They are the scourge of China’s IP system, but thankfully victims of bad faith registrations have several ways to fight back, explains Sharon Qiao.

Bad faith trademark registrations are one of the most significant challenges facing international brands seeking to operate in China. The number of Chinese trademark registrations has grown significantly in recent years, reaching 5,750,000 in 2017. Of these, a substantial proportion are made in bad faith, with one individual having applied for more than 9,000 trademark registrations alone.[1]

The incentives for bad faith registrants are clear, whether it be to secure a financial settlement from the legitimate mark holder for the transfer of the mark, or via an infringement lawsuit, or to take advantage of foreign brands’ market reputation.

There are typically four types of bad faith registration that foreign companies encounter in China:

• Applications for registrations of foreign companies’ unregistered trademarks or transliteration of trade names before the foreign companies apply for relevant registrations.

• Applications for a similar trademark registration in a same/similar class.

• Applications for registrations of marks in other classes when the marks, which are owned by foreign companies, have an established market reputation in China.

• Applications for trademark registration by using the foreign companies’ trade names, newly launched product names or product types.

Tackling bad faith

Encouragingly, Chinese Trade Mark Law provides several methods through which  foreign companies can seek to fight bad faith registrations, including prior registrations/applications on same or similar goods (Art30), prior right such as copyright, trade name, design patent etc (Art 32)[2], prior use (Art 32), well-known trademark claim (Art 13), clause against trademark squatting by agent/representative (Art 15), clause against trademark obtained by using improper means (Art 44 (1)).

Of importance is the recent addition of the principles of honesty and trustworthiness into the Trade Mark Law of China (Art 7 of 2013 Revision). At first, foreign brands regarded this article as a positive and welcome signal that bad faith registrations could now be more effectively constrained. However, the implementation of this law has not been without difficulty or controversy, with the Trademark Review and Adjudication Board (TRAB) and the courts interpreting it as an article that cannot be applied alone. To date, it remains uncertain if (and how) the article can be applied alone. As such, it does not provide a ‘silver bullet’ solution. Nevertheless, what is certain is that the article would be applied in parallel with other relevant articles, or as a consideration in the application of other specific articles by the court – a welcome development for foreign brands seeking to protect their marks.

Court trends

Several recent trends in court practice give further encouragement to foreign mark holders.

Registering a large number of trademarks based on others’ reputable trademarks is deemed as improper means of Art 44(1).

In Shiseido Co, Ltd v TRAB, the TRAB judged that, because the cited trademark does not constitute a well-known trademark, the disputed trademark “怡丽丝尔YILISIER and the figure” should be sustained. However the court held that the third party had registered as many as 50 trademarks, within which there are multiple trademarks which are obviously copying others’ reputable marks such as “杜莎夫人Madame Tussauds”, “MeidiQi美第奇” and others – all of which are rarely used. The court further found that the third party should have been fully aware of the fact that the plaintiff’s cited trademarks had gained considerable reputation within the market. As a result, it was judged that the third party’s registration of the disputed trademarks on other classes should be considered as obtaining trademarks via improper means.[3]

According to court precedents, registering a large amount of trademarks in this way constituted a clear breach of the principle of honesty and trustworthiness and is thus deemed as using improper means.

Of course, this raises the question of how to define a “large amount”. There is no concrete answer thus far, but legal precedents indicate that just a few is insufficient and the court is inclined to adopt a number between 20 and 40.

When bad faith exists, the criteria of reputation evidence shall be lowered.

In the case of squatting prior used trademarks or trade names of other mark holders, it is generally required that the prior used trademark or trade name should be used in China and have obtained a certain level of reputation in the market. But if the squatter bears obvious bad faith or conducts other infringement or unfair competition, or if the prior used trademark or trade name have gained high reputation abroad, the court will lower the criteria of evidence to prove its use in China.[4]

When the applicant’s bad faith is obvious, it is much easier for the applied trademark to be ascertained as similar to the prior trademark – similarly with judgment on goods’ similarities.

In the Invalidation of “芭比国际鼎 BABIGUOJIDING”,[5] the infringing mark was designated upon a beverage. Although the prior trademark, BARBIE, was judged by TRAB not to be similar, the court nonetheless held that, given the high reputation of “BARBIE芭比” in the realm of children’s toys, its popularity could feasibly extend to juice beverages. It was further judged that the disputed trademark owner should be fully aware of this and thus cannot be treated as applying the registration with good faith. The court therefore declared the two to constitute similar trademarks.

