Zero Tolerance for Bad Faith Trademarks By Chinese Authorities

By Ling Zhao & Qin Li

Article 4 of the China Trademark Law regulates that the registration of bad faith trademarks without any intent to be used should be rejected. How should this article be interpreted and what factors should be considered in order to determine if a trademark application is filed in bad faith or not？ What should we know about bad faith trademarks in China？

Bad faith trademarks without intent to use

Article 4 of the China Trademark Law aims to curb bad faith filings presented in the manner of “without intent to use”. On November 22， 2021， the China National Intellectual Property Administration （CNIPA） released a new edition of the Guidelines on Trademark Examination and Review （hereafter referred to as “the Guidelines”）， which are still effective as of January 1， 2022.

The Guidelines define the term“without intent to use” as referring to situations where the applicant does not have a genuine intention of using the trademark， or does not have any plan to use the mark， or there is no possibility that the applicant may use the mark based on reasonable inference. Bad faith trademarks may be words and signs related to national or regional activities and projects， major natural disasters and emergencies that damage social and public interests， major events and exhibitions， names of famous people， places， works or other public resources， industrial general terms， and trademarks or other commercial signs belonging to others with a high reputation or distinctiveness.

The following factors need to be considered in order to determine if a trademark is a bad faith one， namely， the applicants industrial features， business scope and qualifications； the overall situation， such as the number， classes and time duration of trademarks as filed by the applicant； the composing elements of the filed trademarks； whether the marks are used； and whether the applicant has previously registered a trademark in bad faith， etc.

However， the Guidelines specifically exclude the following two situations in the application of Article 4：

● The applicant files trademarks identical or similar to its major mark in different classes for defensive purposes；

● The applicant files a moderate number of marks for its future business.

Special measures against bad faith filings

In March 2021， a special fight to crack down on bad faith trademarks was initiated by the CNIPA. The special fight against bad faith trademarks was carried out through the whole examination procedure from the examination of new applications to oppositions and invalidations， and also with a combination of the administrative penalty measures， to form a joint force for cracking down on malicious squatting of trademarks.

There are two types of bad faith trademarks， i.e. malicious application of a trademark and malicious hoarding of trademarks. The former refers to copying or imitating famous trademarks， taking free rides on othersreputation， which damages othersprior rights， while the later refers to the situation where the amount of applications filed is large， without real intent to use same， thus disrupting the administration order of trademark application.

In 2021：

● A total of 482，000 trademark applications， with the feature of warehousing， were cracked down on.

● 1628 trademark applications， with the feature of ‘bad faith filings， which will damage public interests， were refused for registration.

● 1729 bad faith registrations were declared as invalid as an ex officio action， which was 5 times higher than the total number in the past 10 years.

● 30，000 opposed marks， which were recognized as bad faith filings， were refused during the opposition procedure.

Notice to continue to severely crack down on bad faith trademarks

On April 12， 2022， the China National Intellectual Property Administration （CNIPA） issued the“Notice of the CNIPA on Continuing to Severely Crack Down on Malicious Applications of Trademarks” （the“Notice”）， which requires the continual crack down on bad faith trademark squatting with a “zero tolerance” attitude and a “focus more on the concerns of the people and public opinion”. This follows earlier crackdowns such as the？cancellation of maliciously registered Olympic-related trademarks ex officio？in February.

Article 4 of the amended China Trademark Law aims to curb bad faith filings presented in the manner of“without intent to use”. The Guidelines define the term “without intent to use” as referring to situations where the applicant does not have a genuine intention of using the trademark， or does not have any plan to use the mark， or there is no possibility that the applicant may use the mark based on reasonable inference.

