The overriding objective of the revisedTrademark Law of 2014 (the Law) isto streamline procedures associatedwith obtaining trade mark rights, en-hance protection for rightful owners

and alleviate problems caused by trade marksquatters. Since the revision, detailed regulations,judicial interpretations and examination stan-dards have been implemented to further such ob-jectives. In this article, we highlight the trends inthe application of law and practices associatedwith the key changes.

Bad faith and the latest trend in casesTrade mark squatting has long been a major con-cern for foreign companies who wish to enter the

Chinese market. The Chinese first-to-file trademark system grants protection to those who file firstin China, and no proof of use is required to register.Trade mark squatters or bad faith filers register up-and-coming brands in China anticipating theirentry into China, with the intention of profitingfrom selling the marks back to the internationalbrand owner, or riding on the reputation of the in-ternational brand to advertise their own productsor services.

International brand owners who do not al-ready have a trade mark registration in China inrespect of the goods or services to which the dis-pute relates will have to resort to Article 32 of theLaw (Article 31 of the 2001 Trademark Law) to op-pose or invalidate trade marks filed by trade mark72

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Implementationof the revisedTrademark Lawof 2014Four years later, Anna Mae Koo and Ann Xu ofVivien Chan & Co evaluate the revisedTrademark Law of 2014, analysing itstreatment of trade mark squatters

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squatters. Under this article, the opponent has toprovide evidence that its mark has attained a cer-tain degree of fame in China, which is a signifi-cant hurdle, especially for brands that do not yethave a strong presence in China.

The revised Trademark Law, however, alsointroduces alternative routes for brand owners tofight against trade mark squatting, especially inthe most common circumstance where a trademark is pre-emptively filed.

Mixed application of the good faithprincipleThe general principle of good faith was first intro-duced in Article 7 of the Law and states: “The ap-plication for trade mark registration and the use

of trade marks should follow the principle of hon-esty and credibility.”

Nearly four years after its implementation, wecan see that administrative authorities considerthis article as an overarching principle and are re-luctant to rely on it alone to reject or invalidate atrade mark.

Occasionally, however, the authorities havetaken a more flexible approach, taking into ac-count different factors to find a violation of theprinciple of honesty and credibility.

For example, in the Chinese Trademark Of-fice (CTMO) Opposition Decision No 0000012861(2016), we were able to persuade the CTMO to re-ject registration of the mark on the basis thatthe applicant applied for registration of many73

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marks which were all identicalor similar to others’ registeredmarks and was therefore actingin bad faith and in breach of thegeneral principle in Article 7.

In the CTMO Opposition De-cision No 0000001877 (2017), wewere again successful in per-suading the CTMO to reject reg-istration of the mark AMWAY &device based on Article 7, takinginto account the fame of the op-ponent’s mark in China, the highlevel of similarity between themark in dispute and the oppo-nent’s mark, the close connec-tion between the designatedgoods/services and the fact thatthere was no reasonable expla-nation from the applicant onwhy it adopted the mark.

However, more often, thenotion of bad faith is used as afactor in support of other specificprovisions, especially on theground of “deceptive or other im-proper means” under Article44(1), and in finding similarmarks on similar goods/servicesunder Article 30.

Use of Article 44(1)against large volumesquattersArticle 44(1) of the Law providesthat any trade mark that has beenregistered through deceptive or other impropermeans may be invalidated. Although this articlewas already in the 2001 Trademark Law, prior tothe revision, it was considered to be applicable onlyto invalidate registered marks, but not as a groundto oppose trade mark applications.

However, after the implementation of theLaw, we see increasing reliance on this article toreject or invalidate trade marks where the appli-cant has copied many famous trade marks of oth-ers. In practice, the CTMO, the Trademark Reviewand Adjudication Board (TRAB) and the courts oc-casionally use Article 44(1) in combination withArticle 7.

In the TRAB Decision No 0000055952 (2017),we successfully obtained a ruling that the fact thatthe registrant applied for over 300 marks identicalor similar to other distinctive or well-known trademarks led to the finding that the registrant in-tended to copy others’ well-known trade marksthrough improper means pursuant to Article 44 ofthe Law, and that such improper trade mark reg-istration would disrupt the normal order of trademark registration and fair competition and istherefore in breach of the principle of good faith.

The CTMO rarely adjudi-cates cases together. Each case isgenerally adjudicated on its ownmerits. However, the CTMO uni-fied the adjudication of casesagainst Guangzhou 4399 Infor-mation Technology Co Ltd, whoapplied for more than 9000 trademarks, among which 210 appli-cations were challenged by dif-ferent right owners. The CTMOadjudicated 39 opposition casestogether and rejected all applica-tions on the basis that the mas-sive trade mark squatting by theapplicant was an act of bad faith.

