HongFangLaw ~ Law Updates ~ n’ 84
15 May 2019

The current practice of trademark division system in China

Co-Author: Smile Kuang, Shirley Lin

According to Article 22 of the Implementation of Regulations of the Trademark Law (hereinafter referred to as the “Implementing Regulations”), the only opportunity for an applicant to divide a trademark application is its partial refusal decision made by the China Trademark Office (CTMO), which greatly limits the applicability of trademark division, thus failing the expectations of it to promote “multi-class application” (combining multiple classes in one trademark applications) for the minor role the former plays in trademark refusal review. The limits of the trademark division system cannot fully meet the needs of trademark applicants. The author will analyze the current situation of the trademark division system in China by studying its features.

The birth of the trademark division system in China

On August 30, 2013, the Trademark Law was amended for the third time. One of its major changes was the newly amended Article 22(2) which came to stipulate that a trademark applicant may, in a single application, apply for registration of the same trademarks on goods of different classes.

On May 1, 2014, the amendment took effect, marking the establishment of “multi-class application” in the trademark acquisition system, so to align with the international practice. Article 22 of the Implementing Regulations for facilitating the new mechanism was effective on the same day to regulate trademark division. The three-item article provides for the applicable scenario, the timing and the result of trademark division.

On August 20, 2014, the CTMO published the Notification on the Explanations for the Division Business of Trademark Registration Applications and Its Application Notes to further specify the application process of trademark division.

The features of the trademark division system in China

Trademark division refers to the process where an applicant or owner of a trademark applies for the division of goods or services designated under the mark to split it into two or more items. According to Article 22 of the Implementing Regulations, the precondition for trademark division is a partial refusal decision made by the CTMO against the subject trademark. In practice, an application form for trademark division will be served to the trademark applicant together with the partially unfavorable decision. The form may be submitted within 15 days to separate the preliminarily approved items from the rejected one for the former to be published without the burden of the latter which will proceed with refusal review. After the division, a new application number will be designated to the approved part. The current practice is to suffix the original number with the letter “A”, but retain the original application date, and publish it for the opposition. The original number will continue to go with the rejected part for the following review and adjudication proceedings. The features of the current trademark division system in China may be extracted from the above and listed as follows:

Firstly, trademark division is applicable only when a partial refusal decision has been made. In addition, trademark division is of no practical significance unless the applicant appeals against the unfavorable decision and applies for review. Secondly, trademark division can only be applied once and is applicable only within 15 days from the day of receipt of the partial refusal. Thirdly, the result of trademark division is “case division”, to avoid delayed registration due to refusal review of the entire application.

Current deficiencies of trademark division system in China

“Multi-class application” is a way to combine trademark applications and to some extent streamline the application procedures, improve the efficiency of trademark management, reduce the burden on examiners and cut administrative costs. But as far as the current practice in China, the intended advantages are not fully realized, mainly due to imperfect trademark division system (and it also cost the same with separate filings) mirrored in the following four aspects:

1. Trademarks are indivisible in procedural examination

If the goods and services specified in a trademark application do not pass the procedural examination, correction within a prescribed time limit will be requested by the CTMO in a notification to the applicant sent according to Article 18 of the Implementing Regulations. In practice, there will be only one chance for correction, which is risky because even only one item of the goods or services is not acceptable after the correction, the application may be rejected altogether. Under the first-to-file system inChina, the potential commercial risks posed on such applicants are expected to compel brand owners to lean towards the “single-class application” approach.

2. Trademarks are indivisible in procedural examination in trademark opposition, invalidation and cancellation

The purpose of the existing trademark division system is to improve the efficiency of trademark registration, by enabling applicants to obtain trademarks as soon as possible via “case division” between the approved and the rejected ones. The same needs for trademark division also exist in trademark opposition, invalidation, and cancellation where the approach is not available. Therefore, if trademarks can also be divided in such cases, there will be considerable benefits.

For the best interests of trademark applicants and registrants of “multi-class trademarks”, it is especially encouraging if they are allowed to split the goods or services from the disputed ones to produce a separate trademark when faced with trademark opposition, invalidation or cancellation.

3. Trademarks are indivisible in trademark assignment

The current trademark division system is not applicable in trademark assignment, be it for “single-class trademarks” or “multi-class trademarks”. The rights to an application or a registration can only be assigned altogether without division. And the assignment must conform to Article 42(2) of the Trademark Law.

If trademark applicants or registrants are allowed to divide their marks when seeking trademark assignment as stipulated in Article 42(2) of the Trademark Law, they may overcome the obstacles on some goods or services, which is contributable to improving efficiency and reducing costs in transactions.

4. Trademarks are indivisible in pledges of exclusive rights

Rights to a trademark right are of economic nature. According to Article 70 of the Implementing Regulations, a trademark owner may pledge the exclusive rights to a registered trademark as a guarantee for his or her own debts or other debtors’. Trademark division system is not applicable here. If both parties agree on a pledge contract concerning exclusive trademark rights, the trademark owner must pledge his or her rights to all of goods or services under the subject mark as the parties jointly register the pledge with the CTMO. This may give the trademark owner no choice to retain some of the goods or services he or she values. Once the pledge is fulfilled, the exclusive rights across the board will be first paid off to debtees, which undoubtedly increases the risks on the trademark owner.

In addition, according to Article 79 of the Guarantee Law, exclusive trademark rights to be pledged shall be transferable. Therefore, the pledge should still conform to Article 42(2) and42(3) of the trademark law to protect the pledgee. Therefore, allowing trademark division in pledging and assignment causes no legal conflicts

Conclusion

Trademark rights are private, the rights that trademark owners enjoy to possess, use, and dispose of their trademarks as well as profit from them. Such rights may be attached to a single item or to multiple ones. As long as not hurting the public interest or banned by compulsory laws, trademark owners are certainly entitled to dispose of their rights and profit from them based on the autonomy of will. The design of the intellectual property system must conform to the nature of private rights. Therefore, the establishment and improvement of the trademark division system should be oriented from protecting trademark owners’ interests. The “multi-class application” mechanism is complementary with the trademark division system. Therefore, as an institutional designer, the law should give full play to the functions of the two. That is, an applicant should not only be able to choose freely from “one-class application” or “multi-class application”, but also given more opportunities to carry out trademark division under statutory conditions.

If you would like some more personalized review of the news from us, please kindly let us know by writing to public.relation@hongfanglaw.com. Thank you.