HongFangLaw ~ Chinese IP Law Updates ~ n’ 52
30 March 2018
Non-use TM Cancellation Dispute
Tactics for Identifying Fake Evidence of TM Use
Co-authors: Cathy He, Shirley Lin
Recently, HFL has secured a favorable decision for our client in a 3-year long “non-use trademark cancellation” dispute, where it was sought to annul a trademark squatter’s registration. At first in the cancellation proceedings presided by the China Trademark Office (CTMO), the authority decided to keep the trademark in question based on the evidence of trademark use for the bad-faith registrant’s part. In order to examine further, whether such evidence was substantially valid, genuine and sufficient, a process that is not required in the CTMO’s decision-making, we suggested taking the case to the Trademark Review and Adjudication Board (TRAB) for a review of the previous decision and we eventually won the case. This article will focus on what tactics can be deployed to verify suspicious evidence based on our experiences.
Comments and takeaways:
On the validity of evidence:
Pursuant to Article 49 of China’s Trademark Law, everyone has the right to apply to the CTMO to cancel a trademark when it has not been used for 3 years without acceptable reason. Hence, only evidence generated within 3 years prior to the date on which the trademark is requested to be canceled qualifies to prove its use. The principle has thus made it a primary and critical job to check whether the registrant’s submission registers at a specific time and satisfies the prescribed limit.
This is how we found out most of our counterparty’s exhibits did not fall into this time slot and should be deemed invalid.
On the genuineness of evidence:
The genuineness of evidence is also a pillar of the examination tactics in those disputes, considering that transactional documents sometimes can be easy to falsify. Ill-intentioned trademark registrants may provide deceptive contracts, invoices, product pictures etc. to create nonexistent trademark use. Here are five parts that should be considered, in order to see through the squatter lies:
1. Are the submissions to the CTMO and the TRAB both without question?
It came to our attention that, notwithstanding the registrant’s failure to provide the CTMO with valid evidence that could meet the time requirement, he was suddenly able to gather everything, at least so at first glance, during the TRAB’s review. It appeared counterintuitive to us as the registrant actually had more time in the previous stage given the two months for evidence submission granted by the CTMO.
2. Is the evidence consistent enough to show a reasonable business pattern?
Generally, a company does its business in its own way along developed workflows. The pattern can normally be identified in the materials they comply during transactions, such as documents and invoices. However, this was not the registrant’s case. The deeper we looked into the party’s exhibits submitted respectively to the CTMO and the TRAB, the more inconsistent and even conflicting his commercial practice seemed. For example, he first presented no formal contract concerning his sale of wines (even for a big order trading hundreds of products) to the CTMO, but later turned out perfectly formatted agreements with accompanying invoices for selling merely dozens of wines before the TRAB. It was quite abnormal to see the registrant make a U-turn in his accustomed practice of business in such a short time.
3. Is the registrant’s evidence in line with common sense?
Regardless of what to prove, the evidence should at least be consistent with our common sense. Specifically for the kind establishing trademark use, the information is given, such as the goods’ pricing and sales, should reflect what we normally see in real life. In our case, the other party did not seem to be following this rule. He sold his products to his intermediate distributors and end consumers at the same price, charged far more in larger orders than in purchases that hardly impressed, and let his wines’ prices remain completely without fluctuations for years, which was not common for consumer products as such.
4. Do third parties concerned in the evidence have a stake in the registrant’s case?
When it comes to falsification, you normally don’t turn to someone you don’t know. Therefore, when parties other than the registrant appear in the evidence, efforts should be made to illuminate their relationships such as affiliation and partnership because the chances are high that they are also stakeholders. Some of our respondent’s exhibits were sales contracts entered into with other companies. During our investigation, one was found just next door to the registrant’s affiliated company with respect to their registered domiciles, and the other was said to have never purchased any product recorded in the contract by its own staff. It was telling that the evidence was not genuine.
5. Can the evidence be verified via authoritative channels?
In a modern society prospering in the information era, there are many ways we can tell if some evidence is credible with services provided by the authorities. For example, there is the tax bureau’s official website for sales invoices and the portals operated by departments for industry and commerce to verify a company’s status and capacity for executing a contract. There is one more thing that can be examined when the trademark in question is designated for goods that are more rigorously regulated: the qualifications of the registrant that are a prerequisite for the related manufacture and distribution. This piece of information can also be obtained from authorities concerned.
On sufficiency of the evidence to establish facts to be proved:
1. Does the evidence apply to the designated goods?
Since the substantial use of a trademark is limited to its designated goods, examination of the coverage should always come first. Trademark use on similar goods should not be considered as valid evidence.
2. Does the chain of evidence have links that cross-reference each other?
Contracts and invoices concerning a trademark’s designated goods are critical to establishing the use of the mark. Still, they need to be combined to show a clear picture and should, therefore, be consistent, which is vulnerable if the evidence is not genuine. With this tactic, we found during the dispute that the registrant was not able to provide such materials in complete sets or printed with his trademark. The missing pieces made it impossible to present a complete chain of evidence, thus insufficient to establish real transactions.
3. Is the registrant the one and only source of the evidence?
It is commonly acknowledged that evidence generated solely by a disputing party is less convincing. Hence, some materials provided by our counterparty such as the invoices unilaterally issued by him did not suffice to establish his trademark use due to the innate weakness.
4. Has the claimed trademark use been conducted only for display?
In past cases, we have seen bad-faith trademark registrants try to maintain their marks by using them no more than just enough to get the upper hand in potential cancellation proceedings, with minimum trade and documents in relation therewith. In fights against those deliberated moves, we have developed a strategy to analyze the scale of the infringers’ business activities concerned, combined with the goods’features, so as to shake their grounds by proving no substantial use can be established with so little sales volume.
Similarly in this case, regarding the trademark use in relation with wine documented on the registrant’s contracts and invoices, nothing substantial could be established given the few products sold. For a popular consumer product like wine, what was presented by the registrant was only superficial evidence, and he needed much more business activities to prove otherwise.
In the preceding paragraphs, we have listed a collection of strategies for examining evidence of trademark use in our 3-year non-use disputes. We believe that they can be adopted in combinations as fit for individual cases in practice to win over decision-makers.
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