How tough is bad-faith trademark filing getting?

Since 2008, the development of intellectual property has been a national priority in China. As for trademarks, the volume of applications has consistently grown in the past 15 years, reaching the staggering number of 3.69 million in 2016.

One consequence is the proliferation of so-called “pre-emptive trademark applications” filed in bad faith. The central government is increasingly aware of this situation. The revised Trademark Law, effective since May 2014, had already introduced, apart from the general principle of good faith in article 7, some specific 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 prior unregistered trademark.

On 10 January 2017, the Supreme People’s Court (SPC) issued the Provisions on Several Issues Concerning the Hearing of Administrative Cases Involving the Granting and Affirmation of Trademark Rights, which entered into effect on 1 March 2017. According to provision 15, the terms “agent” or “representative” in article 15.1 of the Trademark Law should be construed widely and include any persons having a kin or any 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 of the law covers a wide range of circumstances, including family relationship, labour relations, business location in the proximity, and unconcluded negotiations, as provided in provision 16.

Regarding the concept of “bad faith registration”, the SPC introduces, in provision 25, 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 reputation of the cited trademark is high, the court may presume that the litigious trademark has been filed in bad faith, unless the applicant can prove proper cause for such filing.

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

• Updating and adjusting the Classification of Similar Goods and Services. China uses a special goods and services classification system in which each class is further categorized into different subclasses. When subclasses are categorized as non-similar, this may create opportunities for filing bad faith pre-emptive applications. For example, prior to the adjustment, “clothing” and “layette” were considered dissimilar, so that a prior mark 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 similar products, and therefore no coexistence of identical or similar trademarks can occur in these classes.
• Making use of the “big data”. The State Administration for Industry and Commerce (SAIC) and local AICs are constructing a national system to keep a record of 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, allowing 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 emphasize 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 that merely consist of purchasing and selling trademarks to make profits are not encouraged.

The SPC and the Beijing IP Court are also 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 (SPC’s Guiding Case No. 82, Wang Suiyong vs Ellassay et al), in which 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 must 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 future, could have a strong impact on bad faith filing activities.

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

• Take into account the circumstance where the applicant’s bad faith has been confirmed in a previous case;
• Publish “bad faith” cases by specifying the names of the trademark agencies and attorneys who represent the bad-faith trademark applicant;
• Increase the burden of proof on trademark agencies when they are suspected of violating articles of the law concerning good faith; and
• Strengthen co-ordination and communication with other administrations to attack bad-faith filings.

Meanwhile, the Beijing IP Court simultaneously publicized 18 typical cases concerning bad-faith trademark filing, including well-known trademarks, filing by the agent, filing a prior used trademark with a certain reputation, massive filing of trademarks without the intention of use, and filing a celebrity’s personal name.

This shows the determination of the central government and the courts to fight bad-faith trademark filing. However, success is never guaranteed, bad-faith cases remain difficult and proof of bad faith is never easy to make. Time will tell if more severe actions are necessary.

Author: Ren Haiyan is a senior partner and Lei Yongjian is a partner at Wan Hui Da