Examining Bad Faith Applications Under the Amended Trademark Law in China - Are the amendments living up to their expectations?

For decades, trademark squatters have been exploiting the first-to-file and sub-classification systems in China to take advantage of the reputation of international brands. They profit by preemptively registering trademarks of these brands (in classes and sub-classes of goods and services which are important to the brand owners as well as those which are less relevant) for selling the registrations to the brand owners when they enter into the China market.  There have been mounting pressures both from foreign governments, companies and chambers of commerce, and within CNIPA itself, to tackle the problem of bad faith filings in China. 

One of the most significant changes is that the CNIPA will now refuse an application under the amended Article 4 of the Trademark Law if it considers the application to be made in bad faith without intent to use the mark. As seen from the recent cases, there is now much closer scrutiny on bad faith applications by the CNIPA as compared to the past. It appears that after the amendments, the CNIPA is likely to refuse an application if the mark is an imitation of a famous trademark and the applicant has, at the same time or within a short period of time, filed a relatively large number of applications. In this article, we will look at some recent cases and review how the amendments actually help brand owners in protecting their trademark rights in China.

1. The amended Article 4 and SAMR rules 

Under the amendments of the Trademark Law, a new provision is added to Article 4 which provides that "Any bad faith trademark applications without intent to use shall be refused." Articles 33 and 44 are also amended accordingly to allow trademark holders to rely on Article 4 in opposition and invalidation actions. 

Accompanying the new Trademark Law are the “Several Rules on Regulating the Application of Trademark Registration” which were in operation since starting from 1 December 2019 (the “SAMR Rules”). The SAMR Rules aim to provide more clarity on how the amendments of the Trademark Law should be applied in practice. 

The SAMR Rules provide specific examples and guidance on when the CNIPA should refuse a trade mark application. Highlights of the SAMR Rules including the following:

Article 2 provides that trademark applicants shall have actual needs of obtaining trademark rights. 

Article 3 of the Rules sets out a list of prohibited trademarks and behaviours which is consistent with the grounds listed in the Trademark Law: 

1. Trademark applications in bad faith without intent to use as provided under Article 4 of the Trademark Law; 
2. Trademarks that copy, imitate or translate other's well-known trademarks;
3. Trademark agency seeking to register their client's trademarks without authorization or one seeking to register an unregistered trademark in prior use by others, provided that the applicant learned about the existence of the trademark through contractual, business or other relationship;
4. Trademarks that infringe the prior rights of others or pre-emptive registrations by illicit means of other's trademark that enjoys relatively high reputation;
5. Applications made to seek to obtain trademark registration by fraudulent or other illicit means; 
6. Trademarks that violate the good faith principle, are detrimental to socialist morality or have other unhealthy influences.

Article 8 lists out factors that shall be taken into account when the CNIPA determines whether an application is made in bad faith without intent to use the mark: 

1. The number of trademark filings, their designated trademark classes and status of trademark assignments made by the applicant or any other associated individuals or entities;
2. The business industry to which the applicant belongs and its operation status;
3. Whether there are effective administrative/judicial decisions regarding the applicant engaging in bad faith trademark filings or trademark infringement;
4. Whether the trademark filing is identical or similar to trademarks of others with considerable high reputation;
5. Whether the trademark filing is identical or similar to celebrity names, trade names, abbreviation of company names or other business logos;
6. Other factors that shall be taken into account in the opinion of the CNIPA.

2. New law in practice 

After the amendments came into effect and in accordance with Article 11 of the SAMR Rules, the CNIPA has started publishing notices of refusal of applications based on Article 4. Compared to the previous practice in which the CNIPA’s decisions were only made available to the public when an applicant filed a review against refusal, this has increased the transparency of the examination process. It also allows us to have a good glimpse of how the amendments have improved the CNIPA’s practice in examining bad faith applications. 

Having reviewed the nearly 300 notices of refusal published so far, we selected two cases below which are clear illustrations of how differently the CNIPA examines bad faith applications before and after the amendments. 

Case of “葆蝶家 BOTEGA” – Bottega Veneta

Just shortly after the amendments of the Trademark Law, the CNIPA refused an application for “葆蝶家 BOTEGA” in Class 10 (Application No. 39595509) in December 2019. The Chinese characters “葆蝶家” (BAO-DIE-JIA) in the mark are pronounced as “BAO-DIE-JIA” in Mandarin and represent the official Chinese name adopted by the Italian luxury fashion brand Bottega Veneta. The Applicant, Yimei Yiyao (Guangdong) Co., Ltd. (医美医药(广东)有限公司), has filed 54 trademark applications in China and many of the applied-for marks are identical or similar to famous brands. The CNIPA decided that this application for “葆蝶家 BOTEGA” was filed in bad faith without intent to use and refused it based on Article 4. It is worth noting that Bottega Veneta has not registered its Chinese name in Class 10 in China.  

