In part 1 of this series, we discussed the typical actions in China when addressing registered trademarks by squatters. Part 2 of this series looks at the vital part evidence collection plays from taking a closer look at well-known situations of squatted trademarks to bad faith, and how such evidence is collected.

Research on the Use of a Trademark is Important in a Trademark Case

The purpose of an investigation into the trademark use in a particular situation is to find out the application history, the current specific use of a trademark for the interests and rights of the right holder during administrative procedures (including but not limited to trademark opposition, review on trademark rejection, 3-year non-use cancellation and invalidation) or litigations. The aim of such search is to know relevant facts and to collect evidence, preparing the right holder for right protection actions.

An effective trademark investigation should find useful facts, thus bringing breakthroughs for a case and turn the situation around.

The following cases, handled by HFG, are to help illustrate and analyze the effectiveness of evidence collection on the use of a trademark.

Case 1: The investigation revealed that the applicant of the disputed mark in administrative litigation no longer had operation qualifications.

A wood company in Changzhou (hereinafter referred to as “the Third Party”) applied the registration of Trademark X in 2004, designated to the goods of “wood, plywood, etc.” under Class 19. Trademark X was identical with Trademark Y under Class 3 (cosmetics) applied by an American company (hereinafter referred to as “the Plaintiff”) which entered the China market as early as year 1991. Trademark Y was recognized as a well-known mark by China Trademark Office (CTMO) in year 2011.

The American company filed an opposition and an opposition review against Trademark X, but its claims were not supported by CTMO and China

Trademark Review and Adjudication Board (TRAB). HFG was hired by the American company to file an administrative litigation.

HFG made a close analysis and held a view that the difficulty of the case lies that the Plaintiff needs to submit evidence to prove 3-consecutive-year use before 2004, in order to prove that Trademark Y under Class 3 had reached the status of famous before 2004. The Plaintiff also needed to prove that there was a relationship between the goods of cosmetics under Class 3 and the goods of wood under Class 19, which was the ground for giving a cross-border protection for Trademark Y. The Plaintiff did not have sufficient evidence to prove that Trademark Y had already become well-known since year 2002. It was due to this inability to burden proof that made the Plaintiff fail in the opposition and opposition review period.

HFG searched the Third Party in the online Administration of Industry and Commerce (AIC) database, and found that the company behind Trademark X business license was cancelled on March 3, 2006.

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Online AIC System Showing the Third Party’s Business License Cancelled

According to the Corporation Law of the PRC, AIC can cancel a company’s business license for its illegal operations, continuous closing-down, or failure to submit annual audit. A company with its business license cancelled cannot do business.

Meanwhile, Article 24 of Guide to Authorization and Right-confirming Administrative Cases on Trademark regulates that “Where a company applying for the disputed trademark has been suspended of its business license but hasn’t performed cancellation procedures, the disputed mark shall not get approval for registration according to Article 4 of Trademark Law if the following conditions are met:”

  1. The company applying for the disputed trademark has been suspended of its business license for more than 3 years when the administrative verdict is made;
  2. There is no evidence showing that the disputed trademark has been transferred or licensed to others;
  3. The company applying for the disputed trademark doesn’t participate in the trademark review period and the following litigation period, or makes explanations or claims on the company or the disputed mark;
  4. The opposed mark imitates or copies the cited mark, and there exists certain relationship between the goods designated by the disputed mark and the cited mark.

Therefore HFG made a rectification of the relevant facts into the target company and the trademark.

Firstly, we carried out an onsite visit to the Third Party. It was found that the Third Party had no actual business operations, and the company entity no longer existed.

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A Photo of the List of Relevant Companies Taken in the Onsite Investigation

Meanwhile, a requested copy of the internal files were filed and the copy obtained by HFG, and it was confirmed that it hadn’t submitted any annul audit since 2004.

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The Last Annual Audit Which the Third Party Received According to the Inner AIC Check (Year 2003)

Finally, HFG made further searches and confirmed that there was no record of the opposed mark being transferred or licensed.

The above facts showed that there were no subjective intentions or objective conditions for the use  of the disputed mark. If the disputed trademark got approval for registration, it would lie idle or have unclear ownership, which is a waste of the trademark resources and goes against the aim of the trademark system.

It can be seen that the investigation results turned the whole situation around for the case, and led to a major change in the litigation strategy.

An administrative litigation was filed to Beijing No. 1 Intermediate People’s Court; complementary evidence was submitted at the end of 2014; the case was heard by the court in 2015.

In the next edition, we will introduce another case where HFG refuted the Third Party’s excuses through a trademark investigation and achieved success.