It is now undeniable: China is a market that (almost) no company can afford to lose. For years we have been repeating to our clients: “protect your brands in China as soon as possible, otherwise you can see your trademark registered in bad faith by third parties” (yes, we know we sounded boring, sometime). Fortunately, however, China’s immense commercial potential is now known to everyone; far gone are the times when few companies owned a trademark in China and we had the arduous task of energetically underlining the essential advantages of registration, notwithstanding the issues that could arise in a country with a legal system so different from ours.
Recently however, a there is a new mantra that we have started to constantly repeat (because we really care about your brands): use your registered trademarks in China, otherwise you risk losing them. In fact, the Chinese Trademark Law provides that if a registered trademark, be it a Chinese national trademark or an international trademark extended to China, is not used for an uninterrupted period of 3 years from registration, third parties may request its cancellation.
The trademark is therefore not automatically cancelled if not effectively used in China. However, as a result of a third party’s petition, the brand owner will be requested to file sound evidence of use of the trademark in China for all the relevant products and services. If the trademark owner is unable prove effective use in China, he will lose the exclusive right to use the trademark. This means that anyone could be later allowed to use a similar or even identical trademark, and (almost) nothing could be done to stop it.
The mentioned scenario unfortunately happens very often. The number of cancellations for non-use filed in China is increasing, in co-relation with the impressive growth of trademark applications filed every year. Since we are talking about numbers in excess of 8 million trademarks filed in China every year,[1] it could easily happen that another company is planning -in good faith- to register a trademark that is similar to yours. The presence of your earlier mark could be an obstacle for the registration of this new trademark. Therefore, if your earlier trademark is registered for more than 3 years the weapon of the cancellation action for non-use will be used to remove the obstacle.
There is also a worst-case scenario. It could happen that company in bad faith is interested to obtain exactly your trademark. In this case, the bad-faith competitor can file the cancellation action for non-use (using a front company) and file at the same time a new trademark application identical to yours. If you cannot prove use of your trademark in China and will lose the trademark right, the infringer will gain it with the new registration.
In addition, Cancellation action for non-use in China is a cheap and very simple action: the person who intends to cancel a trademark will only have to file the cancellation request at the Chinese trademark office, and wait for the office to issue the decision. The burden of proof will lay on the owner of the trademark which must demonstrate the use by presenting detailed and pertinent evidence of use in the territory.
CANCELLATION ACTION FOR NON-USE: PROCEDURAL ASPECTS
Let’s assess the non-use cancellation actions in more details. To avoid a trademark to be cancelled due to non-use:
- the registered trademark must be actually used in China;
- the version in use should match the one recorded in the Chinese database;
- the registered trademark should be used for all products and / or services object of the protection;
- the use should start not later than 3 years starting from the registration date. In case of trademarks registered for more than 3 years, the use must be established for the 3 years preceding the date of filing of the non-use cancellation action.
- What is meant by actual use and how to prove it?
In the past it was sufficient to file very limited evidence to prove the use of a trademark. It was also rather common to see forged evidence of use filed to defend bad-faith registration that were never actually used because they were originally filed in bad-faith just with the intent of blackmailing the legitimate owner.
To address these issues, China laws and practices have changed and considerably improved; Chinese examiners are now way more careful in evaluating the evidence of use and the trademark office has also drawn up some guidelines to identify what can be considered as actual use of the trademark.
However, one concept should be crystal clear from the start: it will not be enough simply state that you have used the trademark, have participated in a certain fair or to have discussed a distribution agreement with a possible Chinese partner. It will be necessary to file, within two months from the date on which the action is notified, documentation proving that the brand has been used for the products and services claimed and that those products and services have been offered for sale in China (Hong Kong, Taiwan and Macau do not fit into the equation). A two months deadline can become a massive headache if the evidence have not already been duly collected and catalogued over the years.
For instance, the following are considered suitable evidence is of use:
- Documents proving the actual sale in China, online or in physical stores, of products where the brand is affixed to the product itself, labels, packaging, user manuals, etc.
- Documents certifying participation in trade fairs in China (photographs, lease of the booth with the trade fair organisers, including details of the products / services displayed, etc.)
- Invoices proving sales in China, Customs export documents, documentation necessary to obtain technical authorizations for trade in China etc. The type of product and the trademark must be clearly indicated from the evidentiary material (for example, on the invoices).
- Images where the trademark affixed to signs, shops or points of sale in China (preferably accompanied by the rental contract of the commercial space used for sale).
- Advertising relating to products / services in magazines, newspapers or on radio or television broadcasts in China.
On the other hand, the following are not considered as valid proof of use of the trademark:
- Commercial contracts with Chinese counterparts (if the actual sale of the products deriving from the agreement could not be proved).
