New trends on bad faith trademark filings (sponsored article)

Bad faith trademark filings and registrations have been a headache for many brand owners in China. Many opposition, invalidation and court case proceedings attempting to place reliance on the element of bad faith may not have been successful until very recently. However, there are some very new trends in recent cases and newly adopted rules in China that may give a better chance of success in such cases going forward.

Fortnum & Mason, an upmarket department store in London, sought to challenge a trademark registered by a Chinese individual on October 25 2002 (the trademark received preliminary approval on March 7 2004). The case came before the Trademark Review and Adjudication Board, which gave its judgment on October 17 2016.

As the case was brought before the newest revision of the Trademark Law came into effect on May 1 2014, the claims were dealt with in accordance with the 2001 Trademark Law. Fortnum & Mason successfully relied on Articles 31 (prior copyright) and 41.1 (other improper means) of the 2001 Trademark Law to have the disputed trademark revoked.

The Board first recited the elements needed to substantiate a finding of an infringement of prior copyright: (1) The trademark in question is identical or substantially similar to works in which someone else holds a prior copyright, (2) The person who applied for the registration of trademark in question has, or might have come into contact with the works in which someone else holds a prior copyright, (3) The person who applied for the registration of trademark in question was not licensed by the holder of the copyright.

The relevant trademark device was Fortnum & Mason's clock logo in the United Kingdom, in which it claimed a prior copyright. As Fortnum & Mason had not submitted the blueprints and design of the clock logo as evidence, it could not be taken to have had a prior copyright earlier than September 4 1964, when detail of the Fortnum Clock was published in a newspaper. The graphics of the disputed trademark and the Fortnum Clock were identical, and the respondent did not submit evidence to prove that the disputed trademark was created independently. The Board held that it could be presumed that the respondent had known and copied the Fortnum Clock. In so deciding, the Board took into account the following: the originality and complexity of the Fortnum Clock; the fact that the graphic portion of the disputed trademark adopted by the respondent was almost identical to the appearance of the Fortnum Clock; the fact that part of the script element of the disputed trademark consisted of Fortnum & Mason's name.

The Board thus held that the respondent's act of registering the disputed trademark had indeed infringed Fortnum & Mason's prior right, and was accordingly in breach of Article 31 of the 2001 Trademark Law.

The Board also stated that the phrase "other improper means" in Article 41.1 of the 2001 Trademark Law refers to actions other than fraud, such as the disturbance of public order, harming public morals, or the improper use of public resources.

The Board found that the respondent had applied to register more than 40 trademarks, among which there were a number of famous trademarks of British clothing brands and department stores and French and Belgian foodstuffs (for example, Peter Rabbit, Godiva and Harrods). The respondent could not explain the independent creation of these trademarks, and did not submit that he had used these trademarks.

The Board thus concluded that the respondent's acts had the obvious intention of copying, counterfeiting and imitating other well-known trademarks. This would not only lead to consumer confusion about the source of goods and services, but also upset the proper processes of trademark registration as well as undermine fair competition within the market. The Board held that the respondent's acts were accordingly in breach of Article 41.1 of the 2001 Trademark Law.

Liu Hongqun, the marketing director of the Zhongshan Pearl River Beer Company, applied to register three "face book" trademarks in multiple categories on January 24 2011. Facebook was able to successfully rely on Article 41.1 of the 2001 Trademark Law to have the disputed trademark invalidated. An appeal to the Beijing High Court by Liu Hongqun was dismissed in April 2016.

The Court appeared to take a principled approach to the interpretation of Article 41.1 by first reciting the legislative spirit of the Article, which was to implement the tenets of public order and good custom, maintain good order for trademark registration and administration and create a healthy market environment.

The Court noted that the applicant had registered the "face book" trademark in multiple product categories, and had even registered the trademarks of other famous brands such as those of Darlie toothpaste and OnePlus One Android smartphones. Thus, there was a distinguishable intention to copy and plagiarise others' famous trademarks, which impaired the fairness of market competition and violated the principles of public order and good custom. The applicant's wholesale registration of trademarks to obtain commercial interests for later resale to others (that is, cyber-squatting) was held to violate the intrinsic value of the trademark, affect proper trademark registration procedures and even hamper the normal business of the honest operators in the goods economy. Accordingly, the Court ruled that the applicant's acts were in breach of Article 41.1 of the 2001 Trademark Law.

