CHINA’S SUPREME PEOPLE’S COURT CLARIFIED CRITERION ON HEARING ADMINISTRATIVE CASES CONCERNING TRADEMARK GRANTING AND OWNERSHIP DETERMINATION


Posted by: China Sunbow & Associates
Practice Area: Trademark    Country: China    Publish Date: 04-Jun-2010

May 25, 2010

By Bill H. Zhang

 


On April 20, 2010, the China’s Supreme People’s Court (“Supreme Court”) issued an Opinion on Several Issues Relating to Hearing Administrative Cases Regarding Trademarks Granting and Ownership Determination (“Opinions”), which took into effect immediately. In the Opinion, the Supreme Court has clarified certain new criterion for hearing administrative cases involving trademark granting and ownership determination, specifically, clarified those important issues relating to (i) the impact of the massive use of the disputed trademark on its final granting and ownership determination; (ii) the registration of geographical names as trademark; (iii) the judgment on distinctiveness of the disputed trademark; (iv) the registration of commodity general names as trademark; (v) the special protection to well-known trademark; (vi) the intentioned registration of trademarks in bad faith; (vii) the judgment on the similarity on goods and trademarks; (viii) the protection to the prior trademark; and (ix) the cancellation of registered trademark. These newly clarified and established criterions will have a significant impact on the trademark protection strategies of foreign investors having registered trademarks and doing business in China. Foreign investors shall acquaint themselves with these new rules. This article tries to address these new rules and analyze its impact on trademark protection in China.

Background

Since the second revision to the Chinese Trademark Law[i], people’s courts have started accepting and hearing administrative cases regarding the relevant interested parties’ claims against the Trademark Review and Adjudication Board (“TRAB”) affiliated with the State Administration for Industry and Commerce for rejected trademark review, disputed trademark review, trademark dispute, trademark revocation review and other related administrative services. These are so called administrative litigation cases concerning trademark granting and ownership determination (“Trademark Administrative Cases”). Any interested parties, when dissatisfied, may initiate legal actions against TRAB’s decisions[ii]. Since TRAB is located within the area where the Beijing Intermediate No. 1 People’s Court have jurisdiction, such administrative cases are generally accepted and heard by the Beijing Intermediate No. 1 People’s Court as the first instance, the Beijing Higher People’s Court and the Supreme Court as the first or second instance, as the case may be. It is reported that the amount of the Trademark Administrative Cases has multiplied to 13 times within five years since the Beijing Intermediate No. 1 People’s Court accepted and heard the first similar case in 2002. In 2009, the Trademark Administrative Cases have accounted 40% of all the intellectual property cases of the Beijing Intermediate No. 1 People’s Court. It is also reported that the Beijing Intermediate No. 1 People’s Court accepted and heard 2,624 Trademark Administrative Cases from 2002 to 2009, and even accepted 555 similar trademark cases in the first quarter, 2010[iii]. With the sharp increase of the disputes relating to Trademark Administrative Cases, and also in order to better hear such cases, and standardize the trial criteria, the Supreme Court has called for a number of special meetings and conducted research to extensively collect advice from the people’s courts, authorities, experts and academics, and finally issued the Opinions to clarify the following important issues concerning Trademark Administrative Cases.

Impact of Massive Use of Disputed Trademark on Its Final Granting and Ownership Determination

The Opinions have set out an important criterion to the trial of Trademark Administrative Case, i.e. whether the trademark in question has been massively used. This will have a significant impact on the final judgment. According to the Opinion, when hearing Trademark Administrative Cases in which the disputed trademarks have not yet been massively used, people’s courts may take reasonably high standard for granting and determining ownership of the disputed trademark when examining and deciding whether the trademarks and goods are similar, and whether the disputed trademark conflicts with the prior trademarks. In such case, interests of consumers and other players in the industry must be fully considered. Improper prior registration must be effectively prevented. Interests of the highly recognized and distinctive prior trademarks, corporate names and other business marks must also be protected. For those disputed trademarks which have already been used for a considerable long period of time, enjoying relatively high market reputation and attracted the relevant public, people’s court shall respect the actual market situation where the relevant public can objectively distinguish the relevant business marks, and shall also maintain the established stable market order. Obviously, the massive use of the disputed trademark is significant for the final trademark granting and ownership determination.

