This article was originally published on the 73rd Issue of the Chinese version of the China Intellectual Property Magazine.

By Meph Jia Gui

The PRC Trademark Law (hereinafter referred to as the “Trademark Law”) applies the “first-to-file” principle, which grants a theoretically exclusive right of trademark use to the registrant who applies first, and provides the registrant a high degree of legal protection for its exclusive use in China. However, some companies fail to register their reputable trademarks in China, potentially preventing them from enjoying their trademark use rights because someone else has preemptively registered it. In this regard, the Trademark Law gives a certain degree of protection to unregistered trademarks with prior use, which mainly reflected in Articles 13 and 31. Article 13 protects unregistered trademarks which have been recognized as well-known trademarks, while Article 31 prohibits preemptive registration of demonstrably influential trademarks which are already in use by other parties by improper means. This paper is to help companies understand how to protect their unregistered trademark in China in accordance with Article 31 of the Trademark Law.

Article 31 of the Trademark Law states that, “[a]n application for trademark registration shall not prejudice any pre-existing rights of others; nor shall any party be permitted to preemptively register demonstrably influential trademarks already in use by another party through any improper means.”

There are two takeaways from this provision of the Trademark Law: (i) owners of unregistered trademark may prevent others from registering their demonstrably influential trademarks; and, (ii) others are not necessarily prohibited from using those same unregistered trademarks. On the second point, where others use a company’s unregistered trademark, the company can only seek injunctive relief to prohibit the “use” under the relevant provisions of the PRC Anti-Unfair Competition Law rather than Trademark Law. With respect to the first issue, the owner of the registered trademark may file an opposition with the Trademark Office against a preliminarily approved preemptively registered trademark within three months of the publication date or file a request with the Trademark Review and Adjudication Board (hereinafter referred to as the “TRAB”) for a decision to cancel a registered trademark which the rightful owner believes has been infringed upon (hereinafter referred to as the “trademark opposition or cancelation” or “administrative procedures”) within five years of the preemptive trademark registration date. Companies who wish to cancel the registration of the trademark shall prove that the following three conditions have occurred: (1) the preemptive registrant registered the trademark using “improper means”; (2) the trademark “has already been used” by the owner of the unregistered trademark; and, (3) the use of the trademark shall have a certain influence.

I. How to understand “preemptively register … through any improper means”?

The Supreme People's Court (hereinafter referred to as the “Supreme Court”) issued Opinions of the Supreme Court on Certain Issues concerning the Trial of Administrative Cases of Trademark Authorization Confirmation on April 20, 2010 (hereinafter referred to as the “Opinions”). Article 18 of the Opinions provides that, “[a]ccording to the Trademark Law, an applicant shall not, via improper means, file preemptive registration of others’ trademarks which have been in use and which have some certain influence in the market. If an applicant files a preemptive registration of another’s trademark that has been in use and has certain influence in the market of which they are or should be aware, the applicant shall be deemed to have taken improper means.” In the retrial case of Changzhou Chenglian Power Supply Manufacturing Co., Ltd. (hereinafter referred to as the “Changzhou Chenglian”) and the TRAB, Changzhou Chuanglian Power Supply Co., Ltd. (hereinafter referred to as the “Chuanglian Co., Ltd.”) trademark cancelation administrative dispute (hereinafter referred to as the “Changzhou Chenglian case”) ((2006) Xing Jian Zi No. 118-1), the Supreme Court also held that, “[i]n the circumstance that (Changzhou Chenglian) was aware that Chuanglian Co., Ltd. (the owner of the unregistered trademark) had used the graphics of the disputed trademark, (Changzhou Chenglian) founded the company conducting similar business and preemptively registered the trademark and trademark graphics being used by Chuanglian Co., Ltd. on similar goods, ... consequently, it is obvious that Changzhou Chenglian registered the disputed trademark using improper means.”

As can be seen from the provisions of the Opinions and the aforementioned case, if the preemptive registrant knows or should have known that the demonstrably influential, unregistered trademark has been previously used by others and still registers the trademark, his behavior can be identified as taking improper means. Therefore, before starting trademark opposition or cancelation procedures against a preemptive registrant, companies should actively collect evidence which can prove that the preemptive registrant has knowledge of or should have knowledge of the use of the unregistered trademark, and use this evidence to prove that the preemptive registrant conducted the “preemptive registration in improper means”. Additionally, if the evidence submitted can prove that the previous use of the unregistered trademark by the original owner is widespread, in various ways, for a long time, and at a high frequency, it is easier for the TRAB and judges to identify that “the preemptive registrant has known or should have known the unregistered trademark has been previously used” and further identify or presume “the preemptive registrant has taken improper means”. Of course, if the owner of the unregistered trademark submits enough direct evidence to prove that the preemptive registrant has an understanding of the unregistered trademarks, it will be easier for the trademarks to be identified favorably with respect to the aggrieved party.

