How does Chinese trademark law deal with bad faith?

Bad faith is certainly one of the most debated topics in reference to trademarks in China. In this article, we aim to provide an overview of the tools in the new Chinese Trademark Law (TML) after the recent changes of November 2019.

ART. 4	Malicious and not for the purpose of use
ART. 7	Good faith
ART. 13.1	Unregistered well-known trademark
ART. 13.2	Registered well-known trademark
ART. 15.1	Agent or representative
ART. 15.2	Any relationship and use in China
ART. 19.4	Trademark agency
ART. 32.1	Infringement of other prior rights - Copyright - Personal Name - Company Name - Title of Movie
ART. 32.2	Improper means and prior use with influence
ART. 44	Fraud or other improper means

According to Article 4 TML 2019, applications which are malicious or which are not intended for use shall be rejected. The following are the factors to consider: the number of trademarks applied for by the applicant, the designated classes, the trading situation, the industry in which the applicant operates, prior decisions related to trademarks against the same applicant.

In a recent decision in relation to a rejection appeal for TM No.30342933 "" (You Ha in Chinese) [Shang Ping Zi [2019] No.0000117640], the CNIPA said: "In addition to the applied for trademark, a large number of applications have been submitted in a short period of time, which exceeds the needs of normal business activities, lacks real intention to use, and disrupts the normal order of trademark registration. Thus it violates Art. 4 of TML".

Also, in the rejection appeal decision on trademark No.29282242 "" (Fa Mu Da Ren in Chinese), [Shang Ping Zi [2019]No.0000162198], the CNIPA applied Art. 4 and said: "In addition to the applied for trademark, the applicant applied for more than 210 trademarks in Class 28 toys. A large number of trademarks are exactly the same as the game names. Their behaviour may cause damage to other people's prior rights and obviously exceeds normal production and operation needs. They have the improper intention of hoarding trademarks."

The Trademark Law 2014 included Art. 7 as well which makes a clear reference to the fact that trademarks shall not be filed and used in bad faith. Art. 7 is not explicitly included in the list of legal grounds available in case of appeal. However, we have seen several decisions mentioning Art. 7 as a legal ground for the decision.

A bad faith registrant filing an infringement lawsuit will be regarded as abusing the right and violating the good faith principle.

In the case WANG Suiyong v Ellassay Co., the former sued the latter for the infringement of the trademark "歌力思" No. 7925873 in Class 18. Ellassay is the owner of the trademark "ellassay" in Classes 18 and 25 and "歌力思" in Class 25. The final judgment from the SPC established that "歌力思" is a coin word without inherent meaning and has strong distinctiveness. It is unlikely that a similar registration would be made with no prior awareness or contact. Given the geographical proximity and established commercial ties between the two cities, it is unlikely that the plaintiff had no knowledge of "歌力思". Therefore, the plaintiff's registration of No. 7925873 trademark on handbags could not be deemed as good faith. The Supreme Court overturned the judgment of first and second instance and held that the plaintiff's lawsuit against the defendant based on its bad faith registration constitutes an abuse of right. [(2016) Zui Gao Fa Min Shen No.1617]. The SPC strongly emphasised that such behaviour violated the good faith principle, but didn't apply Article 7 of the TML. The article used in this case by the SPC was Art. 52 of the TML.

Art. 13 of the Trademark Law foresees different rights according to whether or not the well-known trademark is registered in the class in which it is well-known.

If it is not registered in the class in which it is well-known, the trademark shall be protected anyway. This rule in Art. 13.1 is probably the biggest exception in the Chinese Trademark Law to the principle of "first to file."

In practice, such big exceptions happen very rarely, indeed it is rare that a trademark is well-known and not filed for registration in the class of products/services for which it is well-known.

More common is the circumstance provided for in the second paragraph of Art. 13. This is when a well-known trademark is registered for the products for which it is well-known. Such registered and well-known trademarks have the power to be protected across classes. This is also the case for products and services which are not registered.

