Article 4 of the new Trademark Law fights against bad-faith filings

The fourth amendment to China’s Trademark Law came into force on 1 November 2019. Article 4 now states that: a "trademark filed in bad faith without intention to use shall be rejected”. This modified version is also mentioned in Article 44.1, which provides that any mark registered in violation of Article 4 or by fraudulent or unfair means will be declared invalid.

There is a difference between “application in bad faith without intention to use” and “obtaining registration by fraudulent or unfair means”. The China National IP Administration (CNIPA) decision dated 26 April 2019 sheds light on this distinction, even though it was handed down under the previous version of the law.

Case example

Shanghai KANG HANG Biotechnology Co Ltd applied to register the mark NEOCATE in respect of “soap; laundry preparations; cosmetics; talcum powder; cotton swabs for cosmetic purposes; bath powder; toilet water; tissues impregnated with cosmetic lotions; dentifrices” in Class 3. SHS INTERNATIONAL LTD filed an application for declaration of invalidation against this mark on 28 April 2018, alleging that the registration of the disputed trademark violates the provisions set out in Articles 30 and 44.1.

CNIPA ruling

The CNIPA found that the registration of the disputed trademark “acquired by unfair means” is an absolute ground for invalidation as per Article 44.1 and declared the trademark to be invalid. Its reasonings combined Articles 4 and 44.1.

The CNIPA observed that the prior version of Article 4 of the Trademark Law provided that any person acquiring the exclusive right to use a trademark for its business (goods or services) must file an application for registration. The CNIPA therefore considered that the link between the act of filing a trademark application and the related business implies that the applicant should have a real intention to use the trademark in fulfiling its business demand, and that the trademark application should be reasonable and legitimate.

The CNIPA noted that was is no coincidence that the disputed trademark was identical to SHS INTERNATIONAL’s. In addition, it is established that Shanghai KANG HANG had applied to register more than 180 trademarks, most of which were either similar or identical to other famous brands. Shanghai KANG HANG failed to provide any reasonable explanation to justify this mass registration and submitted no evidence to show that the disputed trademark, together with other trademarks, had been put into actual use. Shanghai KANG HANG’s application for the disputed trademark and numerous other trademarks therefore disrupted the trademark registration order.

Comment

In its reasoning, the CNIPA combined Articles 4 and 44.1. It took the view that Article 4 had already established the link between the act of filing a trademark application and the business need underlying this. In the absence of this business need, the concept of “disruption of the trademark public order” provided in Article 44.1 can be used to sanction and invalidate.

Revisions to Article 4 offer more clarity but apply to trademarks filed after the entry into force of the revised law only. China’s Supreme People’s Court is yet to provide any judicial interpretation on applying the new law. However, it is highly likely that Article 4 will have no retroactive effect on the marks that were registered before 1 November 2019.

However, the Guidelines of the Beijing High Court for the Adjudication of Administrative Cases Concerning Granting and Affirmation of Trademark Rights, which came into force on 24 April 2019, offer some useful explanations. For example, it clarifies that bad faith and lack of intention to use are cumulative conditions. In other words, filing a trademark without intention to use is not an act of bad faith per se. The guidelines provide examples of bad faith, such as being aware of the existence of other’s trademark prior to filing an identical or similar trademark. Yet, the background is mainly the public order as sanctioned by Article 44.1. It is necessary to prove that the bad faith of the applicant “disturbs the trademark registration order, impedes public interest, or encroaches public resources”.

With regard to the lack of real intention to use, which is not mentioned in Article 44.1, the “Several Provisions on Regulating Trademark Application”, issued by the State Administration for Market Regulation, which came into force on 1 December 2019, lays down parameters that may help to determine real intention to use, such as the number, classes of applied trademarks, the transaction records of trademarks, business operation of the applicant, effective rulings on infringement or bad-faith registration, among other things.

Finally, it should be noted that, in practice, the CNIPA applies Article 44.1 in trademark invalidation procedures only – Article 4 has a much broader application scope since it can be used from the examination on the trademark application, to the review of refusal, oppositions, review of opposition and invalidation procedures.