China Cracking down on Malicious Trademark Registrations

Categories: Arbitration and Litigation, Business In China, Foreign Direct Investments, Intellectual Property | By Peter Pang

What does a deck of playing cards and a lighter have in common? ‘Nothing’, one could argue. On December 30th 2015, the Beijing No.1 Intermediate People’s Court argued otherwise and endorsed a creative argument in a case involving the world’s largest playing card manufacturing company and a malicious trademark applicant.

The United States Playing Card Company (USPC) is the world’s leading playing card manufacturing company and is preferred by casinos and industry-professionals alike. In fact, we have all probably, at least once, held one of their decks in our hands, whether it be the famous “Bee”® cards or the “Bicycle”® cards. Over the last several decades, USPC has experienced tremendous success on a global scale. In every country, and particularly in China, it is a well-known fact that successful businesses attract not only new clients and growth opportunities but also copycats of all descriptions. As it has often been said: imitation (and often outright copying) is the most sincere form of flattery.

USPC foresaw this potential threat and mindfully registered many of its brands in China more than fifteen years ago, at a time when most “Western” companies neglected to do so. Having registered its trademarks in China, USPC has, over the years, successfully fought and defeated trademark infringers, not only in administrative proceedings and in court rooms, but also out in the field through a plethora of agents and investigators who have been able to aptly identify the infringing source, and with the help of the local AIC (Administration for Industry and Commerce), take them offline and out of business. Support from Chinese authorities not only shows that China takes its IP Law seriously but it also demonstrates that registering one’s trademark in China is indeed a precursor to effectively leveraging China’s steadfastly improving laws, regulations and interpretation of intellectual property protection.

While spurts of inconsistent rulings still occur, overall, the Chinese authorities are now beginning to understand that the protection and management of trademarks plays a major role in bolstering economic development and business growth. As increasing numbers of infringements are aimed at domestic brands as opposed to solely foreign brands, China is waking up to an entire generation of “innovative infringers” that use clever ways to benefit from the success of others. In the case at hand, an infringer decided to utilize the famous “Bee”® mark, principally known for playing cards, on cigarette lighters. USPC filed an opposition to the application for an identical mark to be affixed to an unrelated item and in a different class of goods (Class 11 as opposed to playing cards in Class 28). The trademark authorities initially ruled against USPC without comment and the matter was then appealed by USPC to the Trademark Review and Appraisal Board (TRAB), who also quickly dismissed the “infringement notion” on the basis that “USPC’s trademark “Bee”’® is being used on an unrelated product (a lighter), therefore, used in a different class of goods would be harmless to USPC.”

Following the second refusal, USPC did not give up, they brought an administrative lawsuit before the Beijing No.1 Intermediate People’s Court against TRAB’s decision, citing among many other arguments, Article 28 of the Chinese Trademark Law which provides that “Where a trademark, the registration of which has been applied for, is (…) identical with or similar to the trademark of another person that has, in respect of the same or similar goods, been registered or, after examination, preliminary approved, the Trademark Office shall refuse the application and shall not publish the said trademark”. China follows the World Intellectual Property Organization’s (WIPO) Nice Classification, which lays out 45 classes of goods and services. Pursuant to Article 28 and the WIPO’s Classification, Chinese Intellectual Property Law bans similar trademark application within their respective class. In other words, the Chinese Trademark Office (CTO) will not grant registration of a trademark that has already been registered for a product that belongs to the same class of goods or services; however, the registration of similar trademarks in a different class is generally not viewed as conflicting. In the case at hand, playing cards belong in Class 28 and lighters in Class 11, which means co-existence would ordinarily be allowed.

Faced with TRAB’s affirmation of the CTO’s initial decision, USPC had to dig deep to invoke legal principles that allowed the No. 1 Intermediate Court to justify a reversal. Drawing on Article 28, USPC made the argument that playing cards and lighters constitute similar goods, because they are often used by the same consumer, linking the two items to a single source i.e. USPC; therefore, not only will there be a likelihood of confusion but actual confusion will occur. To support this view, USPC lawyers also drew on Rule 11 of the ‘Supreme People’s Court Interpretation Trial Trade Marks’ which defines proximity of goods by referring to goods with identical function, use, manufacturer, sales channel and target consumers or goods that the relevant public generally thinks are related to each other in a particular way, and are likely to cause confusion with other goods. Moreover, in 2011 the Supreme People’s Court explicitly set forth the principle for determination of similar goods on a case-by-case basis1. While it is safe to assume that the function, use, and manufacture of playing cards and lighters are unequivocally different, the sales channel and the target consumers of these two commodities are essentially the same.

Mindful that there was little or no legal precedent to support their views2, USPC’s lawyers undertook to demonstrate to the judges that there is a common “theme or thread” between playing cards and cigarette lighters. Putting it simply: if two products or goods bearing identical trademarks or trade dress fall into two different classes of goods, but are often used by the same consumer where actual confusion about the source of the products could arise, then the court must adjudicate that the goods constitute ‘similar goods’ as per Article 28. The nexus between lighters and playing cards exists more often than not; card players often smoke while playing. The Beijing No.1 Intermediate People’s Court bought the argument, rejected the applicant’s effort to register the same and awarded USPC the prevailing right to the classification, based in part on their progressive and expansive interpretation of Article 28.

Although, in its written decision, the Court was silent on the issue of bad faith exhibited by the infringing applicant through its indiscriminate filing of trademark applications of another’s registration in non-conflicting classes for the sole purpose of harassment and potential illicit gains. There is no doubt that this bad-faith argument which USPC has repeatedly asserted in all its cases against the same applicant infringer has had a cumulative effect and influence on the court’s decision.

One critical question that many of the IP law practitioners are probably asking themselves remains: did the Beijing No.1 Intermediate People’s Court act on the spur of the moment or did we witness the inception of a new trend?

Over the last few decades, China has, without doubt, progressed a long way with regard to trademark protection. The latest IP law reform which came into force on 1st May 2014 aims at enhancing interpretation of the already existing legal framework, thereby fostering a more sound environment for foreign businesses who choose to conduct business in China. Although not a landmark decision by any measure, the decision is part of an evolutionary trend to expand trademark protection coverage against applicants who file malicious applications for the purpose of profiting off iconic brands. This decision sends a clear message to multinational corporations and the people who might prey on them: there is hope for businesses as China is beginning to take an increasingly stronger stance on trademarks and consumer protection.

1 Hangzhou Woodpecker Shoes Industry Co, Ltd vs. TRAB.
2 K. Mikimoto & Co., Ltd. vs. YMB; 2014; Trademark Review and Adjudication Board.

 

About IPO Pang Xingpu :

IPO Pang Xingpu is a premier international law firm that has been representing clients in China since the early 1990s. We’ve been here longer than the vast majority of corporate law firms, and have helped hundreds of companies across a wide spectrum of industries securely and quickly establish operations in China, and then provide follow-on services for their ongoing legal needs.

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