Once again, this decision has placed an appropriate emphasis on the significance of the presence of bad faith in trademark cases. Moreover, the court rooted its decision in the legislative spirit and intent of the Trademark Law. This judgment may very well constitute another milestone in the development of Chinese trademark law and its alignment with international trade mark norms.

The current China Trademark Law does not address "bad faith" directly, but instead, uses other similar or relevant terms, such as "deceptive", "negative influence", "fraudulent means" and "improper means" in different articles. These include:

• Article 7, which requires that trademark application and use should follow the 'good faith principle'.

• Article 10.1.8, which prohibits signs detrimental to socialist ethics or customs, or allowing other negative influences to be used in trademarks.

• Article 32 (formerly Article 31 of the 2001 Trademark Law), which provides that: applications for trademark registration may not infringe another person's prior rights; and no applicant may register by improper means a trademark that is already in use by another person and has certain influence.

• Article 44.1 (formerly Article 41.1 of the 2001 Trademark Law), which renders invalid trademarks whose registration is obtained by: fraudulent means; or other improper means. The latest Provisions of the Supreme People's Court on Several Issues Concerning Trial of Administrative Cases Involving the Authorization and Determination of Trademark Rights (effective since March 1 2017) clarifies "other improper means" of Article 44.1 as "other means except fraudulent means, to disrupt trademark registration order, damage public interest, misappropriate public resources or seek unjust benefit".

The China Trademark Office also announced the new Trademark Review and Trial Standards on January 4 2017, which indicate that the following situation would fall under "other improper means" of Article 44.1:

• the registrant files a number of trademarks, which are the same or similar to another party's trademark with high distinctiveness;

• the registrant files a number of trademarks, which are the same or similar to another party's trade name, company name, social organization or other entity name, or special name/package/trade dress of a famous product;

• the registrant files a large number of trademarks and obviously without true intent to use.

• In cases where the bad faith registrant also filed marks similar to other famous brands, there may be better chances of arguing "improper means" of Article 44.1.

• If the previous opposition of similar situation failed and the mark is now registered, it may be worthwhile trying invalidation now based on Article 44.1 as examiners may adopt the new examination criteria in this regard.

• Make sure to include all possible legal grounds in the pleading, as the Court would not accept a new legal ground that is not stated in the earlier administrative stage at the TRAB.

• Bad faith could be recognised as an independent basis for the refusal, opposition, or revocation of trademarks.

• Bad faith could be incorporated into Chinese law through an interpretation of Article 32 of the Trademark Law. Article 32 provides that applicants should not register in an improper manner a mark that is "already in use by another party and enjoys substantial influence". Since virtually all bad faith registrations involve marks that are already in use, this provision would clearly work to combat bad faith registration.

• Allow for default judgments to be entered where the respondent to an application for trademark opposition or revocation fails to respond.

• Establish a blacklist of applicants who have registered trademarks in bad faith. The China State Industry for Industry and Commerce (SAIC), which also administers TRAB, has recently published its Interim Measures for the Administration of the List of Businesses Seriously Violating the Law and Becoming Discredited, which took effect on April 1 2016. Thus, businesses that have had their trademarks successfully opposed or revoked more than a certain number of times in a certain number of years could be candidates for blacklisting.

Frederick Mostert
		Frederick Mostert is a past president of INTA and was chief IP counsel and chief legal counsel of Richemont, which includes Cartier, Van Cleef and Arpels, and Alfred Dunhill. He is a Research Fellow at the Oxford Intellectual Property Research Centre, University of Oxford, a Research Fellow at Peking University and a Visiting Professor at University College, London, and serves on the Advisory Council of the McCarthy Institute for Intellectual Property and Technology Law, the Board of The Walpole Group and he is a Member of the Advisory Council of Anti Copying in Design (ACID).

Gloria Q Wu
		Gloria Wu is a partner and head of trademark team of Kangxin Partners, P.C., and has assisted brand owners from all over the world in devising and implementing tailored strategies for trademark protection in China, with regard to both prosecution and litigation. She is also experienced in dealing with cases involving different types of IP rights, such as copyright, design patents and domain names. Gloria is a member of INTA and PEC of FICPI.