China: What To Expect From The SPC's New Trademark Judicial Interpretation?

In 2014, the Supreme People's Court (SPC) circulated a draft and collected comments, after which the draft was significantly revised. This final version of the Provisions has been adopted at the 1703rd meeting of the Judicial Committee of the SPC on December 12, 2016 and will enter into effect on March 1, 2017.

The Provisions brings very useful guidance for the Beijing IP Court (1st instance) and the Beijing High Court (2nd instance), in relation to appeals filed against decisions of the Trademark Review and Adjudication Board (TRAB).

The 31 articles of these Provisions address a variety of situations, the main ones being related to "absolute grounds" of refusal, "relative grounds" of refusal, "bad faith" applications, other prior rights (copyright, name right etc.), the "use" of a trademark, and several procedural issues. The Provisions refers to the relevant articles of the Trademark Law (L. --- ) and to its own articles (Provisions --).

Absolute grounds

Prohibited signs (L.10)

Regarding the use of State names (L. 10.1.1), the Provisions recommends to look at the trademark "as a whole". This means that even if a trademark contains the name of a State, if the mark is not, as a whole, similar to such name and if the registration of the mark would not be "detrimental to the national dignity", the mark may be registered (Provisions 3).

The interpretation of the term "deceptive signs", in L. 10.1.7, may be made by reference to the same article of the 2001 version of the Trademark Law: "exaggeration and fraud in advertising". (Provisions 4).

The expression "having other unhealthy influence" (L.10.1.8) refers to where the filing of a trademark has a "negative or adverse effect on China's public interests", which, for example, may be the result of the filing of the name of a public figure in the political, economic, cultural, religious, ethnic or other field" (Provisions 5).

Geographical names (Chinese places above the County level or foreign places known to the public) are, in principle, prohibited under L.10.2. However, they may still be used if the sign, as a whole, has a meaning that allows distinction from the geographical name (Provisions 6).

Distinctiveness (L.11)

Signs that are the generic name of a product may not be registered as trademarks (L.11.1).

However, the sign must be examined "as a whole". If the sign contains a descriptive element, while such element does not affect the distinctiveness of the sign, or if the descriptive sign is presented in a special manner so as to serve as a source identifier, the sign may be registered as a trademark (Provisions 7).

In order to determine whether a sign is generic, the Court should verify if it is commonly perceived as such by the relevant public, and may refer to professional reference books, dictionaries etc.  Such perception of the public may also be determined by reference to historical tradition, local customs and practices, geographical environment or other reasons. The Court should also consider the subjective knowledge of the applicant (who knows or should know that its trademark has become generic). Finally, the assessment should be made as of the time of filing of the application. However, if the situation has changed at the time of approval the court may base its decision on the time of registration.

Where foreign language is used, it may happen that the foreign words have a descriptive inherent meaning, and should, in principle, be refused for registration as a trademark. However, if the relevant public is hardly aware of the meaning of such word, the mark may still function as a source identifier and be registered. (Provisions 8).

Signs that are descriptive may not be registered as trademarks (L.11.2 ). This is the case for signs that merely or mainly describe the features etc. of the goods or services designated by the application. However, if the sign only insinuates the features of the goods... but does not affect its identifying function, the mark may be registered.

3D trademarks (L.12)

The registration of such a sign remains very difficult. If, under most circumstances, the relevant public is not likely to take the sign as a source identifier, the mark may not be registered. Furthermore, the fact that the sign has been originally created by or firstly used by the applicant does not necessarily prove that it is distinctive. However, it is possible to rely on acquired distinctiveness through long term or extensive use (Provisions 9).

 Relative grounds

Unregistered well-known trademark (L.13.2)

The owner of an unregistered trademark may oppose or invalidate a litigious trademark by claiming that such trademark is a "duplication, imitation or translation" of its trademark, provided that the owner can prove that (1) its trademark, even though not registered in China, is well-known in China (L.13.2) and (2) that the registration of the litigious trademark is likely to cause confusion. For the determination of the likelihood of confusion, the Provisions enumerates the following factors to be considered by the Courts:

 The extent of similarity of the trademarks;

  1. The extent of similarity of the goods on which the trademarks are designated to be used;
  2. The extent of distinctiveness and reputation of the trademark that requests protection;
  3. The degree of attention of the relevant public; and
  4. Other pertinent factors.

 The Provisions make an additional comment to the above list: the "intention" of the applicant and the evidence of actual confusion may also be taken into consideration, but - and this has been specified by a judge of the SPC during a conference introducing the Provisions – the lack of evidence concerning the intentions of the applicant or any actual confusion will not have any negative impact.

This article (Provisions 12) may be compared to the previous Opinions of the SPC, published in 2010 and 2011, where the SPC advised the Courts to take the reputation of both trademarks - the cited trademark and the litigious trademark – when assessing the similarity and the likelihood of confusion. This was called the "inclusive development theory".

The theory seems to be abandoned.

Registered well-known trademark (L.13.3)

The Provisions, then, addresses the situation covered by L. 13.3: the owner of a registered well-known trademark opposes the application, or requests the invalidation, of an identical or similar trademark designating dissimilar goods or services (Provisions 13). Interestingly, however, the Provisions does not use the word dissimilar. It may be implied, though, but as we shall see when examining Provisions 14, this omission might be voluntary. The court is to examine whether the litigious trademark is likely to cause a certain degree of association, so as to mislead the public and harm the interests of the well-known trademark owner. Such examination is to be made by considering the following factors:

 The distinctiveness and extent of reputation of the Cited trademark;

  1. Whether the trademarks are sufficiently  similar;
  2. The goods on which the trademarks are designated to be used;
  3. The extent of overlapping of the relevant public and the degree of attention thereof;
  4. Signs similar to the Cited trademark that are legitimately used by other market entities or other pertinent factors.

