China: Protecting Your Trade Mark In China Early In A Brand Lifecycle

Last Updated: 16 February 2016
Article by Keeley Millar and Peggy Zhu

Opposing trade marks in China on the basis of prior unregistered rights has, thanks to the trade mark law implemented in 2014, become more difficult. The changes to the law, originally welcome by practitioners and rights holders hoping they would improve trade mark enforcement, have underlined the importance of registering trade marks early on in a brand's lifecycle.

A right holder can rely on a number of grounds for filing opposition against a third party mark in China. However, the opponent must prove (at the time of filing the opposition) that they hold prior rights over the opposed mark or that they are an interested party qualified to use the ground relied upon. If an opponent fails to prove this to the standards of the Opposition Formalities Examination Department of the Chinese Trade Mark Office (CTMO), a 'motion to dismiss' the opposition will be issued. This discretionary power is not a new one but the circumstances that give rise to it have been updated under the revised law making it much harder for opponents relying only on prior use, to oppose a mark.

The question now being asked is, how does an opponent prove that they are a holder of prior rights or, how do they prove that they are an interested party to avoid their opposition being dismissed? Unfortunately, the CTMO has not yet issued any official guidelines or practice directions to assist opponents, other than those found in Article 26 of the Regulation on Implementation of the China Trade Mark Law. The Article states that a motion to dismiss may be issued if the qualification as an opponent and the reason for an opposition do not comply with the provisions of Chinese trade mark law or, there is no clear reason, fact or legal basis for an opposition.
 
The 'qualification as an opponent' is a new requirement and, we are told, is the primary trigger for the issuance of a motion to dismiss. The CTMO states that the proof of qualification must include a certificate of identity to show the opponent is a legal entity and proof verifying the opponent has prior rights over the opposed mark or is an interested party. The only certain way of proving the latter is by showing the CTMO a Chinese registration certificate. If an opponent does not own registered rights in China, their opposition is ultimately in the hands of a CTMO examiner, who has absolute discretion as to what other types of evidence may be deemed acceptable.

Discussions with other Chinese practitioners and CTMO examiners suggest that the following information must be explicitly filed with the opposition to try and avoid a motion to dismiss: evidence showing that the opponent is the user of the mark, the use is commercial in nature and occurs in mainland China, the mark in use is identical or similar to the mark applied-for and the date of use by the opponent must pre-date the filing of the application. It is uncertain whether proof of the manufacturing of goods for export without a commercial presence in China is sufficient to avoid a motion to dismiss.
 
If a motion to dismiss is issued, it is possible to contest the dismissal by filing an Application for Review to the Trade Mark Review Adjudication Board (TRAB) or by filing a law suit to the Beijing IP Court. The purpose of both actions is to persuade the TRAB or Court that the opponent possesses sufficient rights to oppose the mark and, if they agree, they will order the CTMO to retrieve its motion to dismiss and to substantively examine the opposition.

However, it is highly unlikely that the TRAB or Court will set aside a motion to dismiss once issued by the CTMO. A further point to note is that whilst waiting for the TRAB or Court to review the motion to dismiss and issue a decision, there is a high chance that the opposed application will proceed to registration.

For clients finding themselves in this situation, it is often preferable to wait for the subject application to achieve registration and apply to invalidate the mark on the same grounds previously used to oppose the mark. The invalidation action will be decided by the TRAB, which does not have the same power as the CTMO to dismiss an opposition without considering the evidence first.

Businesses that use their trade mark(s) in China or manufacture goods for export, should seek trade mark protection at an early stage. The consequences of not doing so are considerable. China operates a first-to-file system where unregistered rights are very difficult to enforce. If a third party beats you to the post and registers your mark in China, you could find yourself at the other end of a trade mark infringement action and risk paying out large sums of money in compensation, as well as having to re-brand. In our previous article, we discussed a decision involving the brand New Balance, which found itself in a similar situation and was ordered to pay a Chinese individual approximately US$16 million in compensation.

In order to try and avoid this, it is critical that foreign business owners carry out clearance searches to assess whether their mark is free for use and registration in China, and if all is clear, that they apply to register their mark in China at an early stage, ideally before any manufacturing or use has taken place.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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