In recent years, the number of trademark applications in China has been in the forefront of the world. In the year of 2021 alone, the total number of new trademark applications in China was nearly 9.45 million.
Especially in the environment of explosive growth of small and micro enterprises and rising service-oriented consumption, the demand of companies and individual businesses for trademark registration applications has been in accelerated expanding. Facing such a huge number of trademark applications each year, China’s market supervision department has implemented the reform of trademark registration system, such as optimizing filing procedures, shortening examination cycle and reducing filing costs, in order to enable all business entities in the market to enjoy faster and preferential trademark registration services. But at the same time, there are also a series of problems in the market, such as malicious pre-emptive applications for the purpose of “free-riding”, “clout-chasing”, as well as a large number of hoarding trademarks for profit.
In order to optimize China’s business environment further and more effectively curb the problem of malicious trademark applications, in April 2019, the 13th Standing Committee of National People’s Congress decided to amend the Trademark Law, adding the provision of “an application for trademark registration in bad faith for a purpose other than use shall be rejected” in the first clause of Article 4. In addition, the latest Guidelines for Trademark Examination has be correspondingly implemented from January 1, 2022.
In this newly added provision, there are two key words: “use” and “bad faith”. How should we interpret them?
With regard to the use of trademarks, Article 48 of the Trademark Law stipulates:
For the purpose of this Law, the use of trademarks shall refer to the use of trademarks on goods, the packaging or containers of goods and the transaction documents of goods, as well as the use of trademarks for advertising, exhibition and other commercial activities for the purpose of identifying the sources of goods.
From this paragraph it can be seen that the use not for the purpose of identifying the source of goods or services does not belong to the use defined in the Trademark law.
Unlike the “first-to-use” in the US, China follows the principle of “first-to-file”. Applicants do not need to provide any evidence of use when filing a trademark application. Some applicants may ask, especially those consciously improve the protection of core trademarks through planning and strategic deployment: if I file a series of defensive trademarks for my core trademark, will these applications be rejected due to “purpose other than use” according to this new clause?
The applicants are right to question and be worried above. In fact, besides defensive trademark application, trademark hoarding, trademark assignment and some other behaviors also belong to the acts without purpose of use.
However, Guidelines for Trademark Examination 2021 clearly states
“an applicant files the applications for identical or similar trademarks to its registered trademarks for the purpose of defense”
“an applicant files an appropriate amount of trademark applications in advance for the future business with realistic expectation”
are not applicable to Article 4 of the Trademark Law.
In addition, the Constitution and Law Committee of the National People’s Congress studied this Article and finally added the word “bad faith” as the limitation of the clause.
To the term “bad faith”, there is no clear definition in the legal provisions of China’s Trademark Law, but with regard to the acts of bad faith, we can consider generally from two aspects.
- One is the trademark applications characterized by damaging or clinging to other people’s goodwill, civil rights or legitimate interests, of which the typical cases are “free-riding”, “clout-chasing”, preemptive registration for hot events or names of public figures and so on, which is targeted at specific subjects.
- The other is characterized by disrupting market order and deliberately occupying market resources, such as “hoarding trademarks”, or “an excessively large number of application”, aiming at the public interest.
And yet, there are some differences between “application in bad faith for a purpose other than use” in the title of this article and other malicious applications like “free-riding” and “clout-chasing”. The bad faith of the former is reflected in the lack of intention to use and deliberately occupying a large amount of trademark resources to the detriment of public interests, while the latter damages the legitimate rights and interests of specific subjects through preemptive applications. Of course, Article 4 of the Trademark Law also applies to such malicious acts, if the number of trademarks filed in bad faith is large and it causes damage both to specific subjects as well as to the market order and public resources.
Personally, the word “bad faith” in the newly revised provisions is a supplement to “purpose other than use”, which specifies the situation when a trademark application filed “without purpose of use” should be rejected only under the condition of being judged as “bad faith”.
Section 5 of Chapter Two in Part II of Guidelines for Trademark Examination 2021 defines ten acts that belong to “application for trademark registration in bad faith for a purpose other than use”, including:
- A huge number of trademark applications for registration, obviously beyond the normal demand for business activities, lack of real intention to use, disrupting the order of trademark registration;
- A large number of copies, imitations and plagiarism of prior trademarks with certain popularity or strong distinctiveness owned by multiple subjects, disrupting the order of trademark registration;
- Repeatedly applications for registration of specific trademarks with certain popularity or strong distinctiveness owned by the same subject, disrupting the order of trademark registration;
- A large number of applications for registration of marks which are identical or similar to others’ business names, abbreviations of business names, e-commerce names, domain names, trade names, packaging, decorations with certain influence, advertising slogans, designs and other commercial signs by others that are well-known and have gained distinctiveness;
- A large number of applications for registration of marks which are identical or similar to public cultural resources such as the names of well-known personalities, famous works or character names, or works of art by others that are well-known and have gained distinctiveness;
- A large number of applications for registration of marks which are identical or similar to names of administrative divisions, names of mountains and rivers, names of places of interest, names of buildings, etc.;
- A large number of applications for registration of marks that lack of distinctiveness which bear only the generic names, terminologies, and directly indicate the quality, principal raw materials, function, use, weight, quantity or other features of the goods or services concerned;
- A large number of applications for registration of trademarks and a large number of transfers of trademarks with dispersed assignees involved, disrupting the order of trademark registration;
- Applicant’s acts of selling trademarks in large quantities, forcing prior users of the concerned trademarks or others into commercial cooperation, demanding high transfer fees, license fees or compensation for infringement, etc., for the purpose of seeking illegitimate interests;
- Other circumstances that may be deemed to be acts of applying for trademark registration with bad faith.
In the light of the preceding insights, enterprises and individuals may refer to some of the following suggestions when applying for trademark protection for their own brands:
- Recognize the core products and business scope, and give priority to the protection in major Classes. For example, if an applicant produces and sells chemical products for use in industry and cleaning preparations, then Class 1, 3 & 35 should be selected for protection according to its core products and services.
- Obtain protection in similar Classes. A typical one is “beer” in Class 32 and “alcoholic beverages, except beer” in Class 33.
- Obtain protection in the Classes of accessories and derivatives. For example, if an applicant produces stationery and painting articles, goods in Class 16 should be selected. But please be aware that the colorant for painting is in Class 2. So, in order to prevent others from counterfeiting your trademark with ancillary goods, the applicant shall protect the ancillary and derivative goods together.
- Apply for defensive trademark registration. Defensive trademarks can be divided into Same-Class defenses and Cross-Class defenses. In the case of Same-Class defenses, the applicant applies for the marks in the same Class of its core goods with similar font, similar or identical pronunciation to the original trademark, which is a common defense strategy. And for Cross-class defenses, that is, the applicant applies for the same trademark in different classes in which his business may be involved in the future, in addition to its current core goods or scope of business, so as to prepare for future expansion of the business.
- Keep the trademark monitoring work, and file trademark opposition in due time. The applicant may entrust a reliable IP firm to do the trademark monitoring work, and file the opposition against the trademark which is considered to infringe on his own brand when it enters the opposition period.
We hope that each applicant can comply with legal trademark application, respect the law, maintain a good order of trademark registration and establish a healthy business environment together while taking the initiative in trademark protection.