In contrast, back in June 2015 under the previous Trademark Law, another third party filed an application for the same Chinese characters “葆蝶家” (BAO-DIE-JIA) in Class 10 and was approved for registration. Even though this applicant filed a total of 43 trademark applications in China including 40 applications for the mark “葆蝶家” (BAO-DIE-JIA) in various classes within only 3 days, the application in Class 10 was approved and eventually matured into registration in 2016 (Registration No. 17319401).

Case of “玛莎拉蒂” - Maserati

Another similar example relates to the Italian luxury vehicle manufacturer, Maserati. Maserati’s brand name in Chinese is “玛莎拉蒂” (pronounced as “MA-SHA-LA-DI” in Mandarin). 

In March 2020, the CNIPA refused an application for “玛莎拉蒂” (MA-SHA-LA-DI) in Class 5 (Application No. 39936801) on the basis that the mark is similar to Maserati’s prior application and registration for the same Chinese mark in respect of part of the applied-for goods as well as the Applicant’s bad faith under Article 4. The Applicant, Guangzhou Xingkuang Smart Card Technology Co., Ltd. (广州星旷智能卡科技有限公司), has filed more than 100 trademark applications in China since July 2019 in which a majority of them are for marks which are identical or similar to other famous marks, celebrity names and trade names. Even though only part of the goods covered by the application were similar to Maserati’s prior marks, with the amended Article 4 in effect, the CNIPA could rely on bad faith and refuse the entire application. 

Again, contrary to the above refused application, another third party successfully registered “玛莎拉蒂” (MA-SHA-LA-DI) in Class 5 back in January 2012 under the previous Trademark Law. Even though the applicant had filed up to around 1,000 applications at that time with many of them being imitations of other famous marks, the application was approved for registration (Registration No. 10422218). The mark was only subsequently revoked on the basis of non-use revocation in 2018. 

3. Comments

The above examples show that under the amended Trademark Law, the CNIPA now plays a much more active role in guarding against bad faith applications. In the past, bad faith applications were more often only refused on relative grounds when brand owners had already registered their marks in the same sub-classes. For brand owners who had only registered their marks in respect of their core businesses, it was rather inevitable that their famous marks would be copied and registered by trademark squatters for other goods and services, thereby resulting in dilution of the distinctiveness of their marks and difficulties for the brand owners to expand protection of their trademark rights in other classes of goods and services in the future. Although even after bad faith applications were approved, brand owners could still try to remove the marks from the register by filing oppositions, non-use revocations or invalidations, or  negotiating with the trademark squatters on purchasing the marks, these options would usually require much efforts and resources on the part of brand owners regardless of the outcome. 

The amendments of the Trademark Law now confer a clear power for the CNIPA to refuse bad faith applications on absolute grounds to reject imitations of famous trademarks even if a brand owner has not registered its marks for the same or similar goods and services. This offers some assistance and comfort to brand owners, in particular those which may not have the resources to register their trademarks extensively in many or all sub-classes in China for defensive purpose. This may also lessen their burden of regularly watching and monitoring applications for identical or similar marks in order to take timely actions. Having said that, it is still early to conclude to what extent the amendments can contain the problem of trademark squatting in China. For instance, it appears from the recent decisions that Article 4 is invoked in cases where an applicant has filed at least around 50 applications. In most cases, the applicants in fact filed hundreds or even thousands of applications within a short period of time. It is unclear whether there is a general threshold beyond which the number of applications filed will be considered large and objectionable and if so, whether a trademark squatter may evade the effect of Article 4 by filing a slightly smaller number of applications. 

Also, since the amendments only came into effect in November 2019, most of the opposition and invalidation proceedings relying on the amended Article 4 are still ongoing. We expect that the relevant decisions may be published by end of this year at the earliest. We will need to wait until then to see whether the amendments actually make it easier for brand owners to remove bad faith marks using opposition/invalidation procedures. Nevertheless, from the positive developments on the CNIPA refusal decisions against bad faith applications thus far, we believe that the new Article 4 is off to a good start.