On December 17, 2011, the Supreme Court rejected an application for re-trial filed by Castel Frères SAS in a trademark non-use dispute. In the ruling the Supreme Court re-explained the concept of “legitimacy” in trademark use, and reversed its previous decision on the same issue in another case published in 2008.
In 2000, Mr. Li Daozhi registered a trademark “卡斯特” (pronounced “KA SI TE”, and usually regarded as the Chinese transliteration of “CASTEL”), covering wine in class 33. In 2005, the French wine producer CASTEL FRERES SAS applied to the China Trademark Office for the revocation of this trademark registration on grounds of non-use for three successive years (Article 44(4) of the Trademark Law). In 2006 the CTO decided to revoke the registration. Li Daozhi appealed to the Trademark Review and Adjudication Board (“TRAB”) claiming that he had never received the CTO’s notification due to his change of address, and that he had been using this trademark continuously. In the TRAB review, Li Daozhi submitted a trademark license agreement with a firm named BAN TI, as well as VAT invoices issued by BAN TI for selling KA SI TE wine. In 2007 the TRAB decided to overrule the CTO’s decision and to maintain the registration.
CASTEL appealed to the Beijing No. 1 Intermediate Court on grounds that Li Daozhi had not used the trademark “legitimately”. CASTEL argued that BAN TI did not obtain the “Certificate of Label for Imported Food”, and the trademark registrant had not provided product permit, import permit, or sanitary certificate as required by relevant laws. CASTEL claimed, therefore, that the sales of KA SI TE wine in China should have been prohibited. CASTEL deducted from such illegality that, since the use of the trademark was not legitimate, the trademark registration should be revoked.
To such argument Beijing No. 1 Intermediate Court held that such problems belonged to the rules governing the administration of imported products, which had nothing to do with trademark use in the sense meant by article 44(4) of the Trademark Law. In 2008 the court maintained the decision of the TRAB, finding that the trademark had been put into actual use and considering that, whether the trademark had been used legitimately and how it had been used was out of the jurisdiction of the TRAB, and should be governed by other laws and administered by other government agencies.
In 2008 CASTEL appealed to Beijing Higher Court, who upheld the first instance decision.
In 2010 CASTEL applied to the Supreme Court for retrial. On December 17, 2012, the Supreme Court made a ruling to reject the appeal. The Supreme Court opined that whether or not Li Daozhi and BAN TI’s business had violated the relevant regulations on import and sale did not fall into the domain of Article 44(4).
In its ruling (1), the Court affirmed that,
The legislative purpose of Article 44 (4) of the Trademark Law ( revocation of a trademark registration for non-use) is to maintain active trademarks and to get rid of those trademarks that are not active. Revocation of the registration is only the means, but not the end itself. So far as the trademark registrant has used its registered trademark publicly and truthfully in the course of trade, and the trademark use itself has not violated the relevant rules provided in the trademark laws, then the trademark registrant has satisfied its obligation to use the trademark. It is inappropriate to find that the trademark use has violated Article 44(4).
This decision is in contrast with another famous ruling made by the Supreme Court in a non-use dispute, about the trademark “Kang Wang”. In that case, the Supreme Court had decided to revoke the trademark KANG WANG on grounds that the use was not legitimate use. (2) The Supreme Court further included this case in the Annual IP Report of 2008 as a precedent. (3)
In the KANG WANG decision, the Supreme Court held that:
The “use” as provided in Article 44(4) should be public, truthful and legitimate use of a trademark in the course of trade. According to Article 45 of the Trademark Law, the legal basis for judging whether the trademark use is legitimate is not limited to the Trademark Law and corresponding regulations. For the type of trademark use that is connected to production and business transactions prohibited by laws ad regulations, if one affirms the validity of such trademark use, one may encourage and indulge illegitimate activities, and run contrary to the purpose of trademark use as required by the Trademark Law. (Emphasis added).
In the KANG WANG case the Supreme Court found that the trademark registrant and its subsidiary did not produce the production permit and sanitary permit as required for production and sale of cosmetics, so the court considered that the trademark registrant had not used the disputed trademark legitimately during the disputed period. As a consequence the trademark registration was revoked.
The Trademark law describes certain situations of “illegitimate use” in which the Trademark Office has the power to order the registrant to rectify some “misconduct” or even to revoke, ex officio, the trademark. These situations are mentioned in Article 44 (1), (2) and (3) of the Law: unilateral alteration of the mark, unrecorded change of address, bad quality products etc… (4)
Besides, in order to resist an application for revocation based on non-use during three consecutive years as provided in article 44 (4), the trademark registrant needs to bring evidence of use, which must be public and truthful.
The KANG WANG case had added a condition of “legitimacy”, by making reference to other laws and regulations, unrelated to the trademark law, concerning the business in relation to which the trademark was used. This considerably broadened the requirements imposed on a trademark owner, who could be exposed to attacks, from anyone, based on all sorts of regulations other than the mere requirement of using the trademark publicly and truthfully.
In the Castel case, the Supreme Court re-defines the requirements clearly: use of the trademark must be understood only in the context defined by the Trademark law rather than other laws or regulations.
(1) 2010, Zhi Xing Zi 55
(2) 2007, Xing Jian Zi 184-1
(3) The seventh case cited by the Annual IP Report of 2008
(4) Article 44 (1) (2) (3) provides that “The Trademark Office shall order the user of a registered trademark to rectify the situation within a specified time limit, or shall cancel the registered trademark, if the user:
(1) alters the registered trademark without the prescribed procedure;
(2) changes the name or address of the owner of a registered trademark, or other matters contained in the registration, without the prescribed procedure;
(3) assigns the registered trademark without the prescribed procedure.
Article 45 of the Trademark Law Provides that “Where a registered trademark is used on goods that are roughly or poorly manufactured, or on goods of bad quality which pass off as those of good quality, so as to deceive consumers, the administrative authorities for industry and commerce at different levels shall, according to the circumstances, order rectification of the situation within a specified time limit, and may in addition circulate a notice of criticism or impose a fine, and the Trademark Office may revoke registration of the trademark”.