Bad faith filing

By Paul Ranjard and Huang Hui, Wanhuida Intellectual Property
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After the fourth revision of the Trademark Law, is filing a trademark without intention to use an act of bad faith?

On 23 April 2019, the National People’s Congress of China adopted a revised version of the Trademark Law, modifying several articles, particularly article 4, which now reads as follows: “Any natural person, legal person or other organization that needs to obtain the exclusive right to use a trademark for its goods or services during production and business operations shall apply for trademark registration with the trademark office. Any bad faith application for the registration of a trademark that is not intended for use shall be rejected.”

bad faith
Paul Ranjard
Partner
Wanhuida Intellectual Property

In the new article 4, the concept of bad faith is not connected to any prior right owner. It is merely linked to the lack of intention to use the trademark, dovetailing with the concept of “need” in the previous phrase, already present in the old law.

The question that inevitably arises is: What is, exactly, the meaning of bad faith in article 4? Is the simple fact of filing a trademark without intention to use it an act of bad faith? Or is it necessary to prove circumstances in addition to the lack of intention to use, and in the affirmative, what circumstances should that be?

SAMR regulation on bad faith trademark application

On 16 October 2019, the State Administration for Market Regulation (SAMR) published “Certain Provisions for Regulating Applications for Trademark Registration”. Article 8 focuses on how to ascertain whether a trademark application breaches article 4 of the Trademark Law. There are three categories of facts that the trademark authority should take into account:

  • The first category of facts includes: (1) the number of trademark applied by the same person, and whether such person has been conducting transactions (like reselling) any of such trademarks; and (2) the business activity of the applicant. Individuals with no business activities who file hundreds of trademarks as pure commodities for the sole purpose of reselling them are the target of this category.
  • The second category also relates to the trademark applicant’s profile: Whether the applicant has already been identified as a bad faith trademark applicant, or as an infringer.
  • The third category concerns the trademarks themselves: (1) whether they are identical with or similar to trademarks of other persons, having a certain influence (as in article 32 of the law); or (2) whether they are identical with or similar to the name of a celebrity, the trade name of a business, the abbreviation of a business name or other business signs.

In any event, what is definitively new is that the examiner of the China National Intellectual Property Administration (CNIPA) has now the power to refuse, ex officio, the registration of trademarks that obviously fall under the above-mentioned definitions.

Furthermore, with the new article 4, it is possible for any person to request the invalidation of such a trademark at any time, if it can be argued that it has been filed “in bad faith without intention to use”.

Sky case in Europe

Huang Hui
Partner
Wanhuida Intellectual Property

In Europe, cases have recently been submitted to the European Court of Justice that deal with similar issues. They allow an interesting comparison and some additional reflections.

On 16 October, the Advocate General Tanchev delivered to the European Court of Justice the Opinion in the case of Sky International AG v SkyKick UK Limited, examining whether, when Sky International filed an application to register the word “Sky” as a trademark designating the entire category of “computer software”, while it only had the intention to use the mark on some of the products listed in this highly diversified category, such application was made at least partially in bad faith.

Advocate General Tanchev was clearly considering that applying for the registration of a trademark covering a large range of products, without intention of using the trademark for all the products, could be deemed as made in bad faith: “… the applicant is improperly seeking a monopoly to exclude potential competitors from using a sign he has no intention of using. That amounts to an abuse of the trademark system”. However, the conclusion of the opinion is slightly less affirmative: “In certain circumstances, applying for registration of a trademark without any intention to use it in connection with the specified goods or services may constitute an element of bad faith, in particular where the sole objective of the applicant is to prevent a third party from entering the market, including where there is evidence of an abusive filing strategy, which it is for the referring court to ascertain.”

The comparison between China and Europe shows that, despite the use of the same terms (bad faith trademark applications), the situations are quite different. China is facing a phenomenon of trademark proliferation, while Europe deals with a few individual conflicts between trademark applicants.

However, some of the comments provided in the European cases could be useful in the assessment of future conflicts in China. Bad faith should be assessed objectively, keeping in mind that it is a subjective factor. It is necessary to determine the intention of the applicant.

For instance, filing a trademark designating products or services that the applicant has no intention to exploit does not automatically mean that his/her intention is to abuse the trademark system. The applicant may, quite legitimately, wish to prevent competitors from taking advantage of the reputation of his/her trademark – either already acquired, or that he/she intends to acquire – by occupying categories of products or services that have a certain relation with his/her core activity. This is the concept of “defensive trademarks”, a concept not acknowledged in China and EU, yet it remains a sensible strategy for brand owners.

It appears, therefore, that the EU adopts a stricter criterion in assessing bad faith issues, barely leaving any room for defensive registration. But in China, it seems that the new Trademark Law attempts to differentiate the circumstances of applying for the registration of one trademark designating many classes of products/services, some of which may not be used in the short term, and that of applying for the registration of a large number of different trademarks without intention to use them, which are two very different situations. The latter, which is also known as trademark “hoarding”, is the highly prejudicial phenomenon that the CNIPA attempts to progressively eradicate by leveraging the new Trademark Law and the SAMR regulation.

Paul Ranjard is a partner at Wanhuida Intellectual Property. He can be contacted on +86 10 6892 1000 (ext. 388) or by email at [email protected]

Huang Hui is a partner at Wanhuida Intellectual Property. He can be contacted on +86 10 6892 1000 (ext. 201) or by email at [email protected]

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