Foreign brand owners maybe comforted by this trend asmany trade mark squatting activ-ities are operated by professionalentities holding hundreds oftrade marks. However, more re-cently, more sophisticated squat-ters have registered a number ofcompanies to hold trade marks,thereby lowering the total num-ber of trade marks held by eachcompany. Brand owners mayneed to prove that the applicantis related to well-known squat-ters, which may be difficult asthe syndicate may use differentindividuals (mostly relatives orfriends) to act as directors of thetrade mark holding companies.

Prior dealings The Law also expanded the circumstances wherethe authorities may reject or invalidate a trademark for the reason that it was squatted by a partyrelated to or who has had prior dealings with therightful owner.

Article 15(1) of the Law provides that a trademark which is squatted by its agent without therightful owner’s authorisation will be refused.Agent is further defined in Regulation 15 of the2017 Supreme People’s Court’s Interpretation onIssues Relating to Administrative Trademark Liti-gation Involving the Grant and Determination ofTrademark Rights (the SPC Interpretation) to in-clude trade mark agent or representative, salesagent or distributor and persons having a familyrelationship with the mentioned agent or repre-sentative.

Article 15(2) of the Law expanded this princi-pal-agent relationship, so that any attempt to regis-ter a mark by a party who (a) has a contractualrelationship, business relationship or other relation-ship with the trade mark owner and (b) shouldhave known the mark of the trade mark owner inregistering an identical or similar mark, will be74

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Anna Mae Koo Anna Mae Koo is a partner at Vivien Chan& Co, where she practises non-contentious,contentious and transactional intellectualproperty law. She advises on all areas of in-tellectual property, including licensing,franchising, due diligence, prosecution andunfair competition law in China and HongKong.

Ms Koo is a Techstars mentor and isinvolved in the litigation committee of theInternational Bar Association and the in-ternet committee of the InternationalTrademark Association. She is consistentlynamed as a Rising Star in intellectualproperty in Asialaw Leading Lawyers. Shewas a Prince Philip scholar at the Univer-sity of Cambridge, where she graduatedwith an MA in law.

refused. “Contractual or businessrelationship” includes a widerange of activities. According toPart 11.3 of the Examination Stan-dards issued by the TRAB in 2016(Standards), the relationship en-compasses sale and purchase, acontract for manufacture, a fran-chise (trade mark licence), in-vestors, sponsors or co-organisersin a joint event, business visits ornegotiations, advertising agencies,other commercial dealings andfamily relationships. Further, pur-suant to Regulation 16 of the SPCInterpretation, “other relation-ships” include family kinship, em-ployment relationships andgeographical proximity of busi-ness addresses.

The above would includecircumstances where the partiesare in negotiation for a principal-agency relationship or commer-cial relationship but have notestablished a legal relationship.

Part 11.3 of the standardshas further given examples ofevidence required to prove theexistence of such a special rela-tionship for example, contracts;letters, transaction documentsand procurement informationwhich may show an agreementor business dealing; corporatepayroll, labour contracts, socialinsurance, medical insurance materials or house-hold registration certificates.

In practice, in the common scenario where aformer shareholder or director of the original equip-ment manufacturer/distributor sets up a newshadow company in Hong Kong and registers thebrand owner’s trade mark in China, rightful ownersmay be able to convince the court via a detailedchain of evidence. An example of a complete chainof evidence to show a prior relationship would in-clude: (1) distribution contract between the originalequipment manufacturer/distributor and brandowner; (2) employment contract or other docu-ments between the current trade mark applicantand the manufacturer; (3) documents showingcommunication between brand owner and currenttrade mark applicant to demonstrate knowledge ofthe brand on the part of the applicant; (4) when thetrade mark applicant is a company, evidence show-ing the relationship between the former share-holder/director of the original equipmentmanufacturer/distributor and the current applicant.

While the above provisions have expandedthe legal scope of protection to the rightful owners,it remains difficult to obtain evidence to show that

the applicant of the trade markis a family member of the personwho has been in contact withthe rightful owner. Personal in-formation such as marriage cer-tificates and personalidentification cards showing afamily relationship are very dif-ficult to obtain.

Creative use of Article10(1)(7) against marksobviously benefitingfrom other parties’ fameArticle 10(1)(7) of the revisedTrademark Law prohibits theuse of deceptive marks whichwould mislead the public as toits features including the placeof origin. It was originally meantas an absolute ground for all re-fusals, preventing marks thatcontain misleading or deceptiveelements. In practice, the author-ities have in many opposition de-cisions extended Article 10(1)(7)to circumstances where the op-posed mark is found misleadingin connection to the trade origin.

For instance, in the CTMO Opposition Decision No 0000011239 (2016), wesuccessfully persuaded theCTMO to reject registrationof (ELAN ENGLISHEDUCATION TO HARVARD and

design) in Class 41 on the basis that the wordHarvard in the opposed mark was likely tomislead the consumers into believing that theapplicant was related to Harvard Universitywhich is well-known in the education field. It istherefore misleading as to the trade origin.

