Pirate registrations of trademarks should be put to the sword

By Wang Yadong and Hu Cuiqin, Run Ming Law Office
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The phenomenon of the pirate registration of popular trademarks has grown increasingly serious in recent times. From basketball stars Michael Jordan, Kobe Bryant and Yao Ming to Olympic champions Ye Shiwen and Sun Yang, from performing star Zhang Ziyi to piano maestro Li Yundi – none have been spared. Some famous foreign brands may have similar experiences: when planning to apply for registration in China, they unexpectedly find there are already goods that bear a trademark similar or even identical to their own.

Wang Yadong, Executive Partner, Run Ming Law Office
Wang Yadong
Executive Partner
Run Ming Law Office

With their “registered trademarks”, pirate registrants sit and wait for their price, or assert their “rights” against the foreign trademark rights holders, or use a famous person’s name as a gimmick to enhance public awareness of their brands.

The reason that the bad faith pirate registration of trademarks has flourished can be traced to the weaknesses in the trademark system. The Trademark Law specifies that the Trademark Office is to determine ownership of a trademark based on the first-to-file principle – that is, whoever files an application first secures the exclusive right to use the trademark – but does not set forth any corresponding auxiliary provisions to control pirate registrations. The upshot is that once a pirate registrant’s application is successful, the pirate has the lawful exclusive right to use the “registered trademark” that was preemptively registered and, on such basis, can assert rights against the genuine rights holder.

Serious harm

The negative effects of bad-faith pirate registrations of trademarks are increasingly clear. Such acts, to a certain extent, cause confusion among consumers as to the origin of goods, thereby warping the function of trademarks. The continuous flood of bad-faith pirate registrations has had a serious impact on China’s image abroad and raised doubts in foreign countries about its intellectual property protection policies.

Although the opportunistic act of the pirate registration of a trademark seems to bring enormous gain with minimal input, in fact the pirate is more than likely to face negative consequences. The recent dispute in which Michael Jordan sued Jordan Sports has again sounded a warning for the brand strategies of Chinese enterprises: an enterprise accessing a market by using a trademark that it has obtained through a pirate registration faces a huge risk of a potential legal dispute. The disputed nature of such a “trademark” will also harm consumers’ identification with the enterprise, possibly affecting its long-term prospects.

Curbing the pirates

The authors are of the opinion that, under China’s first-to-file system, a stringent trademark registration search system should be established using the opportunity presented by current efforts to amend the Trademark Law, by adding a provision prohibiting the bad-faith pirate registration of others’ unregistered marks. If, based on specific circumstances, it can be clearly determined that the pirate registration of a trademark constitutes an act of unfair competition, and judicial relief can be accorded pursuant to the Law Against Unfair Competition, then such pirate registrations could be better controlled.

With the establishment of a trademark registration search system and such measures as the competent trademark authorities strictly controlling trademark registration from the outset, stringent examination of the qualifications of registration applicants, and regulating the acts of trademark agencies and agents, it would be possible to reduce the incidence of pirate registrations – but it would be impossible to stop them altogether. However, if the necessary attention could be paid to the interests of users of unregistered marks and other rights holders by adding “the malicious pirate registration of another’s unregistered mark is prohibited” or a similar provision to the amended Trademark Law, placing necessary restrictions on and making the necessary adjustments to the first-to-file principle and adding pertinent auxiliary provisions – for example, setting restrictions on the first transfer after a trademark registration – it would be possible to more actively reduce pirate registrations.

Hu Cuiqin Lawyer Run Ming Law Office
Hu Cuiqin
Lawyer
Run Ming Law Office

Of even greater importance is according rights holders adequate legal relief. Currently, rights holders have only administrative procedures and the administrative actions derived from them, which broadly fall into two types: (1) lodging a trademark opposition with the Trademark Office before the disputed trademark is registered; and (2) within five years after the registration of a disputed trademark, submitting the trademark dispute to the Trademark Review and Adjudication Board for cancellation of the trademark. With respect to bad-faith registrations, only owners of well known trademarks are not subject to the five-year limitation. With respect to these two administrative procedures, if a party is dissatisfied with the ruling of the Trademark Review and Adjudication Board, it can institute an administrative action, but other than this, there are few options.

Bad faith

In pirate registrations of trademarks, the key is discerning whether the registration was done in bad faith. If the pirate registrant’s objective in carrying out the registration is to foil fair competition, the act violates the principle of good faith and the subjective bad faith is clear, then the act is one of unfair competition. In judicial practice, if the court can, based on the specific circumstances of the case, determine that a bad-faith pirate registration of a trademark constitutes unfair competition, the rights holder can, even if it has lost the means of relief mentioned above for any reason, still obtain relief through a civil action pursuant to the Law Against Unfair Competition.

Recent high-profile cases including the lawsuit by Michael Jordan against Jordan Sports, the iPad trademark dispute and the Wong Lo Kat trademark battle amply demonstrate the huge impact that trademarks have on enterprises and everyone has seen the power of the double-edged sword that is intellectual property.

With increasingly intense market competition, pirate registrations of trademarks will take on more forms and become more complicated. Simply halting at moral condemnation of pirate registrants will have little significance. It is much more important, through the design of the legal system and the specific enforcement of laws, to prevent the bad-faith pirate registration of trademarks, fully protect prior rights holders and safeguard fair competition.

Wang Yadong is the executive partner and Hu Cuiqin is a lawyer at Run Ming Law Office

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