Introduction

Jiangxi HENGDA Hi-tech Co, Ltd ('HENGDA') is a manufacturer specialising in abrasion and corrosion-resistant materials for industrial equipment.

On 2 September 2008 HENGDA filed an application for the registration of the trademark "" ('HENGDA' in Chinese characters) in Class 32, which covers:

legume drink, coke, milk tea (non-milk based), vegetable drink, pure water (drink), vegetable juices (beverages), non-alcoholic fruit juice beverages and lactic acid beverage (fruit products, non-milk).

The trademark was registered on 21 May 2010.

Cancellation application

On 30 December 2013 Pan Di filed for the cancellation of the aforementioned trademark before the China Trademark Office (CTMO) on the grounds of non-use for three consecutive years.

In order to sustain the registration, HENGDA needed to prove use for the period from 30 December 2010 to 29 December 2013.

On 27 September 2014 the CTMO found that the use evidence produced by HENGDA was sufficient to maintain the registration.

On 23 October 2014 Pan Di applied for review before the Trademark Review and Adjudication Board (TRAB). The TRAB scrutinised the evidence of use and found that it was either inconsistent or merely symbolic. The TRAB granted the cancellation request on 7 January 2016.

HENGDA appealed to the Beijing Intellectual Property Court, which overruled the TRAB decision and maintained the validity of the trademark.

Pan Di and the TRAB appealed before the Beijing High Court.

The TRAB and Pan Di argued (among other things) that:

  • HENGDA had forged evidence;
  • the evidence submitted could not prove that the disputed mark had been put into genuine commercial use;
  • HENGDA had no intention of preparing for the future use of the disputed mark; and
  • the use evidence was insufficient to prove that the disputed mark had been continuously used after the designated period and had reached a certain scale.

High Court decision

On 29 November 2017 the Beijing High Court reversed the first-instance decision and confirmed the TRAB decision to cancel the trademark.

The court set the following general principles to be followed by a trademark owner in order to avoid cancellation for non-use:

  • The evidence must be authentic and legitimate;
  • The act of trademark use must have occurred during the designated period;
  • The disputed mark must be visible on the evidence; and
  • The disputed mark, when used on designated goods or services, must function as a source identifier.

The court stated that the trademark cancellation mechanism aims to encourage trademark owners to use their marks so as to fulfil the marks' source-identifying function in the market.

Given that use evidence is mostly furnished by trademark registrants, such evidence will be subject to the cross-examination and rebuttal of the other party. The courts should scrutinise evidence more closely if it is suspected to have been forged by a trademark registrant.

Therefore, the authenticity and relevance of every single piece of evidence should be assessed.

In this case, HENGDA produced licensing contracts and claimed that the products were produced by third parties. However, the evidence – which was intended to prove that the trademark licensees had commissioned third parties to print HENGDA labels and manufacture and launch HENGDA mineral water into the market – was either flawed or questionable. The licensees could not prove that goods bearing the disputed mark had been launched in the market.

More specifically, the court ascertained the following facts:

  • The bar code (used to identify the manufacturer) of the HENGDA mineral water indicated an entity other than the trademark licensee or the outsourced manufacturer of the trademark licensee;
  • The time stamp (12 December 2013) on the invoices accompanying the licensee's sale of HENGDA mineral water predated the time (17 January 2014) when the blank invoices were claimed by the licensee from the local taxation bureau;
  • The licensees had failed to provide corroborative evidence that the products bearing the HENGDA labels had been launched into the market;
  • The photographs intended to prove that HENGDA mineral water was offered for sale at retailers were questionable because various details indicated that the photos had been taken during a season other than that indicated by the time stamps; and
  • Some seemingly plausible use evidence was formed on 23 December 2013, shortly before the last date of the designated period. Even if such evidence were genuine, the court found it difficult to rule out the possibility that it was symbolic use intended to maintain the registration of the disputed mark.

Comment

The level of scrutiny demonstrated by the court in such a case is most welcome. Too many trademarks are filed in China for the purpose of trading them as a commodity for profit. These trademarks are not filed for the purpose of functioning as a source indicator of goods or services. Meanwhile, regrettably, the procedure at CTMO level is opaque and the applicant of the request for cancellation based on non-use has no possibility to cross-examine the evidence produced by the trademark registrant. This leads to frequent procedures of review before the TRAB, which could be avoided if the procedure were open to rebuttal from the beginning.

Further, HENGDA had filed for the registration of 'HENGDA' in Chinese characters in 43 classes of product, most of which had little to do with its business. Moreover, cancellation requests had been filed against HENGDA's registered trademarks in 34 classes. On 16 December 2013, a few days before Pan Di's cancellation request, another cancellation action was brought against the disputed mark. In such circumstances, it is reasonable to conclude that HENGDA was prepared for the cancellation action. That explains why most of the documented evidence was formed shortly before the expiry of the designated period.

Addressing a similar situation, the EU Trademark Regulation(1) and the Trademarks Ordinance of Hong Kong(2) explicitly rule out evidence formed shortly before the filing of the cancellation action if the trademark owner cannot prove that it had prepared for such use before becoming aware that a cancellation action was about to be filed. Even if this does not quite correspond to the HENGDA case, the aim is the same – evidence dated just before the cancellation action, or even just before the expiration of the three-year period, should be regarded as potentially suspicious and examined with care.

For further information on this topic please contact Xingnan Ming, Nan Jiang or Paul Ranjard at Wanhuida Peksung by telephone (+86 10 6892 1000) or email (mingxingnan@wanhuida.com, jiangnan@wanhuida.com or ranjard@wanhuida.com). The Wanhuida Peksung website can be accessed at www.wanhuida.com and www.peksung.com.

Endnotes

(1) Article 58, grounds for revocation:

1 (a) the commencement or resumption of use within a period of three months preceding the filing of the application or counterclaim which began at the earliest on expiry of the continuous period of five years of non-use shall, however, be disregarded where preparations for the commencement or resumption occur only after the proprietor becomes aware that the application or counterclaim may be filed.

(2) Article 52, revocation of registration:

(5) Any commencement or resumption of the use described in subsection (2)(a) after the expiry of the 3-year period but within the period of 3 months before the making of the application for revocation shall be disregarded unless preparations for the commencement or resumption began before the owner of the registered trade mark became aware that the application might be made.

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.