Should the registration of defensive marks be treated with tolerance?

Registering defensive marks is one of the most common measures taken by owners of well-known trademarks to expand their trademark protection.

Recently the famed distillery Luzhou Laojiao finally secured registration of the defensive mark “银国窖” (yin guojiao, a name of a liquor, in English “silver guojiao”) for its well-known trademark “国窖” (guojiao, a name of a liquor) after a four-years struggle by a judgment of the Beijing Municipal Higher People’s Court. The case concerned a conflict over the similarity between an existing reference mark and the defensive mark in the trademark registration application. The court considered a number of factors in full and took an attitude of lenience toward protection of the defensive mark.

Whether this is a one-off case or reflects a trend in how the courts handle conflicts of similarity is to be seen.

Case background

In July 2007, Luzhou Laojiao applied to register “银国窖”, but the trademark office rejected the registration, citing the existing trademark “银国”. Both the court in the first instance and the Trademark Review and Adjudication Board (TRAB) held that the character “窖” (jiao, in English “cellar”) in the trademark “银国窖” had relatively little distinctiveness for spirits. Further, the two held that the characters in its distinctive “银国” were similar to those in the existing registered trademark “国银”, being the latter in reverse.

Reversal at appeal

The Beijing high court held in the appeal that, while both “银国窖” and “银国” contained the characters “银” and “国”, it was easy for the public to understand “银国窖” as a combined word formed from “银” and “国窖”. This, the high court stated, was because Luzhou Laojiao’s existing registered trademark “国窖” enjoyed significant recognition, and thus people would associate “银国窖” with Luzhou Laojiao.

The high court found that the use of the two trademarks for identical or similar goods would not result in public confusion or misidentification. It quashed the judgment at first instance and the TRAB decision as a result, and ordered the TRAB to render a new decision.

Clearly, the high court corrected the rote application of trademark examination standards by the trademark office, TRAB and the court at first instance. It did so by registering and according protection of the defensive mark after full consideration of factors including “国窖” already being a well-known trademark and “银国窖” being a defensive mark for “国窖”. The high court’s judgment is a reflection that considering distinguishability and reputation when judging the similarity of trademarks is necessary as well as more consistent with the legislative intent of the Trademark Law, namely according well-known trademarks special and wider protection.

Full consideration

In practice, the holders of well-known trademarks frequently encounter similar situations when attempting to register defensive marks. It is clear that the simple rote application of similarity criteria within the trademark judgement and adjudication standards when the trademark in question is contained within an already existing trademark owned by another does not satisfy the legislative objective of the Trademark Law, namely protecting well-known trademarks.

When determining where a defensive mark is similar to an existing trademark, it is necessary to first consider the legislative objective of the law and how to protect the consumers’ rights and interests and maintain fair market competition in addition to making a comparison between the trademarks themselves. Doing so gives the adjudicator a more complete consideration of the renown of the existing well-known trademark and whether the defensive mark defends that reputation. Whether the holder of the existing reference mark in question may have acted in subjective bad faith in registering the trademark should also be considered.

Firstly, trademark law essentially protects the distinguishability of commercial marks. Well-known trademarks have a strong reputation. They are recognized and accepted by consumers to represent, e.g., advanced technology, superior product quality, excellent after-sales services and the valued resulting goodwill.

The goodwill in a well-known trademark may extend to similar and even dissimilar goods or services in addition to those for which it became known. The well-known trademark adds to the defensive mark’s degree of recognition, thereby reducing the possibility of misidentification.

Secondly, the scope of the right to prohibit use of a well-known trademark includes identical or similar trademarks for non-similar goods. The scope overlaps with the scope of the right to prohibit use of the well-known trademark. Approving a registration of a defensive mark thus does not expand the scope of the right to prohibit use of the well-known trademark, nor does it impact the exclusive usage right of the existing reference mark nor the scope of its right to prohibit usage. It also places no additional unreasonable restrictions on the public or the public interest.

Lastly, there are incidents where existing reference mark holders willfully attempt to expand the original scope of their trademark rights or to free ride on a well-known trademark which was registered after the reference mark. It is clear that these bad-faith acts cannot be ignored during cases to determine the similarity, or lack thereof, between a defensive mark for a well-known trademark and an existing reference mark. These bad faith acts may dilute the well-known trademark’s distinctiveness, making it more difficult for consumers to distinguish the well-known trademark, and are likely to create confusion and misidentification.

In cases in which the similarity of a defensive mark for a well-known trademark and an existing reference mark is being determined, it should not be a simple trademark comparison based only on the first-to-file principle and rote application of the trademark examination standards.

The reputation of the well-known trademark and the subjective bad faith of the existing reference mark rights holder should also be taken into consideration to avoid any possibility of confusion. Further, protection of defensive marks for well-known trademarks should be lenient.

This would actualize the protection owed to well-known trademarks while also stamping out bad faith acts by actors attempting to ride upon the fame of renowned brands. In doing so, one will achieve the legislative intent of the Trademark Law.

Jiang Fengtao is the managing partner and Zhang Yu is an associate of Hengdu Law Offices