II. How to understand “already in use”?

In the case of Panyu District, Guangzhou, Wanshengda Electric Appliance Factory and the TRAB, Cai Li trademark cancelation administrative dispute (hereinafter referred to as the “Wanshengda case”) ((2011) Gao Xing Zhong Zi No. 365), the Beijing High People's Court (hereinafter referred to as the “Beijing High Court”) held that, the provision regarding “use” in Article 3 of the Implementation regulation for the PRC Trademark Law (hereinafter referred to as the “Implementation Regulations for the Trademark Law”) is applicable in the situation where it is “already ‘in use’” provided in Article 31 of the Trademark Law. Article 3 of the Implementation Regulations for the Trademark Law provides that, “[f]or the purposes of the Trademark Law and these Regulations, use of a trademark includes both the use of that trademark on goods, packaging, containers, and trade documents, as well as the use of the trademark in advertising, publicity, exhibitions, and other business activities.” Article 2 of the Answers to Several Issues Concerning the Trial of Trademark Civil Dispute Cases issued by the Beijing High Court on March 7, 2006 clearly states that, “[i]n commercial activities, using trademarks to identify the source of goods and making the relevant public differentiation between various market players is the use of the trademarks. Aside from the ways of using trademarks enumerated in Article 3 of the Implementation regulation for the PRC Trademark Law, using trademarks on audio-visual and electronic media, networks, or three-dimensional media and making the relevant public aware of the trademark, the goods indicated by the trademark, and the providers of the goods are all uses of trademark.”

As can be seen from these provisions and cases, the court can recognize various ways of using trademarks. Promoting and publicizing trademarks by new technical means may also be accepted and recognized. This means many means of using the unregistered trademark are all likely to be recognized by the court. Therefore, when collecting evidence to prove that the unregistered trademark has been actually used, companies should make full reference to the above provisions and take all commercial activities associated with the trademark into account, and avoid overlooking evidence which can prove the actual use of the trademark which may be recognized by the court.

Companies should record and file the uses of their core trademarks for record systematically and regularly in their day-to-day operations. This is particularly important for companies who are the owners of unregistered trademarks. In addition, before commencing legal procedures against the preemptively registered trademarks, companies should inform their lawyers of all the situations in which their unregistered trademarks are in use, since this will aid lawyers in identifying the strongest evidence available to prove the actual use of the trademark. In some companies, the evidence proving the actual use of the trademark could be preserved in a number of different departments. For these companies, they should coordinate among the various departments in order to ensure all the evidence can be collected and sorted systematically.

However, it should be noted that Paragraph 2 of Article 20 of the Opinions provides that, “[a] trademark which has not been in actual use, and has only been subject to actions such as transfer or licensing, or for which there has only been announcements of the registered trademark information or exclusive entitlement thereof, it is advised not to deem them as uses of trademark.” Therefore, the separate transfer, licensing, or merely making statements of trademark ownership cannot be deemed as a use of a trademark. However, the transfer and licensing of an unregistered trademark can be used as supporting evidence, combined with the uses of the trademarks referred to in the preceding paragraph, to prove that the owner of the unregistered trademark has already used the trademark.

In addition, the owner of the unregistered trademark may supplement some evidence to support his request of canceling the preemptively registered trademark in the administrative proceedings sometimes. In the administrative procedures, if this evidence have not been submitted, nor have their proving purpose been mentioned, the court will not accept this evidence generally. However, if the companies have submitted some evidence to prove the actual use of the unregistered trademark in the administrative procedures and continue to submit other evidence to indicate that they have used trademark in the administrative proceedings, this evidence may be accepted by the court.

III. How to understand “demonstrably influential”?

If the owner of an unregistered trademark intends to submit an application for trademark opposition or cancelation against a preemptive registration, the use of the unregistered trademark by the companies should also have a certain influence. How to understand the extent of a “demonstrably influential” trademark?

Paragraph 2 of Article 18 of the Opinions provides that, “[t]rademarks actually used within the territory of China and known by the relevant public within a certain region shall be deemed as trademarks that have been in use and have a demonstrable influence on the market. Where evidence proves that an earlier trademark has been in use for a certain time period, in a region, or has been advertised to a certain extent, the trademark can be deemed to have a demonstrable market influence.” In Changzhou Chenglian case, the Supreme Court held that, “[t]he trademark with demonstrable influence provided in Article 31 of the Trademark Law refers to the unregistered trademark that has been used for a certain period of time, and has public awareness in a certain range of the relevant public due to a certain level of sales and advertising activities, and is deemed as the unregistered commercial marks which can distinguish the source of goods or services.” In the Wanshengda case, the Beijing High Court concluded that, “‘[d]emonstrable influence’ refers to the situation that the relevant trademarks have been used for a certain period of time, and have certain regions, sales or advertising activities, which enables a certain range of public to be aware of the trademark, thus distinguishing the source of the goods... a separate advertisement is not sufficient to identify the use of the trademark as having ‘demonstrable influence’.” In another case, the Beijing High Court also concluded that even a single certificate of honor is not enough to prove “demonstrable influence” generally.