 Again, it may be noted that no reference is made to the reputation of the litigious trademark reputation, which confirms the abandonment of the "inclusive development theory".

Provisions 25 introduces what appears to be the implementation of a ruling made by the SPC, on May 19, 2016, in the case P&G vs. TRAB and Weishida. In this case, P&G requested the invalidation of the Weishida trademark, more than five years after the registration date. Therefore, pursuant to article 41.2 (now renumbered 45.1) of the Trademark Law, P&G needed to prove that its trademark was well-known at the date of filing of the litigious trademark, and that the litigious trademark has been applied in bad faith. But another difficulty was to be overcome: the protection of a registered well-known trademark, as provided in the law (L.13), only applies to cases where the litigious trademark is used on dissimilar goods. In this case, the goods were identical. Yet, the SPC ruled that article 13 could apply even if the goods are identical.

According to Provisions 14, if a party files an opposition of an invalidation action against a litigious trademark, claiming that its trademark is well-known, and the TRAB rules in favour of such claim on the basis of Article L.30  of the law (whereas such article concerns the protection of any trademark, even not well-known, against identical or similar trademarks designating identical or similar goods), the Court may apply Article L.30 if the trademark has been registered for  less than 5 years, or apply Article L.13.3, if the trademark has been registered for more than five years.

From this provision, it appears that the SPC agrees that a trademark owner may invoke Article 13.3 (in addition to article L.30) even when the litigious trademark is applied or registered for identical or similar goods. Indeed, if Article L.13.3 can be applied, after the 5 years, to a litigious trademark that would have been refused or invalidated pursuant to Article L.30 (within 5 years), it is obvious that the "dissimilar goods" condition is no longer required for the application of such Article 13.3.

Unregistered trademark with a certain influence (L.32)

If the opponent or invalidation applicant cannot prove that his trademark is well-known, it is still possible to successfully oppose, or invalidate, a trademark that has been applied or registered "preemptively by unfair means" (L.32). The owner of the cited trademark must prove that the trademark has been used in China and has acquired a certain influence, and must also address the "unfair means" issue.  Here, the Provisions brings some assistance (Provisions 23):  if the applicant of the litigious trademark definitely knew or should have known of the existence of the prior trademark, this may be presumed to constitute pre-emptive registration by unfair means, unless the applicant adduces evidence to prove that he has no bad faith in exploiting the reputation of the prior used trademark". So, provided sufficient of prior use is adduced, the SPC considers that the burden of proof should be reversed onto the litigious trademark applicant.

Regarding the evidence proving a certain influence, the Provisions give examples such as continuous use for a certain period of time of a certain geographical coverage.  And, to be perfectly clear, the Provisions adds that article L.32 only applies to trademarks filed on identical or similar goods or services.

Other prior rights, copyright, name right etc. (L.32)

If the prior right cited under L.32 is another civil right, such right must be valid not only before the date of the litigious trademark application but also at the time of the approval of the trademark (Provisions 18).

Provisions 19 to 22 stipulate details explaining how to prove the ownership of copyright and the conditions for obtaining protection of the name, of a pseudonym, of a trade name, of a character image.

Bad faith

Provisions 15 and 16 provide details concerning the interpretation of L. 15.1 and L.15.2. For example, the terms agent or representative used in L.15.1 should be construed widely as including any kind of intermediary in the sense of sales agency, and should include persons having a kin or any specific relationship with such agent, and even if negotiation have taken place without being concluded. Likewise, the term "other relations" used in L.15.2 covers a wide range of circumstances (family relationship, labour relation, business location in the proximity, un-concluded negotiations).

Finally, Provisions 25 deals with another aspect of article L.45.1 which is the "bad faith registration" of the litigious trademark. Here, the SPC introduces two new ideas.

First, the Court should examine, not only, the intentions of the litigious trademark applicant (at the time of filing), but also, the status of use of the litigious trademark, which implies to consider facts that occurred after the date of filing. This is also the application of the abovementioned ruling on P&G vs. TRAB and Weishida.

And secondly, where the reputation of the cited trademark is high, the Court may presume that the litigious trademark as filed in bad faith, unless the applicant can prove proper cause for such filing. This is the same reversal of the burden of proof as provided in Provisions 23.

Use of a trademark (L.49.2)

Provisions 26 clarifies the conditions for the revocation based on 3 year non-use, as stipulated in L.49.2. For example, if the used trademark has only a subtle difference with the registered trademark, this constitutes valid use.  Showing the intent to use through necessary preparation may serve as a "proper reason" for the mark not to be (yet) in use. On the other hand, the mere fact of signing an assignment of license agreement, in the absence of actual use, is insufficient.

Procedural issues

Finally, the Provisions contain a few articles (Provisions 2 and Provisions 27 to 30) that address procedural technicalities.

Provision 2 stipulates that, the court may, ex officio, raise a legal ground that a plaintiff had not raised in the administrative litigation, in order to rectify a decision that appears obviously inappropriate.

Provision 28 clarifies a situation that occurs very frequently: (i) a trademark is refused on account of a prior right, (ii) the applicant files a review with the TRAB and at the same time a procedure against such prior right, but the procedure is still pending when the TRAB makes its ruling (which confirms the refusal). Then, the case is referred to the Court. The Provisions stipulate that, if the prior right obstacle has been removed ("new facts"), the Court may order the TRAB to re-make its decision (even though such decision was correct at the time).

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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