Salvatore Ferragamo S.p.A., an Italian luxury goods company and owner of several trademarks including or consisting of these two words, obtained recognition for its trademark No. G668383 as well-known and the invalidation of the trademark Ferragamo (stylised word)" in Class 11 for "lighting equipment and devices etc."

Cartier, the French jewellery company, in the light of the strong distinctiveness of "Cartier/卡地亚" and its well-known trademark status, obtained protection against bathroom products using the identical trademark "Cartier/卡地亚" as the series name [(2014) Zhe Zhi Zhong Zi No.11].

It is important to make one last remark on well-known trademarks. To enjoy the special rights granted by Art. 13 , the brand must have a reputation in China. It can be created in China or also abroad, but Chinese consumers must be aware of the trademark.

Art. 15 of the Trademark Law 2019 provides for cases where the application is filed in bad faith by a related entity. It distinguishes two types of related entities. The first paragraph mentions "agents and representatives" and jurisprudence has identified at least two categories under this definition – sales agents and trademark agents. The second paragraph enlarges the scope of the related entities more widely encompassing all "relationships". For this, it is necessary that in addition to proving the relationship, it is also essential that the other party knows about the existence of the unregistered trademark.

In the Andis case, the SPC recognised that through business negotiation, the counterparty knew about the existence of the unregistered trademark and had an obligation to protect the interest of the business with which they were cooperating – essentially the good faith principle. The Supreme Court deemed that such business negotiations fall under Art. 15. [(2018) Zui Gao Fa Xing Zai No.22]

A trademark agency is only allowed to file trademarks under its own name in relation to a trademark attorney service, namely in sub-class 4506 "Intellectual Property Service" according to the Chinese sub-class system, otherwise the application will be rejected.

A typical case regarding a trademark agency's bad faith is the Innovation-DreamWorks case. The trademark No. 7679143 "创新工场 Innovation-Dream Works" in 2009 in Class 42 covering "research and development (for others) etc." filed by the trademark agency was declared invalid for violating Art. 19.4 of the TML.

Article 32 of the TML 2019 plays a central role in the legislative tools in place for combatting malicious applications. The first paragraph of Art. 32 is related to the infringement of prior rights, such as copyright, personal names, company names, titles of films or other works, design rights, domain name, etc. If the allegedly malicious application violates a prior right it shall be rejected or invalidated.

Prior copyright is an important weapon to shoot down malicious trademarks. In the litigation initiated by "Ritz-Carlton", a famous hotel brand, against trademark No. 1962902, the court supported the claim by Ritz-Carlton that it enjoyed the prior copyright of Lion Head graphics [(2010) Yi Zhong Zhi Xing Chu Zi No.3223].

Specifically, the court determined that the following conditions should be satisfied for infringement of copyright: a) the work should meet the requirement of copyright law to be protected as a work of art; b) the work is still covered by the protection term; c) the counterparty likely had access to the work; d) the disputed trademark is identical or substantially similar to the work; e) the creation of the work was completed before the disputed trademark.

The personal name of an individual is recognised as a prior right. According to the Standards for Trademark Examination and Trial, the following conditions should be satisfied in order to establish the infringement of personal name: the personal name is known to the relevant public; there is potential damage to the right holder of the personal name.

Personal name rights are extended to autonyms, pseudonyms, stage names, bynames etc. Only someone who is still alive can enjoy such protection.

The most notorious case in relation to this is a case which saw the basket ball star Michael Jordan fighting the registration of 乔丹 (reading "Qiao Dan" and meaning Jordan in Chinese). Considering that the Chinese translation of the name of the famous basketball player Michael Jordan was widely used in China to refer to Michael Jordan and obtained a reputation not limited to the sporting field, the Supreme People's Court, concluded that the use of thedisputed trademark No. 6020569 乔丹 (Qiao Dan or Jordan) in Class 28 on sports equipment and other goods would mislead consumers and damage the personal name right of Michael Jordan. The trademark was consequently invalidated [(2016) ZUI GAO FA XING ZAI No.27].