As can be seen from the provisions of the Opinions and the two aforementioned cases that if an aggrieved company wants to cancel the trademark preemptively registered by others, they should prove that the use of the unregistered trademark has reached a certain extent of awareness in a certain range of the relevant public. The court has flexibility when identifying “a certain range of the public” and “demonstrable influence”, and it will consider various factors comprehensively. A separate copy of the advertisement, a commercial activity, and occasional short-term use are not sufficient to reach the extent of “demonstrable influence”.

Therefore, before starting trademark administrative procedures, a company should fully consider whether the available evidence can prove that the use of the unregistered trademark has existed for a certain period of time and whether the services or goods on which the trademark is used have had a certain market sales. In addition, if the region of the preemptive registrant is not the region where the unregistered trademark is used, then there will be a higher requirement of the public awareness of the unregistered trademark. If the unregistered trademark is used in the region of the preemptive registrant or the preemptive registrant knows or is obviously malicious, then the requirement of the public awareness of the unregistered trademark will be relatively lower.

IV. Whether the trademark which has been used by others and has a demonstrable influence is just limited to trademarks which are identical to the preemptive registered trademark on the same goods

In the Wanshengda case, the TRAB, the Beijing First Intermediate People's Court, and the Beijing High Court held that, if a previously used trademark of demonstrable influence is similar with the opposed trademark on the similar goods, the owner of the pre-existing trademark can submit an application for trademark opposition in accordance with Article 31 of the Trademark Law. Therefore, the trademark which has been used by others and has a demonstrable influence is not just limited to a trademark which is identical to the opposed trademark on the same goods. It is also prohibited to preemptively register trademark which is identical or similar to the unregistered trademark previously used by others on the same or similar goods or services.

In practice, some preemptive registrants file registration applications for unregistered trademarks of demonstrable influence on similar goods or file registration application for similar trademarks after slightly modifying the original trademarks on the same or similar goods. For these cases, companies may supervise the trademark registrations on the relevant categories regularly and immediately submit applications for trademark opposition or cancelation against trademarks which are similar to their unregistered trademarks on similar goods.

V. Conclusion

If companies want to prohibit preemptive registrants from registering their unregistered trademarks in accordance with Article 31 of the Trademark Law, they should meet certain preconditions. The unregistered trademark should be shown to have been widely used, its use has a demonstrable influence, and the preemptive registration of the unregistered trademark has been done through improper means. Before starting trademark administrative procedures against the preemptive registration, companies should carefully study the laws and regulations mentioned above, the demonstration of the court, and the judgment results of the cases during the collection of evidence in order to provide a reference for better preparations of the corresponding procedures.

We provide here some further advice regarding situations where the owner of an unregistered trademark wants to submit the application for trademark opposition or cancelation against the preemptively registered trademark. As for these trademark administrative procedures, the trademark administrative authorities will review the cases in accordance with the evidence submitted by the owner of the unregistered trademark, and the trial process itself is the process of the trademark administrative authorities making specific administrative acts. Therefore, if companies are not satisfied with the results of the trademarks administrative authorities’ review, they are entitled to institute administrative proceedings with the court. During the proceedings, the court will review whether the trademark administrative authorities have made a legitimate administrative decision in accordance with the evidence submitted by the owner of the unregistered trademark. Therefore, companies should make full preparations and try their best to submit all the evidence they have to the administrative authorities before starting trademark administrative procedures in order to avoid submitting evidence acquired before the administrative procedures in the legal proceedings and reduce unnecessary risks of losing their case.

Finally, it is worthy to mention that the 30th session of the Standing Committee of the 11th National People's Congress ("NPC") has preliminarily reviewed the Amendment to the PRC Trademark Law (Draft) in the end of 2012, and has published a draft for public comment. The draft adds one paragraph to Article 15 of the original Trademark Law as Paragraph 2, which reads: “In the event of an application for registration of a trademark that is identical or similar to the trademark used by another person earlier on same or similar goods, if the applicant has contractual, business contact or any other relationship other than those prescribed in the preceding paragraph with such other person and is thus clearly aware of the existence of the trademark of such other person, and such other person opposes the registration, the trademark shall not be registered.” It can be seen from this provision that the legislators intend to further restrict and prohibit preemptive registration of unregistered trademarks. However, it should be noted that this provision still adds restrictive conditions for the protection of the owner of the unregistered trademark. Nevertheless, if the amendments of this provision are accepted by the new Trademark Law, the rights of the owners of unregistered trademarks may be further protected.
 

(The English version of this Issue has been edited by Sean J. Pratt, a New York licensed attorney with Global Law Office’s Shanghai office.)

Mr. Meph Jia Gui is a Beijing-based partner with Global Law Office who specializes in intellectual property (IP) laws and litigation and arbitration. (E-mail: meph.gui@glo.com.cn)