Trademark rights are key drivers for enterprises to create and develop brands of their own. In trademark right establishment and enforcement, trademark reputation is crucial. Although companies are generally aware of the positive correlation between brand reputation and their business performance metrics, such as product profitability and market share, few of them have asked themselves seriously, from a legal perspective, how important trademark reputation is in brand building and protection, or how trademark reputation can be proved in legal proceedings.
Positive correlation between trademark reputation and level of legal protection. Given the “first to file” principle, according to which trademark rights are granted to whoever has a trademark registration approved first, the PRC trademark legislation focuses on protecting registered trademarks when trademark right validation and protection is involved. As a rule that applies to both ordinary and well-known trademarks, trademarks that enjoy greater reputation are entitled to a higher level of legal protection.
Not all unregistered trademarks are excluded from protection, though. In order to be entitled to effective protection, an unregistered trademark must have a certain level of reputation and influence. In this regard, two emerging phenomenon are worthy of attention. On the one hand, the Trademark Office of the State Administration for Industry and Commerce (SAIC) has rejected some bad-faith registrations at the trademark review stage. These involved applications against the principle of good faith, or filed by trademark squatters, or seeking to profit from the goodwill of other trademarks. This move to take regulatory measures against malicious applications since the application stage is expected to steer trademark applicants and registrants in a correct direction.
On the other hand, the Supreme People’s Court (SPC) has made it clear, in the guiding cases and some other cases it releases, that trademark infringement claims lodged by trademark holders who have obtained registration against the principle of good faith will be overturned on the ground of abuse of rights by the registrants. These cases not only signify significant deterrence to malicious trademark registrations, but also stronger protection for unregistered trademarks with a certain level of reputation and influence.
The implications of trademark reputation on lawsuits. In addition to trademark reputation, the level of protection available to a trademark also closely relates to the distinctiveness of the trademark. From a legal point of view, besides inherent distinctiveness, a trademark may acquire distinctiveness through use or by way of gaining reputation. The distinctiveness and reputation of a trademark complement each other.
Trademark reputation has been crucial not only for cases involving trademark granting and validation, but also for trademark infringement cases. For the former category, in addition to article 13, which provides special protection for well-known trademarks, the Trademark Law explicitly acknowledges the role of trademark reputation in article 32 by prohibiting “improper squatting of trademarks with certain influence that are being used by other persons”.
Generally speaking, provisions under the Trademark Law about “malicious” or “bad faith” registrations require evidence about reputation. Arguably, trademark reputation is decisive for the outcome of many trademark granting and validation cases. Similarly, in trademark infringement and unfair competition cases, trademark reputation has been instrumental in preventing use of business names identical or similar to registered trademarks. The degree of reputation of a trademark also has a significant impact on the amount of damages awarded against trademark infringers.
IMPLICATIONS ON ENTERPRISES
Correct understanding of “well-known trademarks” and “famous trademarks”. Before enactment of the 2014 Trademark Law, many enterprises hold themselves out as holders of “well-known trademarks”, which were understood by enterprises and the general public alike as absolutely positive. It was not until the Sanlu baby formula scandal in 2008 that people became aware that “well-known trademarks” were not always something to be proud of. Since then, well-known trademarks have gradually become familiar to the general public as a legal concept.
To further ensure enterprises’ proper use of the term “well-known trademark”, the 2014 Trademark Law explicitly prohibits producers and operators from allowing “‘well-known trademarks’ or words to that effect to appear on goods or packaging or containers of goods, or in any advertising, exhibition or any other commercial activities”. One after another, local governments have also withdrawn “famous trademarks” and “well-known trademarks” recognition initiatives in the past two years.
Protecting brands by taking advantage of reputation properly. The legal stipulations prohibiting appearance of “well-known trademarks” in advertising and promotional activities, and local governments’ withdrawal of “famous trademarks” recognition initiatives, are not aimed at denying the role of trademark reputation. Instead, they are intended to bring back the legal role of trademark reputation into full play.
As discussed above, the Trademark Office’s move to put trademark squatting regulation forward to the review stage, and the SPC rulings for guiding cases that overturn claims from trademark squatters on the ground of abuse of rights, signify stronger support for trademark reputation both from administrative authorities and judicial bodies. Moreover, trademark reputation has been carrying considerable weight in cross-category protection cases.
Collecting and preserving evidence about reputation. While highly confident in their trademark reputation, many enterprises ignore the importance of collecting evidence about reputation. Consequently they may have to bear adverse consequences due to the inability to present strong evidence
For an enterprise, identifying evidence about trademark reputation, and ongoing collection, sorting and preservation of relevant evidence in routine business, are crucial for its brand protection efforts.
Frank Liu is a partner and Adam Zhu is an associate of Jincheng Tongda & Neal