Registration of Geographical Names as Trademark

Under the Trademark Law, the geographical names of administrative regions at the county level or above as well as the geographical names of foreign countries known by the public are generally not allowed to be registered or used[iv]. However, in practice, certain trademarks are formed by geographical names and other key elements. In these circumstances, if the trademarks in question are formed by other key elements and overall meet the requirement of distinctiveness so that such geographical names become irrelevant or insignificant, it will be inappropriate to conclude that the trademarks in question are not registerable on the ground that such trademarks consist of the geographical names of administrative regions at the county level or above as well as the geographical names of foreign countries known by the public. This is an improvement and good news for foreign investors who would like to get certain geographical names specially relating to their products or services registered as trademark in China.

Judgment on Distinctiveness of Disputed Trademark

1.      Judgment Based on Common Knowledge of Relevant Public

 

The Opinions have adopted the criterion of the common knowledge of the relevant public to evaluate whether a disputed trademark is distinctive. According to the Opinion, when hearing Trademark Administrative Cases, people’s courts shall examine and determine whether the disputed trademarks are distinctive as a whole based on the common knowledge of the relevant public to the goods on which the trademarks in question are used as specified. Descriptive elements in the disputed trademarks are irrelevant to the distinctiveness of such trademarks as a whole. Those disputed trademarks which are descriptive but presented in unique manners so that the relevant public is able to distinguish the origin of the goods shall be recognized as distinctive. Important note shall be made that the judgment on the distinctiveness shall be based on the common knowledge of the relevant public in China when the disputed trademarks are expressed in foreign languages. Where the foreign texts used in a disputed trademark has a special meaning but the relevant Chinese public is able to distinguish the origin of the goods, the trademark in question shall be recognized as distinctive too.

 

2.      Situations of Non-distinctiveness

 

The Opinions have illustrated the situations in which the disputed trademark shall be deemed as having no distinctiveness. According to the Opinion, if a mark is just or mainly to describe or explain the used commodities’ quality, main raw materials, function, application, weight, quantity, origin and other characteristics, it shall be determined of having no distinctive features[v]. However, if a mark or its constituent element which implies the characteristics of a commodity, but does not affect its function to identify the origin of the commodity, it shall not belong to the aforesaid situation. When applying for registering trademark, foreign applicants shall pay special attention to these situations so as to get the proposed mark to be registerable.

 

Registration of Commodity General Names as Trademark

1.      Situations of Constituting Commodity General Names

 

Under the Trademark Law, those marks which only indicate the commodity general names, devices and specifications can not be registered as trademarks[vi]. When determining whether the disputed trademarks are commodity general names, the Opinions have distinguished two situations, i.e. legally or traditionally recognized commodity names. Where the names in question are general commodity names under the relevant statutory provisions, national standards or industrial standards, such names shall be deemed as commodity general names and are not registerable as trademarks. Where it is commonly believed by the relevant public that a name sufficiently represents a type of commodities, such name shall be deemed as a traditionally recognized commodity general name and is not registerable as trademark either. Commodity names listed in professional tool books or dictionaries may be referred to as traditionally recognized commodity general names. While, the determination of traditionally recognized commodity general names shall be generally based on the common knowledge of the relevant public in China. Regarding the commodities launched constantly in the relevant market as a result of traditional, cultural or geographical reasons, the general names used in such relevant market may be recognized as commodity general names. Most importantly, where applicants know or should have known that the trademarks proposed in their applications are traditionally recognized as commodity names in specific areas, the trademarks in question shall be recognized as commodity general names and are not registerable.

