Court guidance may have important implications for securing trademark rights

With the revised Trademark Law due to enter into force on May 1 2014, on January 22 2014 the Beijing Higher People’s Court released the "Guidance on the Examination of Administrative Trademark Rights Cases".     

The guidance contains several new legal interpretations pertaining to (1) market research evidence, (2) the name rights of natural persons and (3) registered companies without business licences, which may have important practical implications for securing trademark rights in China.

With regard to the first point, China’s Supreme People’s Court had previously addressed the use of market research evidence in the determination of confusion between trademark applications and earlier trademark rights (see the "Interpretation of Several Issues on the Trial of Administrative Cases").

Despite the Supreme People’s Court’s acknowledgement of the value of market research evidence, in recent years such evidence has not fared very well in proceedings before the China Trademark Office, the Trademark Review and Adjudication Board and the courts, due to the lack of judicial guidance, commentary, professional opinions or normative documents to support the reliability of market research evidence.

To address this issue, the guidance provides the first detailed explanation of the absolute requirements applicable to such evidence:

• It must simulate, to the extent possible, the circumstances in place at the time of purchase by the relevant public;
• It must define the scope, size and method of determining the relevant public;
• There must be a detailed description of the degree of attention that the relevant public pays to the goods at the time of purchase; and
• There must be an explanation as to the methods of comparison used (overall comparison, comparison in isolation or comparison of the main parts). 

In addition to the above, the methodology of the market research must be free of error and verifiable. If the market research evidence does not satisfy all of the above requirements, it will be deemed inadmissible.

With regard to the second point, a natural person’s name is recognised as a personal right under the General Principles of the Civil Law and as a prior right under the Trademark Law.

Article 99 of the General Principles of the Civil Law states that:

"citizens shall enjoy the right to use their personal names and shall be entitled to determine, use or change their personal names in accordance with the relevant provisions. Interference with, or usurpation and false representation of, personal names shall be prohibited."

Article 33 of the Trademark Law provides as follows:

 “A holder of prior rights or an interested party may, within three months from the date of the preliminary examination of a trademark, raise objections to the Trademark Office if it is of the opinion that the trademark is in violation of Paragraph 2 and Paragraph 3 of Article 13, Article 15, Paragraph 1 of Article 16, Article 30, Article 31 or Article 32 of this law. Any party that is of the opinion that the trademark is in violation of Article 10, Article 11 or Article 12 of this law may raise objections to the Trademark Office within the said three-month period. Where no objection is raised upon expiry of the announcement period, the Trademark Office shall approve the application, issue the certificate of trademark registration, and make an announcement thereon.”

The guidance extends the scope of a person’s name rights to include the following:

• terms whose main elements correspond to the names of natural persons;
• alternative names;
• pen names;
• stage names;
• honorific names; and
• nicknames.

With regard to the third point, the Regulations of the People's Republic of China on Administration of Registration of Companies state that the business licence of a company may be revoked by the Administration of Industry and Commerce; however, the company continues to exist until it is officially deregistered. 

Consequently, there are many companies in China that still exist but do not have a valid business licence; some of them have applied for trademarks that they have no intention to use in the normal course of trade. 

According to the guidance, if the applicant for an opposed trademark is an enterprise that has had its business licence suspended, but has not yet been deregistered, the opposed mark may be refused registration pursuant to Article 4 of the Trademark Law if the following conditions are met:

1. The business license of the applicant has been suspended for more than three years;
2. There is no evidence to show that the opposed mark has been assigned or licensed to another party;
3. The applicant has not intervened in the appeal procedure or in later judicial appeal proceedings, and has not made any claims as to its business status or the status of the opposed mark; and
4. The opposed mark is a copy or imitation of the cited mark and the goods covered by the parties’ marks are linked to some extent.

The rationale behind this provision stems from the Supreme People’s Court’s Opinion on the Utilisation of IP Rights Judgments to Facilitate Socialist Cultural Development and Prosperity and Promote Independent and Coordinated Economic Development: companies that have not conducted business for more than three years are unlikely to use a registered trademark, and registered marks in the name of such companies will affect the development of domestic brands.

Accordingly, this provision is especially noteworthy under both the current and amended Trademark Law, as neither ‘use of’ a mark, nor an ‘intention to use’ a mark, is a requirement for securing the registration of a mark.

While the possibility of opposing a trademark based on a lack of intention to use the mark is desirable, given the number of bad-faith trademark registrations that continue to plague China’s trademark registry, an intention to use the mark in order to obtain a trademark registration would be even more appropriate.

George Chan and Tracy Liu, Rouse, Beijing