Distinctive signs are usually included by commenters and jurisprudence in the list of other prior rights in Art. 32. A company name which qualifies for protection must be highly reputed and the scope of protection for trade names is generally limited to identical or similar goods/services.

In the invalidation against No. 7263548 "依多科 (Yi Duo Ke in Chinese)", the CNIPA (previously TRAB) confirmed that the evidence provided by the applicant "上海依多科化工有限公司 (Shanghai EFTEC Chemical Products Ltd.)" – company registration certificate, sales agreements, promotional materials, honour certificates – could prove that the trade name "依多科" has enjoyed a certain reputation before the filing date of the disputed trademark on automotive adhesives. The disputed trademark was totally identical to the applicant's trade name and the designated goods of the disputed trademark, such as industrial adhesives, are similar to automotive adhesives. Therefore, the use and registration of the disputed trademark would easily arouse confusion among the relevant public and infringe the trade name of the applicant. As a result, the disputed trademark should be invalidated [Shang Ping Zi [2016]No.0000080161].

The scope of protection for trade names which have enjoyed a certain reputation can be extended to other related goods/services. The disputed trademark No. 4193035 "Kellogg Company" was filed on July 28 2004 and covers business management assistance, business evaluation etc. in Class 35. As confirmed by the Beijing High People's Court, before the filing date of the disputed trademark, Kellogg Company was a famous enterprise. This can be supported by its corporate financial statements and media reports. Therefore even if the main business of Kellogg is cereal, the goodwill of its trade name could cover business management assistance, thus the use and registration of the disputed trademark would mislead consumers [(2013) GAO XING ZHONG ZI No.635].

Kung Fu Panda (功夫熊猫) is the series film title produced by DreamWorks Animation. A party filed trademark No. 7491648 in Class 44 covering massages, medical clinics etc. The Beijing High People's Court confirmed that the film title is a prior right mentioned in Art. 32. Even if DreamWorks did not provide use evidence for Kung Fu Panda (功夫熊猫) for medical clinics, they could prove the use of Kung Fu Panda (功夫熊猫) on cosmetics, toys, video games etc. Therefore the use and registration of the opposed trademark would crowd out DreamWorks' business opportunities by improper use of movie popularity. The opposed trademark was deemed to infringe the legitimate civil rights and interests of DreamWorks Company which constitutes a situation "damaging the existing prior rights of others" as defined in the 2001 Trademark Law (now Art. 32) [(2017) JING XING ZHONG No.3858].

As we can see from the Kung Fu Panda case, when using trade names to crack down on malicious trademarks, the following requirements shall be taken into consideration: a) whether the title of the film or other works has created business value; b) the use and registration of the disputed trademark will mislead consumers; c) the mark will reduce the right holder's business value through improper use of title.

This article protects trademarks which have not been filed and registered by the authentic owner, but have been in use, the use has generated a certain influence on consumers and the registrant has used "improper means."

"Already in use" refers to prior use before the filing date of the disputed trademark in mainland China. "Certain influence" refers to an already used trademark that is known by the relevant public in certain fields and it is decided based on specific circumstances by taking the history and term of trademark use, advertisement situation, and the influence of the trademark into consideration. "Improper means" refers to malicious behaviour where the applicant is clearly aware of or should have known that the trademark already had a certain status, but preemptively registered it.

Alibaba is one of the largest e-commerce platforms in China. The opposed trademark No. 1445858 "阿里巴巴 (alibaba)" filed by Beijing Zhengpu Technology Development on May 14 1999 covered emails etc. in Class 38. The Beijing High People's Court confirmed that before the filing date, Alibaba had registered domain name www.alibaba-online.com and used "Alibaba/阿里巴巴". The average page views account were 1,541 people/day. At the end of 1998, some media published news mentioning Alibaba/阿里巴巴. Beijing Zhengpu filed domain name 2688.net on April 29 1999 for which Alibaba has enjoyed certain fame among the relevant public. As the companies were in the same fields of internet, Beijing Zhenpu should know about the reputation of Alibaba/阿里巴巴, and therefore, the registration of an identical trademark was clearly done in bad faith.