 

2.      Time Window for Determining Commodity General Names

 

The Opinions have set out a time window for determining whether the disputed trademarks are commodity general names to the actual condition of the trademarks at the time the respective applications are filed. If the trademarks are not commodity general names at the time the respective applications are filed but become commodity general names at the time the trademarks are in dispute over the approval of their registration, such trademarks shall be deemed as general names of the specified goods. If the trademarks are commodity general names at the time the respective applications are filed but become not general names at the time the trademarks are in dispute over the approval of their registration, the consideration of general name shall be irrelevant to their registration.

 

Special Protection to Well-known Trademark

The Chinese laws provide an overall protection to well-known trademark[vii]. The Chinese governmental authorities and the Supreme Court have once promulgated various special laws and regulations to protect well-known trademarks no matter they are registered in China or not. The protection to well-known trademark has once again reinforced by the Opinions. According to the Opinions, when defining the scope of protection for a well-known trademark which has been registered in China for its use on different goods, attention shall be paid to keep the scope appropriate to the degree of its famousness, and, in determining the scope of protection for a Chinese registered trademark that has been widely known to the public for its use on different goods, a broader scope of protection appropriate to the degree of its famousness shall be offered.

 

Intentioned Registration of Trademarks in Bad Faith

Though the Trademark Law prohibits the intentioned registration of trademarks in bad faith, however, its languages on such prohibition are too general and abstract to be enforced[viii]. However, in practice, the intentioned registration in bad faith is quite common. The Opinions have set out a stricter and clearer criterion to prohibit such intentioned registration in bad faith.

 

According to the Opinions, where a trademark attorney or representative, or a trademark agent or representative from a sales agent relationship (“Trademark Agent or Representative”) registers in its own name without authorization the trademark of its principal or the person it represents, such registration shall be determined by people’s courts as the act of squatting the trademark of the principal or the person being represented by the Trademark Agent or Representative. In practice, a rush-register act may take place during the period when the relationship with the Trademark Agent or Representative is being negotiated, i.e. the rush-register occurs before the establishment of the relationship, such act shall also be considered as the trademark squatting by the Trademark Agent or Representative. An applicant for registration of a trademark colluding with the aforesaid Trademark Agent or Representative in rush-register may be considered as a Trademark Agent or Representative, and the collusive rush-register conduct may, as the case may be, be inferred of the nature based upon the specific relationship between the applicant and the aforesaid Trademark Agent or Representative. In addition, the trademark which an agent or a representative may not apply for registration include not only the marks identical but also similar to the trademarks of the principal, and the goods that can not be registered include those identical or similar to the goods on which the trademark of the principal is used. Obviously, such provision intends more to protect the interests of the principle. Foreign applicants shall pay attention to keeping and collecting the respective evidence on the negotiation or business relationship with their agents in the event of intentioned registration by their agents in bad faith.

 

Judgment on Similarity on Goods and Trademarks

Though the China Trademark Office (“CTO”) and TRAB may depend on the International Classification of Goods and Services for the Purpose of the Registration of Marks (“Nice Classification”) and the Classification on Similar Group of Goods and Services (“Similarity Classification”), however, in practice, it is also difficult to distinguish the similarity of marks and goods, and therefore, CTO and TRAB may have made different decisions, and the concerned parties might not be satisfied with such decisions, thereafter initiating administrative litigations against CTO and TRAB. To effectively guide people’s courts to hear such Trademark Administrative Cases, the Supreme Court has set a clearer and practical standard for distinguishing the similarity of marks and goods. According to the Opinions, people’s court shall, when examining and judging if relevant goods or service are similar, consider (i) whether the goods’ function, application, production department, sales channel or customer group is the same or of greater relevance; (ii) whether the service’s purpose, content, method or target is the same or of greater relevance; (iii) whether the goods and services are of greater relevance; and (iv) whether the relevant public is easily made to believe that the goods or service are provided by the same provider or is in a specific relation with the provider. Of course, the Nice Classification and the Similarity Classification may also be referred to when judging similar goods and services. In addition, people’s court shall not only consider the degree of similarity between the components and entireties of the two trademarks in question, but also consider the significances and popularities of the relevant trademarks, the degree of relevance between the goods on which these two trademarks are used and other factors, and it shall make its decision based on whether the two trademarks are easily confused.