Similarly, in the CTMO Opposition DecisionNo 0000040841 (2016), we obtained a successfulCTMO recognition of the reputation of Alticor’smarks including 安利 (Amway in Chinese) and 安利Amway among consumers in China. It thereforerejected the registration of the same mark 安利 byan applicant in Class 35 (drug retail or wholesale)as consumers were likely to be misled into believ-ing that the services provided by the applicantwith the mark were provided by Alticor or relatedto Alticor in some other way.

This article is useful for brand owners with astrong reputation, helping them to combat otherbusiness entities trying to benefit from their fameby using similar marks in related industries, yetwith a mark that does not fall squarely within thesimilarity framework for both the mark and thegoods and/or services, or the strict requirementsof other articles.75

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Ann Xu Ann Xu is a trade mark attorney at VivienChan & Co with more than 20 years’ expe-rience in intellectual property cases inmainland China. She has trade mark,copyright and designs expertise. She regu-larly advises on prosecution and portfoliomanagement.

Ann is consistently nominated as anInternational Who’s Who TrademarkLawyer.

Combating trade mark squatting: aprime initiative of the CTMOAside from the above application of law, theCTMO has emphasised combating trade marksquatting as its prime objective in variousevents, including putting forward the followingmeasures.

The CTMO has actively rejected trade markapplications at substantive review stage whenthey are obvious bad faith filings. For example, theCTMO rejected an application where the appli-cant had applied for over 200 marks which weresimilar to well-known marks used on the same orsimilar goods or services including , and , ruling that the applicant intended tobenefit from others’ reputation and was in breachof the principle of good faith.

The CTMO is considering the development ofa database for suspected bad faith trade mark ap-plicants, and referring to such a database in theirofficial examination.

Examination timelines prescribedby the new law

General timelineThe Law has prescribed in detail the statutorytime limits for the CTMO and TRAB to deliver de-cisions. The CTMO must complete preliminaryexamination of new applications in nine months,non-use cancellation cases in nine to 12 monthsand opposition cases in 12-18 months. The TRABmust issue review on refusal of application andnon-use cancellation review in nine to 12 months,and opposition review and invalidation decisionsin 12-18 months.

In practice, the CTMO and TRAB have metsuch timeframes, and most recently have returneddecisions even earlier than the prescribed dead-lines. The CTMO and TRAB are still continuingtheir efforts to shorten the timeframe for trademark prosecution. In December 2017, the CTMOannounced its new goal to cut down the trademark examination period to six months and re-fusal review period to seven months by the end of2018.

Suspension in review cases The above statutory timeline is, however, also af-fecting the suspension practice of the TRAB.Where a trade mark application is subject to a pre-liminary refusal due to a prior similar mark, themost common tactic for the applicant is to file non-use cancellation, opposition or invalidationagainst the prior mark.

As such, it is a common practice to file a re-view against the refusal at the TRAB, and at thesame time apply for a suspension on the examina-tion of the review pending the outcome of any in-validation or non-use cancellation procedureregarding the cited mark. However, whether togrant the suspension is solely at the discretion ofthe examiner. As the TRAB is under pressure tocomplete the review process in nine to 12 months,the TRAB is reluctant to grant such suspensions.Currently, if the actions against the cited marksare initiated only when the applicant is officiallyinformed of the citation in the Notification of Re-fusal issued by the CTMO, the suspension requestwill not be accepted.

The TRAB would usually only suspend the re-view process if the non-use cancellation proce-dure against the cited mark is filed at the sametime or shortly after the trade mark applicationand if the non-use cancellation procedure is ex-pected to be concluded within half a year. Appli-cants are advised to conduct a pre-filing searchand take action against potential cited marks be-fore filing.

TRAB to issue all decisions onlineThe TRAB launched an online database in Decem-ber 2017 making all its decisions public and im-mediately available online, except for thoseconcerning trade secrets, personal privacy orother inappropriate elements.

This is a watershed moment for Chinesetrade mark practice, as the use of precedents willlikely become more prevalent and important. It isexpected that decisions will be published on thesite within 20 working days of being issued to therelevant parties.

Although China is yet to adopt a bindingprecedent system and each TRAB review case isdecided on its specific facts, such a database mayallow parties to refer to the evidence or argumentsmade by the counterparty in previous cases. It isyet to be seen how the court considers inconsis-tent evidence, self-admission or different positionsadopted by a party in different cases. Nevertheless,such a system may ensure the authorities actmore consistently in arriving at decisions.

The law continues to evolve with practicefour years later. The first four years have broughtmany improvements and we expect there to bemany more changes with practice, as the authori-ties move towards a higher degree of transparencywhen it comes to decisions. 76

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“Where a trade markapplication is subject to apreliminary refusal due to aprior similar mark, the mostcommon tactic for theapplicant is to file non-usecancellation, opposition orinvalidation against the priormark”