Legal update: Bad faith trademark filing

Since 2008, the development of intellectual property has been determined as a national priority in China. As for trademarks, the volume of applications, which has consistently grown over the last 15 years, reached the staggering number of 3.69 million in 2016.

One of the consequences is the proliferation of so-called 'pre-emptive trademark applications', filed in bad faith.

The Chinese government is increasingly aware of this situation.

The revised Trademark Law, effective since May 2014, had already introduced some measures in article 15.2. This article provides that trademark applications should be refused where they are made by persons who, for various reasons, are fully aware of the existence of a trademark that has not yet been registered.

The Supreme People's Court recently published an official interpretation of the revised law. On January 10 2017, the SPC issued the Provisions on Several Issues Concerning the Hearing of Administrative Cases Involving the Granting and Affirmation of Trademark Rights (Provisions), which entered into effect on March 1 2017.

According to the Provisions, the terms 'agent' and 'representative' in article 15.1 of the Trademark Law, should be construed widely and include any persons who are related by family or who have any other specific relationship with such an agent, even if negotiations have taken place without being concluded. Likewise, the term 'other relations' used in article 15.2 covers a wide range of circumstances, including a family relationship, labour relations, a business location in the proximity, and unconcluded negotiations.

Regarding the concept of 'bad faith registration', the SPC introduces two new ideas: (1) the demonstration of bad faith is not restricted to the time of filing of the litigious trademark (which is often difficult), and the court may also take into account facts that occurred after the date of filing, such as the manner in which the litigious trademark is being used; and, (2) where the cited trademark has a prominent reputation, the court may presume that the litigious trademark has been filed in bad faith, unless the applicant can prove proper cause for the filing.

The China Trademark Office and Trademark Review and Adjudication Board are also taking concrete measures:

  • Updating and adjusting the classification of similar goods and services. China uses a very special goods/services classification system in which each class is further categorised into different subclasses. When subclasses are categorised as non-similar, this may create opportunities for filing bad faith pre-emptive applications. For example, before the adjustment, 'clothing' and 'layette' were considered dissimilar so that a mark already registered for clothing could not block the registration of the same mark on layettes. However, under the revised classification guide, clothing and layette are now considered as similar products, and therefore, no coexistence of identical or similar trademarks could occur in these classes.
  • Making use of 'big data': SAIC and local AICs are constructing a national system to keep records on illegal activities in the market via big data supervision. This includes bad-faith trademark filing. Whenever an administrative decision is made concerning such a case, it is put on record. This allows the collaboration between various branches of the administration. For instance, an opposition will be more easily supported by the Trademark Office if a local AIC has already taken a raid action against the opposed trademark.
  • It is possible to combine several cases together (oppositions by different opponents against the same party) which helps to deal with large-scale bad-faith applications. The average success rate for oppositions has increased to nearly 30% from less than 10%.

More generally, the authorities emphasise that a trademark is to serve as an indicator of the origin of goods and services, and is not an asset per se. So, the activities which merely consist of purchasing and selling trademarks to make profit are not encouraged.

The Supreme People's Court (SPC) and the Beijing IP Court also are acting to fight against bad-faith filings by publishing typical precedents.

In March 2017, the Judicial Committee of the SPC published, as a 'guiding case' (therefore binding on lower courts) a judgment rendered by the SPC in August 2014 in a retrial procedure. In this judgment the court stressed that, 'where a party, through bad faith trademark registration and malicious lawsuit, violates the principle of good faith, damages the legal interests of another person and disturbs the market order, courts should not support the claim because such acts amount to an abuse of rights'. In this case, the infringement action launched by the (bad faith) trademark owner was dismissed, even though the trademark was still valid.

Such a decision, if repeatedly confirmed by people's courts in the future, could have a strong impact on bad faith filing activities.

On April 24 2017, two days before World IP Day, the Beijing IP Court held a press conference concerning how it deals with bad-faith filing:

  • Taking into account the circumstances where the applicant's bad faith has been confirmed in a previous case.
  • Publishing bad faith cases by specifying the names of the trademark agencies and attorneys who represent the bad-faith trademark applicant.
  • Increasing the burden of proof on trademark agencies when they are suspicious of violating some articles of the law concerning good faith.
  • Strengthening coordination and communication with other administrations to attack bad-faith filings.

Meanwhile, the Beijing IP Court simultaneously publicised 18 typical cases concerning bad-faith trademark filing (well-known trademarks, filing by an agent, filing a previously used trademark with a certain reputation, massive filing of trademarks without the intention of use, and filing a celebrity's personal name).

All the above shows the determination of the Chinese government and courts to fight against bad-faith trademark filing. However, success is never guaranteed. Bad faith cases remain difficult and proof of bad faith is never easy to establish. Time will tell if more severe actions are necessary.