Per the Notice， the CNIPA states it will focus on cracking down on 10 typical illegal acts that violate the principles of good faith， violate public order and good customs， seek illegitimate interests， and disrupt the order of trademark registration， especially including the following：

Malicious squatting on the same or similar signs as national strategies， national policies， major projects， major scientific and technological projects， important events with high popularity， important exhibitions， major archaeological discoveries， etc.；

● Malicious squatting on specific words related to major sensitive events or emergencies such as major public health events；

● Malicious squatting on the names of political， economic， cultural， ethnic， religious and other public figures with high reputation；

● Where the number of trademark registration applications obviously exceeds the needs of normal business activities， and there is no real intention to use same；

● Copying， imitating， or plagiarizing a large number of trademarks or other commercial signs with a certain reputation or strong distinctiveness of multiple subjects；

● Applying a large number of trademarks which are the same or similar signs as public cultural resources， administrative division names， common names of goods or services， industry terms， etc.；

● Transferring a large number of trademarks where the assignees are relatively scattered， disrupting the order of trademark registration.

The Notice stresses that the CNIPA will continue to promote the revision of the trademark law and its implementation regulations， and will constantly enrich the legal weapons and policy tools for combatting bad faith trademark squatting. It will improve the key monitoring list of trademark malicious applicants. Where the entities in the key monitoring list apply for trademark registrations， they shall be strictly examined and the burden of proof for actual use should be strengthened according to law. This will strengthen the management and control of trademarks with significant adverse effects and continue to take measures such as combined case reviews， rapid rejections， ex officio invalidation of registered trademarks， and announcement exposure. This will also restrict the transfer of malicious hoarding trademarks and strengthen the pre-examination of the use of the trademarks to be transferred to make the bad faith applicant unprofitable.

Trademark hijackers held for damages related to unfair competition

On September 21， 2021， the Fujian Province High Peoples Court made a final judgment on the unfair competition litigation initiated by Emerson Electric Co. （the plaintiff）， owner of the brand “InkSinkErator”and “愛適易” （AI SHI YI） in Chinese for food waste processers （see below） against trademark hijackers for unfair competition. The Court awarded RMB 1.6 million damages in total to the plaintiff for its losses and reasonable expenses for stopping infringement.

The defendants have not only hijacked the trademarks of “InkSinkErator”and “愛適易” （AI SHI YI） of the plaintiff， but also filed many trademarks which are copies or imitations of trademarks belonging to other entities， such as DOW in Chinese， Alikes in Chinese and English， Daimler in Chinese， Daimler Chrysler in Chinese， InFocus in English and Chinese， Grundfos in Chinese， iPhone， Unilever in Chinese， Electrolux in Chinese， Morgan Stanley in Chinese， etc. from 2011 till 2019.

This is first precedent for a case where the trademark hijackers didnt put the trademarks into use， nor did they file malicious complaints based upon the hijacked trademark registration， such that the Court found the defendants （hijackers） guilty of unfair competition， in violation of Article 21 of the Anti-unfair Competition Law of the PRC， for filing trademarks which are copies or imitations of the plaintiffs trademarks in bad faith.

This is an important landmark case due to the following reasons：

● This case clarifies that the acts of trademark hijacking alone constitute unfair competition.

● The defendant is prohibited from registering identical or similar trademarks. The damages are determined according to the lawyersfees incurred by the plaintiff for legal proceedings to fight the trademark hijacking.

● This case clarifies the legal liability of the actual controller of the infringing company and the trademark agency for their contribution to trademark hijacking for the first time and finds that the actual controller constitutes a joint infringement， and the agency constitutes helping infringement， which is also a breakthrough in the assumption of responsibility.

Enhancing intellectual property protection has become one of the core issues reiterated by the Chinese government. In recent years， China has made efforts to improve and strengthen its trademark protection system from almost every layer to better guarantee trademark applicants and owners rights and benefits. These measures include legislative improvement， strengthening the obligations regarding trademark use， stipulating penalty measures for malicious trademark registration and malicious litigation by applicants and trademark agencies， regulating the acts of trademark agencies， administrative enforcement， and judicial efforts. We believe that with all these efforts， malicious trademark squatting will be effectively curbed， and Chinas trademark protection will be further enhanced.

（Authors from the CCPIT Patent and Trademark Law Office）