Similarly, the TRAB and courts of both first and second instance all denied the similarity between the disputed trademark ‘Galitt’ and the cited trademark “Garrett盖瑞特”. However, the Supreme People’s Court (SPC) judged that the cited trademark has strong distinctiveness, having gained a significant reputation in China. Furthermore, due to the inability of the Chinese public to easily recognise and differentiate foreign words, it was likely Chinese consumers would confuse the two marks. The SPC therefore held them to be similar trademarks.[6] It is thus evident that the SPC tends to prevent bad faith registration in determining trademark similarity.

Besides, the judgments reveal the use of a key judicial principle: if it can be seen from relevant evidence that the applicant’s purpose is to free ride other proprietors, the court will break the limit of classification when determining whether the goods are similar, the criteria of which will also be looser.

The bad faith registrant filing an infringement lawsuit will be considered an abuse of right.

In the retrial case of “歌力思”,[7] the SPC overturned the judgment of first and second instance and held that the plaintiff’s lawsuit against defendant ELLASSAY, based on its bad faith registration constitutes an abuse of right. The SPC’s reasoning was that trademark No 7925873 “歌力思”, designated on a leather product owned by the plaintiff is, in terms of character composition, identical to the trade name and “歌力思” trademark previously registered on clothes products of ELLASSAY.

“歌力思” is a fanciful word without inherent meaning and has strong distinctiveness. As a result, it was deemed impossible for a similar registration to be made with no prior awareness or contact. The plaintiff had been operating in the leather products market in Guangzhou, Guangdong Province, a city located very near Shenzhen, where ELLASSAY is located. Given the geographical proximity and established commercial ties between the two cities, it was deemed highly unlikely that the plaintiff had no knowledge of ELLASSAY. Therefore, the plaintiff’s registration of No 7925873 trademark on a leather handbag – a fashion product closely connected with clothes – cannot be deemed as good faith.

The retrial judgment did not deny the effect of the registered trademark and still affirmed its validity. But if the trademark owner files a lawsuit against the party whose trademark right had been squatted, the trademark owner’s behaviour will be deemed as abuse of right and cannot be justified accordingly.

An important and current case is Fujian Qiaodan Sports Products Co Ltd v Nike Fujian Qiaodan, which claimed trademark infringement/unfair competition based on the registration of the “乔丹” trademark. The case was tried on 3 March by Jinjiang Court and we await the issuing of judgment. As the SPC concluded in retrial cases initiated by Michael Jordan that Fujian Qiaodan had bad faith by registering “乔丹”, based on previous SPC precedent, it is likely that the court will deem the litigation initiated by Fujian Qiaodan to constitute an abuse of right. We wait to see how this local court will judge.

In addition, the China Trademark Office (CTMO) classifies and summarises the typical types and cases of bad faith registration by optimising the process of review. During the review process, the bad faith application for registration (for example, free riding others’ goodwill, high numbers of registrations on dissimilar commodities squatting highpopularity trademarks, bad faith registration on others’ prior rights such as celebrities’ names, repeatable or continuous trademark squatting against the same corporate) will be strictly reviewed and shall be thrown out by the CTMO initially. Moreover, the CTMO

also concentrates on dealing with a group of trademark opposition cases regarding free riding other’s goodwill and trademark hoarding with bad faith, of which the cases are usually incorporated for judgment and the trademarks involved are denied to be registered.[8]

Footnotes

1. The trademarks in defensive registration are seldom used by the registrant, instead, they are registered to prevent others from registering them in other categories. Some big companies even apply for registration of the same trade mark for goods/services of all categories.

2. In the series of cases initiated by Nike v Fujian Qiaodan Sports Products Co, Ltd., Nike lost by using prior registered trademark “Michael Jordon”. However, in the series of cases Michael Jordon v Fujian Qiaodan, the SPC concluded that the disputed mark“乔丹”(Jordon in CC) is the corresponding name of Jordon and shouldn’t be registered, thus the SPC overturned both first, second instance judgment and the TRAB decision.

3. Beijing Intellectual Property Court (2016) Jing 73 Xing Chu No 1163.

4. Crocs claimed prior trade name right of “卡骆驰” (corresponding Chinese transliteration of Crocs), but no sufficient evidence to prove the prior use in China, the court supported Crocs as the other party had obvious bad faith by imitating Crocs shoes, etc. See Beijing Higher Peoples Court (2016) Jing Xing Zhong No 4.

5. Beijing Intellectual Property Court (2016) Jing 73 Xing Chu No 6045.

6. Supreme Court(2014)Xing Ti Zi No 33

7. Supreme Court(2014)Xing Ti Zi No 24

8. http://ip.people.com.cn/n1/2018/0110/ c179663-29756557.html