Discussions on Co-owned Trademark’s Licensing
1.The licensed use of Co-owned trademarks
When talking about “Co-owned trademark” we are referring to the case in which two or more natural persons, legal entities, or other organizations may jointly apply to the Trademark Office for the registration of the same trademark, and jointly own and exercise the right to exclusively use the registered trademark.
“Licensed use of trademarks” means that a trademark registrant may, by entering into specific legal procedures, license another party to use its registered trademark, provided it follows one of these three guidelines:
(1) Solely licensed use refers to the event in which the registrant of a trademark permits only one licensee to use the registered trademark during an accorded time period, in the geographic area or ways as agreed upon so that the registrant may not use the registered trademark as pursuant to the agreement.
(2) Exclusive licensed use, refers to the event in which the registrant of a trademark permits only one licensee to use the registered trademark during the time period, in the geographic area or ways as agreed upon; the registrant himself may, as pursuant to the agreement, use the registered trademark but may not permit another third person to use the registered trademark;
(3) Ordinary licensed use refers to the event in which the registrant of a trademark permits other people to use the registered trademark during the time period, in the geographic area and ways as agreed upon. The registrant himself may use the registered trademark and may license other people to use the registered trademark as well.
2. Issues regarding the licensed use of a co-owned trademark
The right to exclusively use a registered trademark is a property right, which allows the right-holder to have the right to possess, use, make profits from, and dispose of their private rights according to law. Thus, the right-holder can derive the profit from permitting the licensed use of a trademark. In terms of co-owned trademark, co-owners shall license the co-owned trademark to the other party by consensus. But if the consultation fails, could one of the co-owners nevertheless permit other people to use the co-owned trademark?
In this regard, the relevant rules and judicial interpretations are not clearly prescribed in Chinese Law. As such, we could use for reference the case concerning disputes over infringement upon trademark rights between retrial petitioner Zhang Shaoheng and respondent Cangzhou Tianba Agricultural Machinery Co., Ltd. (No. 3640 , Civil Petition, SPC).
The Supreme People’s Court stated that: under the co-owned trademark rights, the exercise of trademark rights shall observe the principle of autonomy of will of the parties and shall be exercised upon the consensus of co-owners as the trademark rights are the rights of separate private entities. If the co-owners fail to reach a consensus and there is no justifiable reason to the refusal, any co-owner may not prevent the other from permitting third parties to use the trademark in the manner of ordinary licensing use.
First of all, trademarks can only be used in production and business activities, combined with goods or services, in order to distinguish the source of such goods or services, reflecting the true value of trademarks for the owners. If the trademark is difficult to use because of the difficulty of reaching consensus between the co-owners, it is not only difficult to reflect and perceive the value of the registered trademark, it is contrary to the legislative intent of the trademark law, and as such it is difficult to protect the common interests of the joint owners.
Secondly, if one of the trademark owners authorizes the use of the trademark by third parties, generally it does not affect the interests of other co-owners. Other co-owners may use the trademark by themselves or by means of an ordinary license. The licensing method should be, in principle, allowed. However, if only one of the owners of the trademark permits others to use it in an exclusive way or with a “solely licensed use”, it will have a greater impact on the interests of other joint owners and should be prohibited, in principle.
Thirdly, according to the provisions of the Trademark Law, the licensor shall supervise the quality of the goods used by the licensee to use its registered trademark, and the licensee shall guarantee the quality of the goods using the registered trademark. Therefore, from the perspective of ensuring the quality of goods and the goodwill of trademarks, the co-owners of trademark rights will generally carry out ordinary licenses, and will generally have no significant impact on the interests of other co-owners. To take a step back, even if the ordinary license of the trademark owner alone reduces the goodwill of the trademark and damages the interests of other joint owners, this is also the risk brought by the trademark ownership system itself. In the event that the trademark owner does not agree on the exercise of the rights, the co-owner should anticipate the risk.
Finally, requiring the trademark owner to agree to the ordinary license will undoubtedly increase the cost of the trademark licensing itself, and even lead to some valuable trademarks that cannot be used because the co-owners cannot reach a consensus.
Above all, under the circumstance that co-owners of a trademark right do not agree upon the exercising rules of the aforementioned right, any co-owner could permit others to use the trademark in the manner of ordinary licensed use.
Therefore, according to the previous ruling by the Supreme People’s Court, any co-owner could permit others to use the co-owned trademark in the manner of “ordinary licensed use” under the circumstance that co-owners of a trademark right do not agree upon the exercising rules of the aforementioned right. But licensing others to use the co-owned trademark in the manner of “Solely licensed use” and “exclusive licensed use” shall require that both owners reach a consensus first.