From narrow to broad: significant change for ‘interested parties’

A new Supreme People’s Court ruling offers a much broader interpretation of the term ‘interested party’ and could allow more parties related to trademark owners to bring cancellation actions.

The Supreme People’s Court has issued its judgment on a retrial concerning Trademark Registration 3060409, ‘采埃孚’ (ZF in Chinese), in ZF Lenksysteme GmbH v Trademark Review and Adjudication Board. The Supreme People’s Court finally ruled that the disputed mark infringed the prior rights of ZF GmbH and its Chinese-related companies in the trade name ‘采埃孚’, thus violating Article 31 of the Trademark Law. Further, it revoked the judgments of the courts of first and second instance and the decision of the Trademark Review and Adjudication Board.

While China’s newly amended Trademark Law came into force on May 1 2014, this retrial was filed before its implementation. As a result, the Trademark Law referred to here is the former Chinese Trademark Law. Articles 15, 31, 41(ii) and 53 correspond to Articles 15(i), 32, 45(i) and 60(i) of the new law.

As a major partner to many famous automobile manufacturers, ZF GmbH is one of the world’s largest companies engaged in the development, production and sale of steering systems for passenger cars and commercial vehicles. On January 4 2002 Huichang Company filed an application for the trademark ‘采埃孚’ (ZF in Chinese), which was approved for registration on July 28 2003 for “hydraulic pumps; hydraulic valves; pumps (machines); pumps (machines); pumps (parts of machines, engines or motors); hydraulic components (not including vehicle hydraulic system); oil pump and other goods; etc.” in Class 07. Before the filing date of the disputed mark, ZF GmbH and its Chinese-related companies had adopted the words ‘采埃孚’ as their Chinese trade name and this name enjoyed an excellent reputation in the relevant field. ZF GmbH claimed that the registration of the disputed mark violated Article 31 of the Trademark Law and would not only damage the legitimate rights and interests of ZF GmbH and its related Chinese companies, but also cause confusion among the relevant public. It requested that the registration be cancelled. However, ZF GmbH’s arguments were rejected in the invalidation procedure and the judicial proceedings at first and second instance.

ZF GmbH comprehensively analysed the judgments of the courts of first and second instance and concluded that they were one-sided and overly restrictive, as they equated the ‘interested party’ in Article 41(ii) of the Trademark Law with the ‘interested party’ in Article 53 of the same law and interpreted this term as referring only to “licensees and legal successors of relevant rights”. It held that the judgments based on this narrow interpretation should be revoked. ZF GmbH carefully prepared its evidence and lodged a retrial request with the Supreme People’s Court.

After examination, the court ruled that the laws and regulations fail to provide a clear-cut definition of the term ‘interested party’ in Article 41(ii) of the Trademark Law. In current judicial practice, the term is mainly limited to licensees and legal successors; however, its scope should not be restricted in this way. Other parties that can be proved to have a stake in the matter can also request cancellation of a registered mark under Article 31. In addition, the court found that the goods sold under the disputed mark were closely related to the steering systems and related automotive components produced and sold by Shanghai ZF, ZF GmbH’s interested party. Therefore, registration of the disputed mark by Huichang, a company engaged in the same field, infringed the prior trade name of ZF GmbH and its related companies. The court found that the judgments at first and second instance were not based on sufficient factual and legal grounds and should be corrected.

The success of the retrial marks the end of ZF GmbH’s 10-year battle to have the disputed mark cancelled. It also safeguards the trade name rights of ZF GmbH and its Chinese-related companies, and protects the relevant public from confusion and misrecognition.

However, the case also has wider repercussions. In the long term, its significance lies in the fact that, for the first time, the Supreme People’s Court has made an express and broad interpretation of the term ‘interested party’, which will serve as useful precedent in future cases of a similar nature.

The case is also likely to be associated with the long-running debate over the term ‘agent or representative’ in Article 15 of the Trademark Law – specifically, whether this term refers only to trademark agents. This debate was finally settled by the Supreme People’s Court’s judgment in Case 2007(2), which affirmed that: “According to the authoritative notes of the Paris Convention for the Protection of Industrial Property, the common practices of its member states, and China’s consistent attitude in the administrative enforcement, the term ‘the agent or representative’ in Article 6(vii) of the Convention should be broadly construed as the agent or representative in the special sales relationships including the exclusive distribution and general agency.” Based on this, the court held that ‘agent or representative’ in Article 15 should also be broadly interpreted. This has become something of a trump card with which to challenge the pre-emption of a rights holder’s marks by its distributors and agents.

The term ‘interested party’ has likewise prompted heated arguments in the relevant theoretical and practical fields. In its final judgment in Case 2011 (346), the Beijing High People’s Court revoked Schneider Electric’s claim to its Chinese related company’s prior trade name, explicitly stating that: “The entity should not be considered as ‘the interested party’ in the Article 41 (ii) of the Trademark Law, even if the said entity holds part of, or even a majority of, the trade name owner’s shares.”

However, in this retrial the Supreme People’s Court reinterpreted the term ‘interested party’ as the party that had been proved to have a stake in the case. This broad interpretation stands in stark contrast to the Beijing High People’s Court’s judgment and overturns the narrow interpretation of the term which had previously dominated case law in this area. According to this new interpretation, even if the foreign party has not used the disputed mark on the Chinese market, it can still defend its IP rights in China as a qualified and independent party by claiming its Chinese-related companies’ existing prior rights (eg, trade name right, industrial design right or copyright), and even the related companies’ prior use rights. Undoubtedly, the Supreme People’s Court’s interpretation will be good news, especially for foreign parties.

Hu Gang ([email protected]) is a senior managing attorney and Li Ruili is a trademark attorney at CCPIT Patent & Trademark Law Office

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