A trademark serves to identify the source of goods or services, and original trademark rights are mainly derived from the accumulated goodwill created by businesses. However, due to the large profits margin between the revenue of trademark transaction and the cost of registration, the business model in practice need to be paid attention to: some market entities hoard trademarks as investments to obtain improper interests and charge high transfer fees.
In an effort to curb malicious trademark registration applications that misappropriate trademark resources, the Trademark Law amended in 2019 added a provision in Article 4 that disqualifies bad-faith trademark registration applications that are not made for the purpose of use. This refers to the circumstance that the applicant lacks any actual use or intent to use the trademark at the time of applying for trademark registration, or based on reasonable inference, is unlikely to use the trademark.
According to the Guidelines for Trademark Examination and Review, in determining whether a trademark filing constitutes "not for the purpose of use" or a bad-faith filing, a number of factors need to be considered holistically, including the scope and the qualifications of the business, in addition to the characteristics of the industry where the applicant is engaged. Furthermore, it is also necessary to have a comprehensive analysis of the applied trademark per se, the number and span of classes of trademarks submitted by the applicant, as well as whether the applicant has a history of malicious registrations.
Before diving deeper into this issue, it is important to note that the defensive registrations and preparatory registrations neither constitute "bad faith filings, not for the purpose of use" as stipulated in Article 4 of the Trademark Law nor are they subject to that provision.
The former refers to the applicant applying for the same or similar trademark in conjunction with the registered trademark for defence purposes, whereas the latter refers to the applicant applying for an appropriate number of trademarks in advance with realistic expectations for future business. A defensive registration, though lacking in intent to use, should not be considered malicious due to the purpose of proactive protection. A preparatory registration, on the other hand, usually indicates a specific intention to use the trademark in the future. Thus, where the budget permits, preparatory and defensive registration, including cross-class registration of the same or similar trademarks, remain key parts of the strategies for building corporate brands.
Thus far, Article 4 of the Trademark Law has been effectively implemented by the CNIPA through active examination in the course of trademark application proceedings and passive examination of the claims raised by other right holders in adversarial proceedings, such as oppositions and invalidations. Next, we will look at two cases to understand how the CNIPA applied this provision in different procedures.
Case A - Rejection of bad-faith filing during the application procedure
In this case, the applicant Lincoln (Shenzhen) Travel Technology Co., Ltd. has filed a series of (over 200) trademark applications containing the Chinese translation of “Lincoln” in the year of 2020. These irregular applications caught the examiner’s attention and led to the rejection of almost all applications submitted by the applicant that year.
In the appeal process for trademark application no. 47866230, the CNIPA ascertained that the applicant submitted, within a short period of time, a large number of trademark registration applications, which clearly lacked the actual intention of use and exceeded the needs of normal business activities. Such behaviour could easily disrupt the normal trademark registration order, thus constituting the situation referred to in Article 4 of the Trademark Law.
Without certain business scale, a significant finding was that despite being a trading company, the applicant had filed trademark applications covering all classes of goods and services, which was apparently beyond the scope of the company’s normal operation and inconsistent with the nature of the industry. It is unjust to classify these applications as defensive or preparatory registrations.
The CNIPA further find that 929 trademark applications, spanning all 45 classes, were filed under the name of the applicant. From May 2018 to January 2019, the applicant filed more than 500 applications. The CNIPA maintained that it was difficult to find a reasonable explanation for the rationale behind such a large number of filings.
Accordingly, the CNIPA made the decision to reject the application of the above trademark, along with other similar trademarks filed by the applicant.
Case B - Invalidation of bad-faith trademark registration
In the invalidation case of ROLEX vs RLEX, the CNIPA did not support ROLEX’s request for well-known trademark protection. Instead, the CNIPA decided to support the invalidation on the basis of Article 4 of the Trademark Law.
In its decision, the CNIPA noted the fact that the owner of the challenged trademark registration had filed over 800 trademark applications in multiple classes of goods and services, whereas part of these applications resemble other well-known trademarks. The respondent failed to provide a plausible explanation or evidence to prove its genuine intention to use the trademark in question. Furthermore, a web search revealed that the respondent was at the time peddling its registered trademark online.
Consequently, the CNIPA ruled that the respondent engaged in trademark hoarding which violated the principle of good faith, disrupted the normal order of trademark registration and damaged the structure of fair competition.
To conclude, the trend of curbing malicious trademark applications not for the purpose of use is becoming more and more obvious, and the application of Article 4 of the Trademark Law in actual cases by CNIPA is also increasing. For right owners, when it is difficult to claim the rights through other provisions, relying on Article 4 of the Trademark Law to crack down the trademark squatter based on malicious trademark applications not for the purpose of use is also a way worth considering.