Since 2008, the development of intellectual property has become a national priority in China. The volume of trademark applications has consistently grown over the past 15 years and reached 3.69 million in 2016.
One of the consequences of this growth is the proliferation of so-called 'pre-emptive trademark applications', filed in bad faith.
The Chinese government is becoming increasingly aware of this problem.
The revised Trademark Law, which became effective in May 2014, introduced the general principle of good faith in Article 7 and specific measures in Article 15.2. This update explores the notion that trademark applications should be refused when they are made by applicants who are fully aware of the existence of a prior unregistered trademark.
The Supreme People's Court recently published an official interpretation of the revised Trademark Law. On January 10 2017 the court issued the Provisions on Several Issues Concerning the Hearing of Administrative Cases Involving the Granting and Affirmation of Trademark Rights, which became effective on March 1 2017.
According to Provision 15, the terms 'agent' and 'representative' in Article 15.1 of the Trademark Law, include any person with any kind of relationship with such an agent, even if negotiations have taken place, but are not concluded. Under Provision 16, the term 'other relations' used in Article 15.2 of the law should also be interpreted broadly and includes:
- familial relationships;
- labour relationships;
- businesses located in the proximity; and
- any unconcluded negotiations.
Regarding the concept of 'bad-faith registration', in Provision 25 the Supreme People's Court introduced the two following points:
- the demonstration of bad faith is not restricted to the time of filing of the litigious trademark (which is often difficult), and the court may also take into account facts that occurred after the date of filing, such as the manner in which the litigious trademark is being used; and
- where the reputation of the cited trademark is high, the court may presume that the litigious trademark has been filed in bad faith, unless the applicant can prove proper cause for such filing.
The China Trademark Office and Trademark Review and Adjudication Board are also taking concrete measures, which include the following:
- Updating and adjusting the Classification of Similar Goods and Services – China uses a specialised classification system in which each class is categorised into different subclasses. When subclasses are categorised as non-similar, this creates opportunities for filing bad-faith pre-emptive applications. For example, before the adjustment 'clothing' and 'layette' were considered dissimilar and a prior mark registered for clothing could not block the registration of the same mark on layettes. However, under the revised classification guide, clothing and layette are now considered as similar products and therefore, no coexistence of identical or similar trademarks can occur in these classes.
- Making use of 'big data' – the State Administration for Industry and Commerce and local administrations for industry and commerce are constructing a national system to record illegal activities in the market by utilising big data. This includes bad-faith trademark filing. Under this system, whenever an administrative decision is made concerning a bad-faith filing, it is recorded. This allows the collaboration between various branches of state and local administrations. For example, an opposition will be more easily supported by the Trademark Office if a local administration for industry and commerce has already led a raid action against the opposed trademark.
- It is possible to combine several cases together – for example, oppositions by different opponents against the same party – which helps to deal with large-scale bad-faith applications. The average success rate for oppositions has increased from under 10% to nearly 30%.
More generally, the authorities have emphasised that a trademark serves as an indicator of the origin of goods and services and is not an asset. Therefore, the act of purchasing and selling trademarks to make a profit is not encouraged.
The Supreme People's Court and the Beijing IP Court are also acting to fight against bad-faith filings by publishing precedents.
In March 2017 the Judicial Committee of the Supreme People's Court published, as a 'guiding case' – therefore binding for lower courts – a judgment rendered by the court in August 2014 in a retrial procedure in which the court stressed that:
"where a party, through bad faith trademark registration and malicious lawsuit, violates the principle of good faith, damages the legal interests of another person and disturbs the market order, courts should not support the claim because such acts amount to an abuse of rights." (Supreme People's Court Guiding Case 82, Wang Suiyong v Ellassay.)
In Wang Suiyong the infringement action launched by the bad-faith trademark owner was dismissed, even though the trademark was still valid.
Such a decision, if repeatedly confirmed by courts in the future, would have a big effect on bad-faith filing activities.
On April 24 2017, two days before World IP Day, the Beijing IP Court held a press conference concerning how to deal with bad-faith filing, which covered the following:
- Take into account the circumstance where the applicant's bad faith has been confirmed in a previous case.
- Publish bad-faith cases by listing the names of the trademark agencies and attorneys who represent the bad-faith trademark applicant.
- Increase the burden of proof on trademark agencies when they are suspected of violating some articles of the law concerning good faith.
- Strengthen coordination and communication with other administrations to clamp down on bad-faith filings.
The Beijing IP Court simultaneously publicised 18 typical cases concerning bad-faith trademark filing, which included:
- well-known trademarks;
- filings made by an agent;
- filing a prior used trademark with a certain reputation;
- mass filing of trademarks with no intention to use; and
- the filing of celebrity's personal names.
The actions detailed above indicate that the Chinese government and courts are determined to fight bad-faith trademark filing. However, success is not guaranteed and bad-faith cases remain difficult to control and proving bad faith is not easy. Time will tell if more severe actions are necessary.
This article was first published by the International Law Office, a premium online legal update service for major companies and law firms worldwide. Register for a free subscription.