▍ Patent practice - Filing Divisional Applications in China

Karson Yang | May 28 2022

Background

In recent years, the number of trademark applications in China has been at the forefront of the world. In 2021 alone, the total number of new trademark applications in China was nearly 9.45 million. Especially with the explosive growth of small and micro enterprises and the rising of service-oriented consumption, the demand for trademark applications has been increasing rapidly. Facing such a huge number of trademark applications each year, China’s Market Supervision Department has implemented new policies and reformed the trademark registration system, including optimizing filing procedures, shortening the examination cycle, and reducing filing costs. Thus, all business entities in the market will be able to enjoy faster and more high-quality trademark registration services. However, fighting against malicious hoarding and preemptive registration is still a challenge.

In order to further optimize China’s business environment and curb malicious trademark applications more effectively, the 13th Standing Committee of the National People’s Congress decided to amend the Trademark Law. In April 2019, “trademark application filed in bad faith for purpose other than use shall be rejected” was added to the first clause of Article 4. In addition, the latest Guidelines for Trademark Examination were implemented correspondingly on January 1, 2022.

Interpretation

How should we interpret the two keywords “use” and “bad faith” in this newly added provision? With regard to the “use” of trademarks, Article 48 of the Trademark Law stipulates:

• For the purpose of this Law, the use of trademarks shall refer to the use of trademarks on goods, the packaging or containers of goods, and the transaction documents of goods, as well as the use of trademarks for advertising, exhibition, and other commercial activities for the purpose of identifying the sources of goods.
  

According to this paragraph, uses are not for the purpose of identifying the source of goods or services that do not belong to the “use” defined in the Trademark law.

Unlike the “first-to-use” in the US trademark law, China follows the principle of “first-to-file”. Applicants do not need to provide any evidence of use when filing a trademark application. Some applicants, especially those who consciously improve the protection of core trademarks through planning and strategic deployment, may ask: if I file a series of defensive trademarks for my core trademark, will these applications be rejected due to “purpose other than use” according to this new clause? 

To answer this question, Guidelines for Trademark Examination 2021 clearly states that “An applicant files the applications for identical or similar trademarks to its registered trademarks for the purpose of defense” and “An applicant files an appropriate amount of trademark applications in advance for the future business with realistic expectation” are not applicable to Article 4 of the Trademark Law. In addition, the Constitution and Law Committee of the National People’s Congress studied this Article and finally added the word “bad faith” as a limitation to this clause.

There is no clear definition of the term “bad faith” in China’s Trademark Law. However, with regard to the acts of bad faith, generally, two aspects below should be considered.

1. The trademark applications are characterized by damaging or clinging to other people’s goodwill, civil rights, or legitimate interests, of which the typical cases are “free-riding”, “clout-chasing”, preemptive registration for hot events or names of public figures.
   
2. The trademark applications are characterized by disrupting market order and deliberately occupying market resources, such as “hoarding trademarks”, an excessively large number of applications, or aiming at the public interest.
   

Nevertheless, there are some differences between “application in bad faith for purpose other than use” in the title of this article and other malicious applications such as “free-riding” and “clout-chasing”. The bad faith of the former is reflected in the lack of intention to use and deliberately occupy a large number of trademark resources to the detriment of public interests, while the latter damages the legitimate rights and interests of specific subjects through preemptive applications. Certainly, Article 4 of the Trademark Law also applies to such malicious acts. If the number of trademarks filed in bad faith is large, it causes damage to specific subjects, the market order, and public resources altogether.

The word “bad faith” in the newly revised provisions is a supplement to “purpose other than use”. It specified that a trademark application filed “for purpose other than use” should be rejected only if being judged as “bad faith”.

Section 5 of Chapter Two in Part II of the Guidelines for Trademark Examination 2021 defined ten acts that belong to “application for trademark registration in bad faith for purpose other than use”, including:

1. A huge number of trademark applications for registration, obviously beyond the normal demand for business activities, lack of real intention to use, disrupting the order of trademark registration.
   
2. A large number of copies, imitations, and plagiarism of prior trademarks with certain popularity or strong distinctiveness owned by multiple subjects, disrupting the order of trademark registration.
   
3. Repeatedly applications for registration of specific trademarks with certain popularity or strong distinctiveness owned by the same subject, disrupting the order of trademark registration.
   
4. A large number of applications for registration of marks that are identical or similar to others’ business names, abbreviations of business names, e-commerce names, domain names, trade names, packaging, decorations with certain influence, advertising slogans, designs, and other commercial signs by others that are well-known and have gained distinctiveness.
   
5. A large number of applications for registration of marks that are identical or similar to public cultural resources such as the names of well-known personalities, famous works or character names, or works of art by others that are well-known and have gained distinctiveness.
   
6. A large number of applications for registration of marks that are identical or similar to names of administrative divisions, names of mountains and rivers, names of places of interest, names of buildings, etc.
   
7. A large number of applications for registration of marks that lack distinctiveness which bear only the generic names, terminologies, and directly indicate the quality, principal raw materials, function, use, weight, quantity, or other features of the goods, or services concerned.
   
8. A large number of applications for registration of trademarks and a large number of transfers of trademarks with dispersed assignees involved, disrupting the order of trademark registration.
   
9. Applicant’s acts of selling trademarks in large quantities, forcing prior users of the concerned trademarks or others into commercial cooperation, demanding high transfer fees, license fees or compensation for infringement, etc., for the purpose of seeking illegitimate interests.
   
10. Other circumstances that may be deemed to be acts of applying for trademark registration with bad faith.
    

Tips

In the light of the preceding insights, enterprises and individuals may refer to some of the following suggestions when pursuing trademark protection for their own brands:

1. Recognize the core products and business scope, and give priority to the protection in major Classes. For example, if an applicant produces and sells chemical products for use in industry and cleaning preparations, then Class 1, 3 & 35 should be selected for protection according to its core products and services.
   
2. Obtain protection in similar Classes. A typical one is “beer” in Class 32 and “alcoholic beverages, except beer” in Class 33.
   
3. Obtain protection in the Classes of accessories and derivatives. For example, if an applicant produces stationery and painting articles, goods in Class 16 should be selected. In addition, the applicant should be aware that the colorant for painting is in Class 2. In order to prevent others from counterfeiting trademarks with ancillary goods, the applicant shall protect the ancillary and derivative goods together.
   
4. Apply for defensive trademark registration. Defensive trademarks can be divided into Same-Class defenses and Cross-Class defenses. For Same-Class defenses, the applicant applies for marks in the same Class of its core goods with similar font or identical pronunciation to the original trademark, which is a common defense strategy. As to Cross-class defenses, the applicant applies for the same trademark in additional classes in which future business may be involved, besides the classes of the current core goods or scope of business, so that to prepare for future business expansion.
   
5. Keep on trademark monitoring and file trademark opposition in due time. The applicant may entrust a reliable IP firm for trademark monitoring service and filing opposition against the potentially infringing trademark when it enters the opposition period.
   

We hope that each applicant while taking the initiative in trademark protection, can respect the trademark law, develop a good trademark registration strategy, comply with the filing requirements and formalities, consistent and proper use of trademarks, and help to maintain a healthy business environment.