 

Protection to Prior Trademark

1.      General Provision on Protecting Prior Trademarks and Its Application

 

The Trademark Law has a general provision that an application for registration of a trademark must not cause any damages to any other person’s existing prior rights[ix]. The Opinions have clarified the proper application of this general provision. According to the Opinions, people’s court, when determining whether the proposed trademark has caused any damages to another person’s existing prior rights, shall protect, in accordance with the special provisions of the Trademark Law, those existing prior rights that are under such special provisions of the Trademark Law; for those lawful interests and rights that are not under the special provisions of the Trademark Law but are subject to the protection of the provisions of the General Principles of the Civil Law[x] and other laws, protections shall be granted in accordance with such general provisions. More over, the determination whether the disputed trademark has caused any damages to another person’s existing prior rights shall be based on the actual situation at the time when the disputed trademark is applied for registration. The disputed trademark is registerable if the prior rights do not exist any longer when the disputed trademark is in the approval for registration. Obviously, it is reasonable that the Opinions protect prior rights subject to the existence of such prior rights when the dispute arises.

 

2.      Protection to Trademark Already Used and Influential to Certain Extent

 

According to the Trademark Law, no applicant may in any improper manners anticipatorily register any other party’s trademark which is already in use and influential to a certain extent. The Opinions have defined such improper manners for anticipatory registration and the trademark which is already in use and influential to a certain extent. Under the Opinions, if an applicant knows or should have known that a trademark is already in use by another party and is influential to a certain extent but anticipatorily registers such trademark, such act of registration may be deemed as the aforesaid improper manner. In addition, a trademark which is in actual use and known by the relevant public in a specific area in China may be deemed “to be in use and influential to a certain extent”. Should there be any evidence to support that a prior trademark is in use within a consecutive period of time, in a region, in a volume of sale or in promotional activities to a certain extent, such trademark shall be deemed as “influential to a certain extent”. Furthermore, it is inappropriate to protect a trademark which is in use and influential to a certain extent on dissimilar goods.

 

Cancellation of Registered Trademark

1.      Cancellation of Registered Trademark to Protect Public Interests

 

According to the Trademark Law, if a trademark is registered through deceitful means or other improper means, such trademark shall be cancelled for registration[xi]. However, the Trademark Law fails in defining what situations constitute other improper means. To clarify this, the Opinions have fixed the other improper means to protection to the relevant public interests. According to the Opinions, when hearing administrative cases regarding cancellation of registered trademarks in which people’s courts are required to determine whether the disputed trademarks are registered in other improper manners, the people’s courts shall consider whether the disputed trademarks have been registered in a manner that the trademark registration system is intervened, the public interests are impaired, public resources are misused or improper benefit is gained. Obviously, this is dedicated to protect the public interests.

 

2.      “Actual Use” Argument against Cancellation of Registered Trademark for Non-use for Three Consecutive Years

 

The Trademark Law provides for a cancellation system to registered trademark for non-use for three consecutive years[xii]. In practice, the owner of the registered trademark might claim that the disputed trademark is in actual use to defend the cancellation. In such case, the correct understanding to the actual use of the disputed trademark becomes extremely important. Unfortunately, the Trademark Law fails in specifying what situations constitute actual use of the trademark in question. The Opinions have clarified the specific situations of actual use of the disputed trademark. According to the Opinions, the use of a trademark by its owner or the owner’s licensee or in any other manners that does not conflict with the owner at will may be deemed as actual use. Where a trademark in actual use is insignificantly different from the registered trademark but the distinctiveness remains unchanged, the registered trademark may be deemed as in actual use. More over, if a trademark owner is incapable of actually using or ceases to use the registered trademark as a result of any force majeure events, policy restriction or liquidation or on any other factual grounds, or the trademark owner has the intention of actually using the trademark and makes necessary preparations for such actual use but is incapable of using the registered trademark on any factual grounds, such incapability may be deemed to have good reasons. In such case, the registered trademark shall not be cancelled for registration.

