It has always been in question what would constitute good evidence of use in the context of non-use cancellation in China since there are indeed no clear-cut rules and standards. This Article will discuss some of the trends observed from the current practice and recent cases, and provide some suggestions which may help enhance evidence collection and preservation.
It is observed that the China National Intellectual Property Administration (“the CNIPA”) has been tightening the examination standard on use evidence submitted in defence of non-use cancellations. At the appeal stage, the Chinese courts tend to be more flexible in general (such as less bound by the subclassification system, or more open to accept OEM evidence), but they have also been getting more detailed in adjudicating non-use cases.
This increasing strictness in examination and adjudication on trademark use is quite in line with the proposed amendments to the PRC Trademark Law. While the Draft Amendment thereto as released by the CNIPA on 13 January 2023 has not yet come into effect, one of the main changes under the Draft is the reinforcement of the obligation to use trademarks. Specifically, the Draft adds the requirement of actual use or commitment to use for trademark filings (Article 5) and the potential cancellation of a trademark registration in failure of submission of Statement of Use upon registration for 5 years (Article 61).
It seems the overall trend is that use would play an increasingly important role in the trademark regime in China. Therefore, for brand owners, it is important to have a good practice of preserving use evidence in view of the potential challenges.
Through case studies, we have observed some changes in the CNIPA’s recent practices in examining non-use cancellations:-
(i) Electronic evidence may face challenges on its authenticity if not notarised. In practice, notarisation of evidence is generally required at the court level and the CNIPA used to find evidence without notarisation acceptable. However, there are recent decisions where the CNIPA did not accept evidence without notarisation.
(ii) The CNIPA may go farther by initiating and conducting checks on the authenticity of evidence.
(i) The CNIPA may not accept evidence which shows only preparation for use, such as authorisation letters or contracts per se. In the absence of other supporting evidence which shows actual commercial use, the evidence showing only preparation for use may be considered as insufficient.
(ii) In examining evidence related to export, the CNIPA is now inclined to require a chain of evidence, or the evidence would be considered as incomplete. For example, mere customs declarations without any other corroborative evidence would be considered as insufficient to prove actual performance of export activities.
(i) The evidence submitted should show the disputed mark but not any other marks owned by the same registrant. It is common for brand owners to have more than one registration for a trademark, such as multiple registrations for different stylisation of the trademark. In the context of non-use cancellation, if the use evidence submitted shows use of other marks owned by the same registrant but not the disputed mark, it may be considered as insufficient to maintain the registration of the disputed mark.
(ii) The use of a mark as a name of the product model or in product description cannot be deemed as trademark use. Some of the brand owners may register trademarks for model names and relevant descriptions for their products. However, once these registrations encounter non-use cancellation attack, due to the relatively weak distinctiveness of such trademarks, use evidence may not be acceptable as the use is unable to serve the purpose of distinguishing source of goods or services.
While the above may demonstrate that the CNIPA and the Chinese courts are getting more stringent in examining use evidence in a non-use context, it may also suggest that they are putting more focus on the actual use of trademark in a commercial sense. In other words, the examination is conducted in a more conscious way, which in some cases may result in higher flexibility. For example:-
1) Token use is generally considered as insufficient in defence to non-use cancellation. However, the CNIPA and the Chinese courts have been considering this more comprehensively, and the determination of token use should not depend only on the amount/quantity of evidence submitted.
2) When the disputed mark covers non-standard goods/services items, and the evidence submitted does not reflect the exact registered goods/services under the non-use cancellation, the CNIPA would consider if the goods/services as registered and as in use are the same in terms of nature.
Evidence of trademark use is of significant value, in fact not only in the context of non-use cancellation, but also in proving intent to use in examination opinions triggered by large-scale applications, as well as in opposition, invalidation and infringement cases to prove the earliest use of the trademark, its continued use and reputation. Therefore, it is always a good practice to have regular preservation of use evidence to strengthen the value of brand owners’ trademarks.
Having learned from the precedent cases and recent trend, we would provide some practical tips on collecting and preserve use evidence of trademark in common daily operations:-
The evidence of use for different brand owners could be roughly divided into the following three aspects according to the daily business operations:
Firstly, in the process of production, the documents signed with the suppliers, manufacturers, product inspection and testing organisation, such as manufacturing agreements, purchase orders, payment receipts, invoices that can be verified on tax authority’s online platforms, exporting documents (customs declarations for exported goods with stamps, release confirmation, etc.), photos of products and package, test report (issued by the third party), etc. could be preserved as use evidence.
Secondly, in terms of the sales process, the signed distribution agreements, letters of trademark authorisations, transaction documents (including sales contracts, purchase contracts, receipts, invoices that can be verified on tax authority’s online platforms, transaction records on online stores), pictures of displaying the products, videos of sales of the products, consumers’ comments, etc., between the brand owners and the sales agents, distributors, online platforms and other business partners are also beneficial and should be preserved.
Thirdly, when it comes to promotion, the brand owners could keep the advertising agreements signed with advertisement agents, platforms, influencers, etc., the advertising materials (e.g. brochures, videos, social posts on TikTok, red book, dianping.com) and press release/ media reports. In addition, the exhibition contracts, invoices and pictures of the exhibition should be kept in good record. For advertising in magazines and other publications, the covers, catalogs and pages bearing trademarks would be useful. In case of outdoor advertisements and TV commercials, it is also necessary to take promotional pictures showing the time and place. When commissioning someone to design or print merchandise packaging, the design or printing contracts and corresponding invoices should be retained, and the trademark, goods and time should be reflected on these documents.
Among all types of use evidence, evidence of actual transactions in production and sales is in general of the strongest probative value. However, one should bear in mind that the relevant documents, including the agreements/contracts/payment receipts/invoices/purchase orders, shall correspond to each other in order to prove the actual performance of the sales activities.
The evidence of sales can directly prove that the goods have entered into the market circulation, therefore it has a strong probative value comparing with other evidence. Sales contracts and corresponding invoices are usually the most common evidence, and invoices are indispensable as supporting evidence to prove the fulfillment of contracts. In this regard, sales contracts and invoices should always specify information such as trademarks and goods, and the relevant time and amount should be able to correspond to each other, so that the combination of the two can prove the sales time, sales volume and so on.
To ensure the validity of the evidence, attention should be paid to the standardised use of the trademarks in the commercial documents. For example, the trademarks and the relevant goods should always be reflected in the commercial documents such as invoices and contracts.
The manner of using the trademark will also greatly influence the determination of trademark use. Trademark used on product packaging should be in a reasonable size, font design, position, and color so that consumers can easily identify it as a trademark. Besides, adding the TM or ® symbol to the product packaging would also help demonstrate the registrant’s intent to indicate the source of the goods or services and to use the trademark in a trademark sense, particularly when the companies whose trademarks are the same as their trade names.
In case of a brand with multiple sub-brands and products, each trademark should be used differently and evidence of the use of each trademark should be preserved.
Self-made evidence such as product brochures, mere photos and receipts, etc. should be avoided. Some self-made evidence does not show the formation of the time and is not used on the registered goods/services, which authenticity would generally be questioned.
Last but not least, regarding the periodical timeframe of evidence preservation, keeping the use evidence on a yearly basis would be recommended. For instance, keeping 3-5 major deals proving production and sales contracts as well as keeping the corresponding invoices, sales records, etc. in the record. In terms of the process of evidence preservation, it is recommended to preserve them by notarisation or time stamp to improve the authenticity of the evidence, especially for the electronic evidence.