China: Prior User Rights In Chinese Trademark Law

Last Updated: 14 April 2016
Article by Unitalen Attorneys At Law

INTRODUCTION

The present Trademark Law of the People's Republic of China was enacted in 1982 and subsequently amended in 1993, 2001 and 2013 respectively. On the one hand, in China, trademark registration has been long adopted as the dominant and traditional means of obtaining exclusive rights in a trademark, albeit the principle of voluntary registration is well established. Under most circumstance, the date of use is not one of examining standards except where more than two similar or identical trademark applications are filed on the same date. In this scenario, the mark with the earliest date of use shall be granted protection. On the other, the very existence of the principle of voluntary registration theoretically results in the legitimacy of unregistered trademarks. Thus, both registered and unregistered trademarks co-exist in Chinese economic life. Under certain circumstances, unregistered trademarks are granted modest protection. For instance, Article 13(2) illustrates protection of unregistered well-known trademarks, which applies only when the later-filed application and the prior unregistered well-known mark constitute similar or identical trademarks in terms of similar goods or services. Besides, Article 15(1) prohibits an agent or representative, without the authorization of the principal, from registering the principal's trademark and registration in the agent's name. In the newly amended Trademark Law, Article 15(2) even tries to stop an applicant from registering a prior user's mark, where the applicant's knowledge of the said mark came from prior contractual agreement or business relationship between the applicant and the prior user. Notably, Article 32 utterly forbids a trademark applicant from registering in an unfair manner a mark that is already in use by another party which enjoys substantial influence. The aforementioned stipulations, to some extent, serve to restrain the increasingly fierce trademark preemption in China. Yet, the past few years witnessed a fact that infringements upon prior users' legitimate rights in unregistered trademarks are not less. Among those 'trademark squatters', some indeed have no prior knowledge of the unregistered mark which enjoys substantial influence. Under such circumstances, it is hard to say that the later registrations were obtained in bad faith. However, to skirt relevant laws and regulations, some registrants might have registered prior marks, for instance, in the name of shell companies. In this scenario, it is significantly difficult, if not impossible, for prior users to resort to regular legal means to defend their rights. As some local authorities rigidly stick to the principle of trademark registration, once registrations are granted to later registrants, prior users may have to immediately cease using their marks and may even be facing penalization of damages. It is obviously unfair, for prior users whose marks enjoy substantial influence, to face such potential legal risks. As such, there is an urgent need for legislation of prior user rights. The very stipulation of prior user rights in the newly amended Trademark Law not only embodies the principle of bona fides but also encourages fair competition among market participants. In the following parts, the denotation and connotation of prior user rights will be construed in detail. The application of prior user rights will also be analyzed.

LEGAL INTERPRETATION

1. Concept of Prior User Rights

Article 59(3) in the Trademark Law explicitly stipulated an exception to the principle of trademark registration, namely the prior user rights, which reads 'Where an identical or similar trademark has been used in connection with the same goods or similar goods by others before the registrant's application, the exclusive right holder of the said registered trademark shall have no right to prohibit prior users from using the aforesaid trademark from continuous use of such trademark within the original scope, but may request its prior users to add proper marks for distinction.' The legislative intent of Article 59(3) is to grant modest protection to trademarks which become readily distinguishable through prior commercial use, to ease the conflict of interest between prior users and later registrants and to maintain fair competition in the marketplace.

2. Applying Conditions of Prior User Rights

Being dissimilar to exclusive right in a registered trademark regarding scope and degree, prior user right is merely counterplead right and has been strictly limited to the original scope of use. The application of prior user rights shall meet the following conditions.

2.1 Prior Use before the Filing date of the Later Registration

As the concept suggest, there should always be 'prior use'. Generally speaking, the time of use of a mark shall be calculated as from its first commercial use, which is before the filing date of the later registration. It would be false proposition if the use of a prior mark is later than the filing date of the later registration.

2.2 Prior Use before the Later Registrant' First Commercial Use

According to Article 59(3) in the Trademark Law, the prior user shall not only have used the concerned mark earlier than its filing date but also before the later registrant's first date of commercial use. For instance, if the filing date of the later registration is January 1, 2015 while the registrant started to commercially use the mark on January 1, 2014, then the prior user who objects the later registration shall be able to prove his use of the mark before January 1, 2014 rather than January 1, 2015.

