Chinese IP Law Updates
September 6, 2019

TM Dispute Resolution Case Agreement

Good Deed by Thoughtful Court Comes After Deal Made by Disputed Trademarks Owners

When the application for a trademark is rejected because of the prior identical or similar trademarks (especially the identical trademarks), in addition to recommending that the client submit the application of refusal review timely, we usually suggest the trademark applicant take proper measures against the cited trademarks upon the specific circumstances of cases, in order to have a better chance to acquire the trademark rights. One of the strategies is to initiate the cancellation action and an invalidation action against the cited marks, especially those in bad faith filing, to leverage the trademark negotiation, which gained favorable outcomes in our practice. With the stronger attitude to tackle down the bad-faith trademark applications by launching new laws and regulations in areas of legislation, administrative enforcement and judicial procedure in China, trademark squatters are facing a more severe situation. Once the trademarks have been invalidated or canceled, the trademark squatters would be like the “ants on the hot pot”. Therefore, filing the trademark cancellation and invalidation procedures could be a good tactic, providing more bargain power to the trademark applicants with bona fide when negotiating with the ants.

In practice, an awkward situation may arise from this is such as the two parties confronting each other intensely at the examination stage shooking hands and make peace in court, leaving the judges and agents of the China National Intellectual Property Administration (CNIPA) helpless with resignation. After all, the “reconciliation between the two parties in dispute” is not a specified legal reason for the survival of the disputed trademarks. And according to the examination of legality doctrine in administrative litigation, in the absence of other procedural or substantive errors, it is hard for the court to render against the CNIPA whose related decision is well-grounded in law and appropriate in any steps.

However, we should believe that the judges equipped with extraordinary legal wisdom and judicial perception of fairness and justice can handle this kind of case. In judicial practice. The judges would usually utilize their subjective initiatives instead of mechanically applying regulations to “help others fulfill their wishes”, and achieve the ultimate fairness and justice within the law.

Application of the Principle of Changed Circumstances

Take one of our cases as an example. In a trademark invalidation administrative case, the disputed trademark was decided invalid at the examination stage on grounds of infringement upon the prior copyright of the third party. Nevertheless, at the stage of administrative litigation, the registrant has reached a settlement with the third party, which has become the substantive reason put forward by the registrant at the stage of litigation as the disputed trademark was transferred under the name of the third party. After hearing this case, Beijing Intellectual Property Court held that because the facts of this case have changed, and according to the principle of changed circumstances, the CNIPA should make a separate decision based on new facts.

For the case, the court did not mechanically apply the rules which only require examination from the perspective of the legality of administrative acts, but flexibly exercised the principle of changed circumstances. It has got to the root of the disputes between the two parties and achieved substantive fairness and justice.

Consideration Based on Balance of Interests

In the above case, the third party had initiated the invalidation procedure on the basis of infringement upon prior rights, but as the disputed trademark has been transferred under the name of the third party, the infringement has no longer existed. Base on such facts, it was indeed indisputable for the court to apply the principle of changed circumstances.

However, in the case of cancellation against trademark for three-year non use, i.e. cancelling trademark which have ceased to be used for three consecutive years, the disputed trademark being transferred to the third party had no effect on the facts of the case by nature, because whether the disputed trademark was actually being used would not change when the trademark was transferred to the third party. The cancellation system against trademark for 3-year non-use should not be used for resolving civil disputes between a particular subject and the trademark owner, but for examining whether the disputed trademark is actually being used by the CNIPA, who carries through the system according to the application of the third party on the basis of social public interest.

In the trademark cancellation review case of Dongguan Bo Te Trading Co. Ltd. v. Trademark Review and Adjudication Board of State Administration for Industry and Commerce (TRAB), the court also clarified that upon decision to cancel the disputed trademark by TRAB, the People’s Court shouldn’t close the case on account of the reconciliation between the trademark owner and the cancellation applicant, since it’s in violation of the original idea of setting up the cancellation system based on public interest.

“However, taking into account the fact that the plaintiff and the third party have reached a cooperative attention on the disputed trademark, plus the stability of trademark rights and current interest arrangements of the parties, the criteria of use can be relaxed appropriately during the designated period on the premise of no prejudice to the public interest and no violation of the basic principles on commercial use of the disputed trademark. It is also conducive to safeguarding the legitimate rights and interests of the parties concerned.”

From the above cases, it can be concluded that the court has agreed to appropriately stretch the criteria of trademark use, which was in accordance with the principle of balance of interests and ultimately achieved the balance between social public interests and the interests of the parties. That was indeed the instance of fairness and justice in the real sense.

Brief Comments:

From the above cases, we can easily figure out that the courts in China would try their best to respect the objective facts in the administrative litigation of trademark examination cases, in order to achieve the equitable balance between public interests and the interests of the parties, thus realizing the idea of fairness and justice of judicial trial in essence.

This is also an inspiration for the parties concerned. There are various measures to resolve disputes while the combination of such measures can mutually benefit and achieve the most satisfactory result. After all, there is a group of worried judges behind you who have been distressed by “helping others to fulfill their wishes”.