02 May 2019
One of the most common issues faced when securing protection in China is the earlier registration of third-party rights, which are then cited against the later application. However, there are various tactics that can be adopted to overcome this hurdle.
Many articles are written about various aspects of the trade mark system in China: the risks of the first-to-file system, the development of the law in recent years, the behaviour of trade mark squatters and the production of counterfeit goods. However, fewer focus on the obstacles encountered when filing in China or offer practical guidance on how to overcome or address these.
For foreign businesses attempting to protect their marks in China, objections throughout the prosecution process are reasonably commonplace for various reasons, including significant differences between China’s legal system and those of other countries. However, in our experience, one of the most common issues is the earlier registration of third-party rights that are then cited against the later application and form a block to its progress. Under the Chinese system, the onus is on the applicant to overcome the possibility of confusion with earlier rights, as compared to it being up to the earlier rights holder to actively object to a later application.
Having assisted many clients over the years that face this exact problem, we have had to consider and develop several potential strategies and solutions for tackling the issue. Below are a handful of the methods we regularly use to try to obtain protection.
Anyone filing in China should be aware that the classification system is unique and that a specification drafted for elsewhere in the world is unlikely to pass the Chinese examination process without some form of query or objection being raised. Where possible, it is therefore advisable to obtain a full list of the terms included within each relevant sub-class from a Chinese attorney and to consider creating a separate or adapted specification for use in China that either utilises those terms in place of the specification employed in the jurisdiction where the mark was first registered or lists them alongside, to assist with later adaptations.
This will not always be possible (e.g. if filing via the Madrid Protocol or where a priority claim means that a previously drafted specification must be used). However, in instances where the strategy may be employed, it is advisable to consider doing so.
It will be useful from a wider prosecution perspective but can also help to avoid the unnecessary citation of earlier rights. For example, it can often be the inclusion of one term in one sub-class that prompts a citation from the China Trademark Office (CTMO). When, for example, a UK specification has been used, this may be an unnecessarily wide-reaching term that could have been removed or limited prior to examination in order to avoid the citation.
Pre-empt Objections Despite the propaganda, the trade mark system in China no longer lives up to its Wild West reputation; there is a wider acknowledgement of the value of intellectual property and the authorities are adapting the law in an attempt to stamp out the dishonest practices that gave rise to the reputation in the first place. However, trade mark squatting is still present and there will always be individuals and businesses that see the financial opportunity presented by the first-tofile system.
For this reason, you will often find that a client’s brand is illegitimately registered in China even before that client has decided to protect the mark itself.
Because of this, as well as the potential existence of legitimately registered earlier rights, it is strongly advisable to conduct searches as soon as there is any indication that the client has an interest in the Chinese market. Where no obstacles are found, early filing is also strongly recommended to prevent interim disruptive filings by third parties.
Searches and Non-use Actions One of the most common methods of overcoming the citation of an earlier right is to file a cancellation action against the earlier right on the basis of non-use (i.e. where it has been registered for more than three years and no obvious use can be identified). This is a useful way of removing the citation from the register and thus clearing the way for the client’s application.
However, the process is not always straightforward; if the non-use action has been prompted by an official objection to a trade mark application, the CTMO will not generally agree to suspend examination of the application pending the outcome of the non-use action, thereby leaving the client with no option but to file the non-use action, abandon the application and re-file in the hope that by the time the new application is examined, the non-use action is close to being concluded.
This is why pre-filing searches are so important in China; it is much more beneficial to know about potential citations in advance of filing so that you can instigate those actions early, rather than wait 18 months until you receive a refusal and then potentially have to start from scratch. Indeed, in circumstances where nonuse actions are instigated before either the filing or the provisional refusal is issued, the CTMO is more likely to agree to a suspension pending the outcome of the cancellation action.
Thus, discovering potential citations before filing could lead to the development of a more informed strategy that reduces the time and cost involved in obtaining protection.
Invalidate Earlier Registrations
Where a non-use action is not possible (either because the registration is too young or use is being made in China), clients can also look at pursuing an invalidation action against the cited right.
These can be based upon a number of grounds, including earlier proprietary rights or bad faith; the latter of which is more likely to succeed when there is evidence of squatting and dishonest intentions.
However, such actions are generally difficult to support in the absence of good evidence, a copyright registration or prior use/protection of the mark in relation to virtually identical goods to those included within the cited registration.
Indeed, a handful of our clients have discovered identical logo marks registered in China in classes in which they have no protection and have not previously used their marks. In these circumstances, invalidation actions failed despite the logo being clearly identical due to the lack of pertinent evidence of use or ownership in relation to the contentious goods or services.
Sometimes, despite all one’s best efforts, none of these options are viable and it is difficult to identify a route forward. In these circumstances, the client may need to accept that it has to play the long game. Generally if the application was filed by a squatter, there will be no real intention to use it and so you could choose to diarise the three-year non-use date and then pursue non-use proceedings as soon as possible, while simultaneously re-filing for the client’s mark in the hope of achieving the above-mentioned stay of proceedings, if necessary.
In the interim, or even as a defensive mechanism alongside an initial trade mark filing, copyright registration in China can provide a useful addition to a client’s portfolio and additional armour against trade mark misuse or misappropriation. Indeed, it provides the client with a registered right protecting its stylised mark and it is not limited by the same classification system.
For clients with distinctive logos, a copyright registration can provide a strong alternative right for enforcement purposes. For example, the client can obtain a registered right to record with Customs, and potentially a broader-reaching right to enforce against squatters filing to protect the client’s logo in different classes of goods or services. It is therefore well worth considering.
It is no secret that trade mark squatters will often request huge sums of money in return for the transfer of an earlier trade mark registration for the client’s brand (or something similar). Often the figure put forward is far in excess of the value of that registration, particularly in view of the fact that squatters rarely take the steps to enforce those rights against the rightful owner.
However, in certain circumstances, the purchase of an earlier right may be worth considering – for example, if the value is reasonable in comparison to the cost of pursuing actions at the CTMO, potentially having to re-file and being forced to stall enforcement action in the interim.
Moreover, this could be an option worth considering where a mark is already within the non-use period or very close to that period and thus more vulnerable, or where there was actually a genuine intent to use but it has fallen out of use, or perhaps if there are overseas rights that can be used as leverage in negotiating a commercial relationship that could benefit both parties.
However, do consider who is best to begin those negotiations, as an initial approach from a lawyer is not always looked upon favourably from a cultural perspective.
This article was first published in the June/July 2019 edition of World Trademark Review.
For more information, contact Margaret Arnott or Laura West.
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