Xia Junli – Judicial Policies for Prevention of Bad Faith Trademark Registration

Part I

Editor’s Note: This is a translation summarizing the speech by Xia Junli, presiding judge at the Supreme People’s Court’s Intellectual Property Division, at the 2017 annual meeting of the China Intellectual Property Law Association. The speaker herself has approved the content of this article. This article was originally published in Chinese by the Wechat public account: zhichanli. Link to the original here.

The subject under discussion surrounds judicial policies for prevention of bad faith trademark registration. In fact, one cannot study and discuss judicial policies without referring to substantive cases and mulling over other relevant issues. The subject issue is worthy of discussion for it involves legislative and judicial practice as well as a research on relevant issues in the academic community. As a judge at the Supreme People’s Court, Xia Junli would like to summarize what we have done, what we are doing, and what we are trying to do to prevent malicious trademark preemptive registration in years long judicial practice.

We can divide our work in four areas: 1. Clarification through application of law in substantive cases; 2. Guidance with publication of model cases and judicial policies; 3. Reference to guiding cases in similar situations; 4. Regulation by promulgation of judicial interpretations.

1. Clarification though application of law in-substantive cases

Among all sorts of IP cases that the SPC IP division has reviewed in the recent two years, cases involving trademarks, especially trademark administration, account for the largest proportion. They stand out for the following reasons:

• Trademark cases have witnessed a considerable increase in general and administrative trademark ones have grown substantially during 2015 and 2016. Legal issues related to the determination of similar trademarks and goods as well as protection of prior rights remain dominant.The principle of good faith is highlighted more than ever as the guiding principle when trademark cases are heard in light of how to render protection of trademark rights proportionate with its fame regarding the actual situation in the market by deploying instruments such as similarity and confusion of trademarks and goods.
• Case hearing have grown increasingly difficult and eye-catching, such as the “Jordan” trademark administrative case concluded by the SPC.
• Standards for granting and determining trademark rights have been clarified and the substantive solution of disputes has been given more importance.
• Judicial protection is gathering increasing momentum.

When we approach today’s topic, we should make clear how bad faith registration and the principle of good faith applies in the Trademark Law, and how they are connected to each other. In the 3^rd amendment of the Trademark Law, Article 7 stipulates that “The principle of good faith shall be upheld in the application for trademark registration and in the use of trademarks.” The principle was disputed during legislation when it comes to whether it could apply as a substantive standard in dealing with trademark objections or trademark disputes.

Eventually it has remained non-substantive as we can see in today’s Trademark Law. Thus, we need to think through how to uphold the principled Article 7 and adjust its relations with other substantive provisions including Article 10 Paragraph 1 Clause 8, Article 15, Article 30, Article 32 and Article 44 in the latest amended Trademark Law when promulgating judicial interpretations and applying laws in substantive cases.

As early as in the “CHENG LIAN” case ([2006]Xing-Jian-Zi No.118-1) in 2006, the SPC clarified that a registered trademark shall be cancelled if its registration is obtained by deceptive or other improper means as stipulated in Article 41, Paragraph 1 along with other absolute reasons that lead to the cancellation of a trademark. (The provision mentioned here is inscribed in the Trademark Law before amendment for its application in the case. Same with provisions below.) It was also clarified that it would only take correct comprehension and application of Article 31 to prevent unfair competition and resolve issues such as violation of the principle of good faith, trademark preemption or other infringements on prior rights.

Article 31 stipulates three conditions on triggering protection of an unregistered trademark, which are, prior use of the trademark, impact exerted on the trademark, and improper means by which the preemptive trademark is registered. The former two conditions are quite flexible. When determining the impact on the preempted trademark, a lower threshold should be adopted in addition to considering whether the registrant is aware of the prior rights or is in bad faith.

As for Article 28, it stipulates how trademark similarity is determined. In the 2011 “LIANG ZI” case ([2011]Zhi-Xing-Zi No. 50), the trademark “LIANG ZI” was in dispute over whether it should be cancelled for malicious preemption. The focal point fell on whether the coexistence agreement in this case would undermine the trademark’s registrability. The TRAB held that the cited trademark and the disputed trademark constituted similar trademarks, which was in violation of Article 28, and the coexistence agreement was irrelevant to this case. The court of first instance held that the agreement failed to exclude the legal requirements of a trademark’s registrability in the Trademark Law while the court of second instance held that the agreement manifested party autonomy and obeyed the law’s legislative intention.

Thus, the opposing party’s application for cancellation violated the coexistent agreement and the principle of good faith. As for the SPC, it eventually supported the court of second instance and held that the balance of interests settled in the agreement and the years long market structure would be broken if the disputed trademark was cancelled, which would prove obviously unfair to the opposed party.

(To be continued)

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