 

However, it is inappropriate to recognize transfer or assignment of a trademark not in actual use, or mere announcement of the details of the registration of a trademark or declaration of the entitlement of the exclusive rights in a trademark as use of the trademark.

 

Conclusion

 

With the sharp increase of Trademark Administrative Cases, and in order to guide people’s courts to effectively hear such administrative cases, the Supreme Court has timely issued the Opinions since the Trademark Law keeps silent on many important issues relating to trademark granting and ownership determination. The Opinions have materially supplemented and clarified the Trademark Law in these aspects. Most importantly, the Opinions have newly established certain rules and criterion for people’s courts to properly hear those Trademark Administrative Cases. These new rules and criterion will have a significant impact on the trademark protection and enforcement strategies of foreign investors having registered trademarks and doing business in China. In this sense, foreign investors shall timely acquaint themselves with these rules and criterion, and adjust their trademark protection strategies in China so as to get them in line with the Opinions.

About The Author

Bill H. Zhang is the managing partner of China Sunbow & Associates with rich experience in cross-border transactions involving China, particularly on intellectual property transactions such as patent and trademark prosecution, enforcement, dispute resolution, infringement analysis, due diligence, technology license and transfer, as well as on corporate and commercial matters, such as mergers and acquisitions, direct investment in China, joint venture, international trade, corporate governance and compliance, restructuring and reorganization, labor and employment, and dispute resolutions. He has advised many multi-national companies on registering, prosecuting and enforcing various trademarks, patents and copyrights worldwide and represented them to merge and acquire Chinese enterprises, make direct investment and resolve commercial disputes in China. He has also counseled many foreign invested enterprises on their daily operations in China.

For more information about this article and the author, please contact:

Bill H. Zhang, Esq.

T: +8621 5081 5229
F: +8621 5081 5239
C: +86 1391 652 9795
E: bill.zhang@chinasunbow.com

About China Sunbow & Associates

China Sunbow & Associates (“Firm”) is a general business law firm mainly practising Chinese intellectual property (“IP”) and commercial laws and rendering the same services in China. From incorporation, the Firm has been providing high quality IP and commercial law advisory services on China related IP and commercial transactions, particularly, on registering and enforcing various trademarks and patents, conducting IP due diligence, providing legal analysis on registerability, patentability and infringement, and advising IP license and transfer. Apart from IP practice, the Firm has also assisted many multi-national companies entering into Chinese markets and establishing business in China. The Firm’s attorneys have accumulated extensive experiences in counseling foreign investors on registering and enforcing various trademarks and patents, or setting up joint venture enterprise, wholly foreign owned enterprise, and representative office, as well as on their daily operation in China, including employment, tax, corporate governance, restructuring and compliance, etc. Further more, the Firm has successfully advised many foreign investors on merging and acquiring Chinese entities and resolving their IP and commercial related disputes in China.

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[i] The Chinese Trademark Law was enacted by the Standing Committee of the National People’s Congress on August 23, 1982, and was revised on February 22, 1993 and October 27, 2001, resepecitvely.

[ii] Article 43 of the Trademark Law.

[iv] Article 10 of the Trademark Law.

[v] Article 11 of the Trademark Law.

[vi] Article 11 of the Trademark Law.

[vii] Article 13 of the Trademark Law.

[viii] Article 15 of the Trademark Law.

[ix] Article 31 of the Trademark Law.

[x]The General Principles of the Civil Law as the basic law governing various civil legal relations was enacted by the National People’s Congress on April 12, 1986.

[xi] Article 41 of the Trademark Law.

[xii] Article 44 of the Trademark Law.




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