2.3 Similarity/Identity of the Prior Mark and the Later Registration regarding Similar /Identical Goods or Services

Doubtlessly, to defend prior user rights, the prior mark and the later registration shall constitute similar or identical marks regarding similar or identical goods or services. If the said condition is not met, there will be no conflict of interest between the prior user of an unregistered mark and a later registrant. Then it will be unnecessary and impossible to defend prior user rights.

2.4 Substantial Influence Enjoyed by the Prior Mark

To defend prior user rights, the prior mark is required to enjoy substantial influence among relevant Chinese public within a certain geographical area. If the prior user could not prove the substantial influence enjoyed by his prior used mark, he is in no position to claim prior user rights and is not entitled to continue using the mark. The requirement of substantial influence could be considered as a compromise between the institution of prior user rights and the long established principle of trademark registration. On the one hand, if no protection is granted to a prior mark which becomes readily distinguishable since it enjoys substantial influence, it is visibly unfair to the prior user. On the other, where a prior user objects a later registration, the onus probandi lies on the prior user to show the substantial influence of the prior used mark. Without the requirement of substantial influence, the exclusive right of the later registrant could not be ensured and the principle of trademark registration would be weakened and easily challenged.

2.5 Bona Fides of Prior Users

In China, it is still disputable whether the prior use of a mark shall be in bona fides. In Japan and Taiwan, it is explicitly required that the prior user shall be using the mark in good faith. Yet, there is no such requirement for the state of mind of the prior user in UK and US. In US, the trademark law attaches more importance to the consequences of the prior use, i.e. such use shall not confuse or defraud the public. Although the amended Trademark Law does not throw a light on the state of mind of the prior user, according to relevant laws and regulations and the legal practice in the aforesaid countries or regions, it is not unreasonable to examine bona fides of the prior user where he objects a later registration and claims prior user rights.

3. Application of Prior User Rights

According to Article 59(3) in the Trademark Law, where prior user rights are claimed, 'the exclusive right holder of said registered trademark shall have no right to prohibit prior users from using the aforesaid trademark from continuous use of such trademark within the original scope, but may request its prior users to add proper marks for distinction.' To be specific, the application of prior user rights shall meet the following conditions.

3.1 Continuous Use of a Prior Mark within the Original Scope

The 'original scope' shall be inclusive of three aspects, i.e., the original geographical area, the original representation of the mark and the original goods or services specifications. Firstly, to strike a balance of interest between the prior user and the later registrant, the prior user shall keep his continuous use of the mark within the original geographical area and such use could not be expanded to other geographical areas at will. It is worth noting that we shall always stick to the 'substantial influence' standard when examining the original geographical area. In other words, a prior user could only continue using his mark within the area where the prior mark enjoys substantial influence. However, in light of the soaring e-commerce in Chinese markets, it requires to weigh and consider in practice on how to determine the geographical area when e-marketing is involved. Secondly, the prior user shall not alter the original mark representation at will in his continuous use. Nonetheless, the alternation of the original mark representation shall be allowed if the prior user only does so to better distinguish his mark from the later registration. Lastly, the continuous use of the prior mark shall be exclusively confined to the original goods or services.

3.2 Later Registrants may Request Prior Users to Add Proper Marks for Distinction

If a later registrant deems that the prior mark is apt to confuse the public over the source of goods or services, he may request a prior user to add proper marks to the unregistered prior mark for distinction. Legally speaking, this is to grant the later registrant a right to request, in order to counterbalance prior user rights and to defend his exclusive rights in the registered mark. If a later registrant requests a prior user to do so but the latter refuses, the latter shall cease using the prior mark. What if a later registrant does not request so? Will a prior user be obligated to avoid confusion by adding proper marks to the prior mark? In line with the principle of fairness, prior user rights in unregistered marks and exclusive rights in registered marks shall refrain from invading each other. To better protect a later registrant and consumers, it is fair to impose a duty on a prior user to avoid confusing or misleading the public over the source of goods or services.

CONCLUSION

The prior user rights institution has been in existence in many countries and regions and is generating positive legal effects. As one of basic trademark institutions, the institution of prior user rights in the Trademark Law of the People's Republic of China well embodies the principle of fairness. Meanwhile, the prior user rights institution tries hard to strike a balance of legitimate rights among prior users, later registrants as well as consumers. The prior user rights institution also serves to better coordinate trademark use with trademark registration. It could be concluded that better protection has been granted to unregistered prior marks and more importance has been attached to the use of trademark. This also implies more emphasis on practical commercial use of trademarks.

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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