Fishing for infringements in PRC’s pool of dormant trademarks

Atrademark registrant has the exclusive right to use his registered trademark, and even if he has not actually used his registered trademark, his trademark rights should be accorded legal protection. However, the subject of protection under the PRC’s Trademark Law is not the mark itself, but the distinguishing function of the trademark and the commercial reputation established, so as to avoid confusion among consumers. The Trademark Law and the PRC laws and judicial practice have imposed certain limitations on the protection of registered trademarks that have not actually been used.

Application for cancellation

In reality, there are many registered trademarks that have not been used. It is because the Trademark Law does not require that a statement of intent to use the trademark be made at the time of registration, nor does it set actual use of a trademark as a condition of registration. It is a waste of public resources and may also impede the normal operations of others.

A trademark rights holder may use the trademark rights himself or license the rights to another. If a trademark registrant fails to use a registered trademark for a period of three years after successful registration, pursuant to Article 44 of the Trademark Law anyone may apply to the Trademark Office for the cancellation of that trademark. If the trademark registrant is unable to substantiate that he used his trademark during those three years, it could be cancelled.

Idle trademarks

Notwithstanding this, there still exists a large number of idle trademarks that “have been registered but are not used”. The reasons are the public has no interest in idle and irrelevant trademarks, and the Trademark Office will not proactively cancel those not used for three years. Another reason is that cancellation disputes often require a substantial amount of time and the cancellation procedure is quite involved, including: submitting a cancellation application to the Trademark Office; submitting an application to the Trademark Review and Adjudication Board (TRAB) for re-examination if dissatisfied with the ruling of the Trademark Office; and instituting an administrative action in a People’s Court if dissatisfied with the TRAB’s re-examination ruling.

Infringement and liability

Pursuant to the Trademark Law, if a third party uses a trademark that is identical to a registered trademark on identical or similar goods without the permission of the trademark registrant, infringement is constituted. The trademark registrant may request protection of his exclusive right to use his registered trademark, and whether such trademark has actually been used does not affect whether infringement is established.

However, in judicial practice, whether a trademark has actually been used is a factor that a court will consider when determining infringement. Pursuant to Articles 9 and 10 of the Interpretations of the Supreme People’s Court of Several Issues Concerning the Application of the Law in the Trial of Civil Dispute Cases Involving Trademarks, when determining whether the use of a similar trademark constitutes trademark infringement it is necessary to consider whether its degree of similarity is sufficient to cause confusion in the market, and consider the distinctiveness and notoriety of the registered trademark.

Red River Red dispute

In the “红河红” (read as Honghehong, which literally means “Red River Red”) trademark infringement dispute case tried in accordance with the retrial procedure, the Supreme People’s Court held that when determining infringement, besides comparing factors such as the font, pronunciation, meaning, etc., “it is necessary to consider whether its similarity will cause confusion in the market. Distinctiveness and actual use of the relevant trademark, whether an illegitimate intent was involved, etc. need to be considered in reaching a comprehensive determination”.

Accordingly, if the alleged infringer is able to substantiate that the registered trademark for which protection is claimed was never used, and the alleged infringing trademark has actually been used, giving rise to the distinguishing function, consumers will not be confused or mistake the marks. Accordingly, the alleged infringing trademark will not be found to be infringing.

Liability for infringement: in trademark infringement cases, “whether the registered trademark for which protection is claimed has actually been used” is also an important factor when a court determines the measure of damages for infringement. Pursuant to Article 7 of the Opinions on Intellectual Property Trial Service Under the Current Economic Situation issued by the Supreme People’s Court in 2009, if a registered trademark for which protection is claimed has not actually been used commercially, an injunction to desist from infringement may be used as the principal method of protection when determining civil liability.

When determining damages, if the trademark was not actually used, and if there were no actual losses or damage other than the reasonable expenses incurred to protect the rights, the damages are not to be determined based on the profits derived by the alleged infringer. If the registrant or transferee had no intention to actually use the registered trademark except for using it as an instrument to lodge claims, damages may be denied. If the registered trademark has not been used for three years in succession as specified in the Trademark Law, a claim for damages may be rejected. In judicial practice, if a registered trademark has not actually been used, the claim for infringement by a registered trademark rights holder will generally not be upheld.

Defence argument

Judicial relief for trademark infringement in the PRC favours protection of trademarks that are trademarks in actual reality and emphasises the interests arising from actual use. If a trademark registrant accuses a business operator of infringing his exclusive right to use his trademark in his business operations, the business operator should first determine whether such trademark has actually been used. If such trademark has not been used, and if the alleged infringing trademark is not completely identical in form to the protected trademark, the alleged infringing party may defend that the trademark that has not undergone commercial use has not given rise to the distinguishing function and cannot cause confusion, and therefore no infringement is constituted. Such a defence argument will generally be upheld by the court.

Where the alleged infringing trademark is identical to the protected trademark, the alleged infringing party may assert that the trademark that has not undergone commercial use does not have true market benefits, therefore no losses exist.

Wang Yadong is the executive partner and Li Min is a partner at Run Ming Law Office.