Is ‘policy restriction’ a justification for idle trademarks?

Article 49 of the Trademark Law provides that, “where a registered trademark serving as the generic name of the designated goods stays unused for three consecutive years, any organisation or individual may apply to the Trademark Office for its cancellation”.

The purpose of the cancellation is to encourage and urge trademark owners to put their registered trademarks to active use, and prevent idleness or hoarding of registered trademarks, to help stimulate trademark resources and ensure healthy and orderly operation of the trademark system.

In practice, application for cancellation of any unused trademarks registered for three years has become an important go-to option to eliminate existing obstacles in trademark applications. Many idle trademarks have thus been cancelled. However, there are also many scenarios where trademark owners have failed to use their registered trademark during the designated period through no fault of their own.

Article 67 of the Implementing Regulations of the Trademark Law provided the following four justifiable reasons as described in article 49 of the Trademark Law: (1) force majeure; (2) government policy restrictions; (3) bankruptcy liquidation; and (4) other justifiable reasons not attributable to the trademark registrant.

Article 20 of the Opinions of the Supreme People’s Court on Several Issues Concerning the Trial of Administrative Cases involving Trademark Authorisation and Confirmation, issued in 2010, provides that if a trademark owner fails to use, or ceases to use, the registered trademark due to the above-mentioned reasons, or “if a trademark owner has the intention to use the trademark and has made necessary preparations to use the trademark, but fails to do so due to any other external reasons, the idleness is deemed justifiable”.

In the above-mentioned circumstances, the trademark registrant may provide relevant evidence to the China Trademark Office to defend the trademark idleness based on justifiable reasons. In this article, the author uses the following cases to analyse “policy restriction” as justification for trademark idleness within the designated period.

Marumiya re-examination

The respondent (trademark owner), Marumiya Food Industry, argued that on 11 March 2011, the great earthquake in Japan caused serious nuclear leakage from the Fukushima Daiichi Nuclear Power Plant, which caused material impact to the safety of Japanese aquatic products, agricultural products, dairy products and other foodstuffs. The trademark had not been used due to policy restrictions.

The applicant argued during the cross-examination that the Announcement on Prohibition of Imports of Certain Japanese Food and Agricultural Products (announcement No. 35 of 2011) and the Announcement on Further Strengthening Inspection and Quarantine Supervision of Food and Agricultural Products from Japan (announcement No. 44 of 2011) were not justifiable reasons for the trademark under review not being used during the specified period.

Moreover, it has been nearly 10 years since the issuance of those announcements, which means the respondent has had sufficient time and opportunities to produce goods that meet the inspection and quarantine requirements in Japan and import them into China, or set up factories to produce such products directly in China, or license the trademark to Chinese companies, or otherwise use the trademark. Therefore, the trademark was not used when it could have been used.

The re-examination opinion states that the justification of the respondent for not using the trademark in question does not fall under any justifiable reasons stipulated in article 67 of the Implementing Regulations of the Trademark Law, and the registration of the trademark shall be cancelled.

SKY re-examination

The respondent (trademark owner), Sky International, argued that it is one of the leading providers of digital pay-TV channels that, together with its subsidiaries, mainly operate pay-TV broadcasting, broadband and telephone services in the UK and Ireland. The respondent cannot use the trademark designated as class 38 “television broadcasting service” in the Chinese market due to policy restrictions by the central government, which falls under justifiable reason stipulated in the Trademark Law.

The re-examination opinion states that the Regulations on the Administration of Radio and Television, the Catalogue for the Guidance of Foreign Investment Industries and other such regulations clearly provide that “China prohibits establishment of radio stations and television stations in the form of wholly foreign-owned enterprises or Sino-foreign joint ventures”, and restrict foreign investment in industries including “telecommunication services”. Therefore, the respondent’s reason for non-use was not supported, and the trademark would be stricken from the 38th category of service.

“Policy restriction” is commonly adopted by trademark owners to explain why their registered trademarks have not been used. However, as noted from the above-mentioned cases, the Trademark Office is extremely cautious in giving it credence.

In the Marumiya case, while the respondent’s defence seems justified and reasonable judging from the evidence provided by the respondent. However, the specified period was nearly 10 years after the earthquake in Japan, granting it sufficient time and opportunity to overcome the relevant restrictions, or otherwise use its registered trademark in China. Thus, the trademark very well could have been used.

In the SKY case, the respondent claimed that China’s Regulations on the Administration of Radio and Television prevented it from using the trademark. However, these regulations have undergone three revisions in the past 10 years, and have consistently been clear regarding the prohibition of foreign investment into China’s radio and television industry. Operating in the relevant field, the respondent should be aware of such policies and regulations, as well as the impossibility of using its registered trademark in China. Thus, its defence was not supported.

From the above-mentioned cases, we can gather that the existence of certain policy restrictions does not necessarily support the legitimacy of non-use of trademarks. Rather, it in large part depends on whether the trademark owner has taken the initiative and exerted reasonable efforts to use its registered trademark, while being subject to policy restrictions and other justifiable reasons not attributable to the trademark owner.

Therefore, before resorting to “policy restriction” as a justification, trademark owners should carefully examine whether their industry has indeed been restricted by policies, and confirm that they have made every effort to use the registered trademarks.

Sun Qinghua is a partner and trademark attorney at Sanyou Intellectual Property Agency