Supreme Court redefines ‘legitimacy’ requirement for trademark use

China

The Supreme Court has rejected an application for re-trial filed by Castel Frères SAS in a non-use dispute. In doing so, the Supreme Court re-explained the concept of 'legitimacy' in trademark use, and reversed its 2008 decision on the same issue in another case.    

In 2000 Mr Li Daozhi registered the trademark 卡斯特 (pronounced 'Ka Si Te', which is usually regarded as the Chinese transliteration of 'Castel') for wine in Class 33 of the Nice Classification. In 2005 French wine producer Castel applied to the China Trademark Office for the revocation of this trademark on the grounds of non-use for three successive years (Article 44(4) of the Trademark Law). In 2006 the Trademark Office decided to revoke the registration.

Li Daozhi appealed to the Trademark Review and Adjudication Board (TRAB), claiming that he had never received the Trademark Office’s notification due to his change of address, and that he had been using his trademark continuously. Li Daozhi submitted a trademark licensing agreement with a firm named Ban Ti, as well as VAT invoices issued by Ban Ti for the sale of Ka Si Te wine. In 2007 the TRAB overruled the Trademark Office’s decision and maintained the registration.

Castel appealed to the Beijing Number 1 Intermediate Court on the grounds that Li Daozhi had not used the trademark “legitimately”. Castel argued that:

  • Ban Ti had not obtained a 'certificate of label for imported food'; and
  • the registrant had not provided the product permit, import permit or sanitary certificate, as required by the relevant laws.

Castel thus claimed that the sale of Ka Si Te wine in China should have been prohibited; since use of the trademark was not legitimate, the registration should be revoked.

The Beijing Number 1 Intermediate Court held that these issues related to the rules governing the administration of imported products, but had nothing to do with trademark use under Article 44(4) of the Trademark Law. In 2008 the court upheld the decision of the TRAB, finding that the trademark had been put to actual use. The issues of whether the trademark had been used legitimately and how it had been used fell outside the jurisdiction of the TRAB.

In 2008 Castel appealed to Beijing Higher Court, which upheld the first instance decision.

In 2010 Castel applied to the Supreme Court for a re-trial. On December 17 2011 the Supreme Court rejected the appeal (2010, Zhi Xing Zi 55). The Supreme Court opined that the issue of whether Li Daozhi and Ban Ti had violated the relevant regulations on import and sale did not fall within the scope of Article 44(4).

The court held as follows:

    "The legislative purpose of Article 44 (4) of the Trademark Law (revocation of a trademark registration for non-use) is to maintain active trademarks and to get rid of those trademarks that are not active. Revocation of the registration is only the means, but not the end itself. So far as the trademark registrant has used its registered trademark publicly and truthfully in the course of trade, and the trademark use itself has not violated the relevant rules provided in the trademark laws, then the trademark registrant has satisfied its obligation to use the trademark. Here, it is inappropriate to find that the trademark use has violated Article 44(4)."

This decision contrasts with another famous ruling issued by the Supreme Court in a non-use dispute involving the trademark KANG WANG (2007, Xing Jian Zi 184-1). In that case, the Supreme Court decided to revoke the trademark on the grounds that its use was not legitimate. The Supreme Court included this case as a precedent in the Annual IP Report of 2008.

In the KANG WANG decision, the Supreme Court held as follows:

"The 'use' as provided in Article 44(4) should be public, truthful and legitimate use of a trademark in the course of trade. According to Article 45 of the Trademark Law, the legal basis for judging whether the trademark use is legitimate is not limited to the Trademark Law and corresponding regulations. For the type of trademark use that is connected to production and business transactions prohibited by laws and regulations, if one affirms the validity of such trademark use, one may encourage and indulge illegitimate activities, and run contrary to the purpose of trademark use as required by the Trademark Law."

The Supreme Court found that the registrant and its subsidiary had not produced the permits necessary for the production and sale of cosmetics. Therefore, the court considered that the registrant had not used the trademark legitimately during the relevant period.

The Trademark law describes certain situations of “illegitimate use” in which the Trademark Office has the power to order the registrant to rectify its “misconduct” or even to revoke the trademark ex officio. These situations are mentioned in Articles 44(1), (2) and (3) of the law (eg, unilateral alteration of the mark, unrecorded change of address and bad-quality products).

In order to defend an application for revocation on the grounds of non-use during three consecutive years under Article 44(4), the registrant must provide evidence of use, which must be public and truthful. The KANG WANG case thus added a condition of 'legitimacy' by making reference to other laws and regulations that are unrelated to the Trademark Law. This considerably broadened the requirements imposed on trademark owners, who were exposed to attacks based on requirements other than the mere condition of using the trademark publicly and truthfully.

In the Castel case, the Supreme Court re-defined these requirements: use of a trademark must be understood only in the context defined by the Trademark Law.

Zhang Shuhua and Paul Ranjard, Wan Hui Da Law Firm & Intellectual Property Agency, Beijing

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