The judgment of "improper means" is subjective, but from the above case and other prior cases, the below elements usually are taken into consideration: a) was there business cooperation before? b) are the two parties located in the same place or do they have the same sales channels for products? c) did they have internal contact before, etc.? ; d) was there improper profit-making behaviour by asking for a high transfer cost etc.?

Article 44 TML provides that a fraudulently filed trademark or a trademark filed through other improper means should be rejected and, if granted, invalidated. The jurisprudence better clarifies these two scenarios.

Fraudulent means usually refers to the act of fabricating a signature and seal on application documents or the act of fabricating and altering the applicant's identity certification documents such as ID card, business licence, etc. In the decision dated February 6 2018, the CNIPA invalidated the trademark No. 8397269 "Redline" on the ground that it was fraudulently acquired by using a fake business licence [Shang Ping Zi [2018] No.0000022013].

Other improper means refers to disturbing the order of trademark registration, harming public interest, improperly occupying public resources or obtaining improper benefits. There are three typical "other improper means": a) filing multiple trademarks which are identical or similar to others' trademarks which have relatively strong distinctiveness; b) filing multiple trademarks which are identical or similar to others' trade names, institution names, specialised names or the packaging of a well-known product; c) filing a massive amount of trademarks with obvious lack of genuine intention to use (hoarding trademarks).

In the invalidation decision against No. 24166955, No. 12276599, No. 16706193 for "Playseat", the CNIPA (prior TRAB) mentioned that "Playseat" had been used before by F. SMIT Holding and had relatively strong distinctiveness. The counterparty filed multiple identical trademarks in different classes but a without reasonable explanation on the origin of design. In addition, the counterparty and its legal representative filed multiple trademarks which were identical to others' trademarks in the same industry. Such behaviour was obvious bad faith and constitutes "other improper means" as per Article 44. Thus, all three trademarks were invalidated [Shang Ping Zi [2020] No.0000004299/4300/4302].

In the invalidation case against trademark No. 10619071 "UL" filed by UNIQLO, the counterparty filed more than 2,000 trademarks. Many of these were transferred for profit. At the same time, they asked for RMB 8 million as an assignment fee from UNIQLO. In particular, more than 40 malicious trademark infringement lawsuits based on the same grounds were filed by the counterparty against UNIQLO in different local courts. Both Beijing Intellectual Property Court and Beijing High People's Court confirmed that the counterparty had no reasonable reason to own such a massive number of trademarks and no real intention to use them as well, which constituted the scenario of obtaining registration through "other improper means" [(2017)Jing Xing Zhong No.5603].

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Fabio Giacopello is a senior partner at HFG Law & Intellectual Property. He has been widely recognised as one of the most valuable IP practitioners in China.

Fabio recently received the following awards: "Recommended Lawyer" by Legal500, "Winner of Client Choice Award – Trademarks (China)" by ILO, "IP Star" by Managing Intellectual Property, "Notable practitioner" by Chamber and Partners, "Leading practitioner" by WIPR, "Expert in the Trademark Category" by Asia IP.

He is author of several articles published by international and local publishing houses. Fabio often cooperates with educational institutions and associations in order to give lectures about the Chinese IP system and/or European IP system.

Fabio has substantial experience in trademark portfolio management, trademark disputes and litigation, and enforcement including anti-counterfeiting. Fabio's practice covers technology transfer, patent and trade secret litigation, and arbitration in relation to employees who exhibit disloyal behaviour. He has also achieved brilliant results in commercial and corporate transactions on behalf of international companies.

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Ariel graduated from university with an English degree in 2016. She has four years of experience as a trademark attorney, mainly focusing on the areas of trademark portfolio management in China and providing advice on pre-filing, trademark disputes, brand strategies etc. to many foreign companies.

In 2019, Ariel joined HFG and has been engaged in providing intellectual property legal services for international companies.

Ariel is fluent in Mandarin and English.