- Use of the trademark on samples or gifts.
- Written or oral testimonials.
- It remains yet debated by the Chinese courts whether the use of the trademark on products exclusively intended for export (OEM) could found actual use in China.
It is important to emphasize that the use must refer exclusively to the Chinese territory; proofs of use in languages other than Chinese that refer to foreign territories will not be accepted. The evidence should also be clearly dated, to prove that they refer to the relevant period (3 years dating back from the date in which the cancellation action for non-use was filed). It is therefore clear that the basic principle is that actual use in China occurs when the brand has actually come into contact with the Chinese consumers.
The legislation offers some causes for exemption: the trademark will not be cancelled if the lack of use is due to force majeure, wars, limitations imposed by the Government but also in the event of bankruptcy or liquidation of the company.
The evidence of use of your trademark are an extremely important asset of your company, and not only to defend the trademark against cancellation actions for non-use. They must always be carefully stored to be used in case of need and contestation of your Brands.
– Is the use of the trademark in a modified version a valid proof of use?
There is not a consolidated practice on this aspect and very often the final outcome lays in the discretion of the individual examiner. Usually, if the version of trademark as registered and the one actually used have minimal variations, it is possible to defend the registered trademark from a non-use cancellation action.
To cite an example, if you have registered the trademark “
“, but you have actually used the trademark “
” you could risk not being able to defend the trademark ““. Similarly, the same risk exists if the registered trademark is “PINK DOG”, but is used with a rather different font, for example “
“.
This translates into the need to constantly update the brand portfolio according to the different restyling that the brand undergoes over time.
– Use of the trademark only on some of the protected services products
What happens if the trademark has been used, but not for all the products and services covered by the registration? What if it is not possible to find evidence relating to the use of the trademark for all products / services?
The answer is unfortunately simple: the exclusive right on the trademark will be maintained only in relation to the products / services for which effective use has actually been proven, and those belonging to the same subclass of the Nice Classification.
We must be extremely cautious on this aspect, since the product / service classification system adopted in China is very rigid, so it will be necessary to prove the use for least one product / service belonging to the different claimed subclasses.
– Calculation of terms: what is the “last date” to start using the trademark?
The deadline for start using your trademark in China slightly vary depending on the nature of the trademark at stake.
If your trademark is a Chinese national trademark, the time from which third parties can file a non-use cancellation action, and therefore the last date to start using the trademark to avoid its cancellation, is 3 years from the date of registration of the trademark, as indicated on the registration certificate.
If, on the other hand, your trademark is an international trademark extended to China, the 3-year period will start from the deadline for the national office to issue a refusal on the extension. This deadline is 18 months calculated from the day in which World Intellectual Property Organization (WIPO) sends the notification on the trademark application to the Chinese Office for its examination. Therefore, the 3 years will be calculated starting from the eighteenth month after the date indicated in the notification of WIPO to the Chinese Trademark Office.
If the trademark was subjected to an opposition procedure before being registered, the 3-years term will instead start from the date on which the opposition decision entered into force (hence after the deadline for submitting an appeal to the decision has expired). Also in this case, in fact, the registration date as indicated on the certificate and the date from which the 3-years will start counting will not coincide.
If your protection in China has been achieved with international trademarks, it is also important to pay attention to any communication received from the Chinese Trademark Office (CNIPA). The usual practice is that if a non-use cancellation action is filed against an international trademark extended in China, the Chinese trademark office sends a notification to WIPO, which in turn will communicate it to the owner of the trademark or representative indicated in the international application, if any.
Therefore, it can happen that the non-use cancellation notification is sent directly to the owner of the international trademark. Considering that the deadline for submitting the appropriate reply to a cancellation action for non-use in China is two months from the date of receipt of the notification it is very important to understand the content of the notification itself, in order to react promptly and adequately. Furthermore, in the case of direct notification to the holder, in the reply it is necessary to attach the envelope in which the notification was delivered. In the absence of this document, the reply will be refused and the trademark cancelled. When such notification is received it is a must to keep the original envelope, otherwise it may not be possible to defend the trademark.
- Conclusion
The weapon of Cancellation actions for non-use has been used for years as great option to obtain cancellation of competitors’ trademarks. Since in recent years the number of cancellation actions lodged by Chinese companies against foreign trademark is considerably increasing, it is absolutely necessary to assess if your trademarks have been used in China and sound evidence of such use are readily available to defend the trademark from a cancellation for non-use lodged by a third party. It is therefore highly advisable to consult with an attorney with experience in the jurisdiction to plan the most appropriate strategy of protection.
[1] WIPO Country Statistics https://www.wipo.int/ipstats/en/statistics/country_profile/profile.jsp?code=CN
