HongFangLaw ~ Law Updates ~ n’ 86
14 June 2019

Article 4th – The Positive Impact of Trademark Law against TM-Squatters

Co-Author: Edmond Au, Shirley Lin

On April 23, 2019, the 10th Session of the 13th National People’s Congress Standing Committee unanimously agreed to amend eight legislations, including the Trademark law of the People’s Republic of China (the “Trademark Law”). Six articles were amended, of which the amendment of Article 4 had a direct bearing on Articles 19, 33, 44, 68, etc. and the ways the provisions should be applied. The revised Article 4 is undoubtedly the highlight in the amendment and deserves further discussion and analysis because it plays a profound role in cases concerning the granting and affirmation of trademark rights.

The former Article 4 of the Trademark Law provided for the legitimate purpose of applying for trademark registration. Any person who seeks exclusive trademark rights for commercial activities should file an application for trademark registration with the China Trademark Office (CTMO). Although the original provision did not require the “intention to use”, it was implied by the explicit expression that trademarks should be acquired “for the goods produced or services and activities offered”. However, many applicants did not apply for trademark registration for actual use in practice, which has systemically disrupted trademark registration and damaged the rights and interests of other applicants. Therefore, it is pressing and necessary for the amended Article 4 to explicitly prohibit bad-faith trademark application filed not for using purposes, which should be rejected by CTMO.

By the additional prohibitive language – “a malicious application for trademark registration not for using purposes should be rejected”, the amended Article 4 specifies what constitutes bad-faith trademark application without the intention to use., It is a replenishment and improvement to the provision for “other improper means” of trademark acquisition in Article44 (1). With respect to the importance of the new Article 4 to the practice of trademark examination and trial, lawmakers also amended Articles 19(3), 33,44(1), 68(1) to accommodate the change so that Article 4 would actually work. The words “should be rejected” used in the amendment of Article 4 merit more attention.

They serve to state an absolute prohibitive scenario in trademark application – bad-faith applications should be banned whenever identified during the examination by the CTMO. As for the changes to Articles 33 and 44(1) that have been made for the amended Article 4, they allow trademark holders and other interested parties to file for the opposition, or anyone to seek invalidation against bad-faith trademarks pursuant to the statutory prohibition in Article 4. The amendment of Article 4 is also significant for that it aligns with the breathing encouragement of trademark use in the Trademark Law. We believe the amendment would help good-faith rejects prevail over bad-faith hurdles in refusal review, as long as they are not confusingly similar, and the applicants for the former are able to provide certain proof of trademark use. The author considers that if the applicant doesn’t have the scenario like malicious application for trademark registration stipulated in Article 4 during the proceeding with refusal review, he/she can provide certain evidence concerning trademark using, and the similarity between the applying trademark and the cited trademark is not particularly high, which to some extent can increase the probability of success in trademark refusal review.

As for what constitutes “a malicious application of trademark registration not for using purpose”, the amended Trademark Law still gives no definition. We may refer to the “improper means” of trademark acquisition stated in the Standards for Trademark Examination and Trial. A provided scenario is where an applicant applies for “multiple trademarks without the intention to use”. The provision also points out the condition may be satisfied when the applicant does not actually use or show any intention to use the trademarks which have been hoarded for seeking illegitimate benefits, peddling the trademarks to others, using the trademarks to coerce others into business cooperation, claim for unreasonably large amount of assignment or licensing fees, damages, etc.

We also believe the following behavior is questionable: (1) the applicant applies for and registered trademarks more than necessary for his/her business. (2) the applicant applies for and registered multiple trademarks in the popular classes 3, 9, 18, 25, 33, 35, 43, etc. that are irrelevant to his/her scope of the business, and the applicant shows the intention to peddle the trademarks. (3) the applicant has applied or registered multiple trademarks by copying or imitating other’s famous trademarks, and the applications and registrations are irrelevant to the scope of business. (4) the applicant who is a natural person and the legal representative or shareholder of a trademark agency has applied for or registered a large number of trademarks in several classes.

To sum up, Article 4 locates at the beginning of principles in Trademark Law and has been amended, even adopted specifically into other provisions, in order to make the Article full of principle and effectiveness. If one can fully understand the intention of the amendment by lawmakers and gist the main connotation, the amended Article 4 can function greatly in the Trademark Right Granting and Verification Cases.

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