In this newsletter, we are excited to share our insights and takeaways from some of our recent notable IP cases in China.
Overcoming Absolute Ground of Refusal by Amending Normally Rigid Standard Terms
A trademark application for a mark in Class 9 incorporating the term “AI” was rejected on the ground that the presence of “AI” may mislead the public. The basis of such absolute ground of refusal is that if the mark is being used for non-AI related goods, it may mislead the public that the goods are AI related.
Given that China adopts the standardized goods and services items listed in the Chinese Classification Booklet rigidly, as an alternative we may have to use IR mark designating China to overcome such refusal by adding qualification or limitation to the specification. However, the inability of IR mark to control the translation of the specification and the designation of the subclass may bring uncertainty to the scope of protection.
Strategically, we assisted the client to file a new national application, picking the relevant standardized goods items yet adding appropriate limitations to each standardized good item, so as to mitigate the risk of misleading the public. Our approach was accepted by the CNIPA and the application was finally approved for registration without meeting with any notice of corrections or further absolute grounds of refusal.
With carefully drafted specifications and thinking ahead on any possible absolute grounds of refusal which may be raised by the CNIPA, we can help clients to secure registrations that protect their interests accurately.
Successful Invalidation of Bad Faith Registrations Registered over 5 Years Without Well-Known Status
From time to time, we see prior identical/similar registrations remaining in the register for a long period of time, yet the client may not have sufficient evidence to establish its marks as well-known in China to go against these registrations.
We have a client who is in the furniture industry facing this situation. A Chinese company has a registration dated back to 1998, and our investigation revealed that the counterparty has been making up “use” evidence so that non-use cancellation was not a viable option.
The law generally requires well-known status to be established before marks registered for more than 5 years can be tackled. As the client would face an uphill battle for establishing well-known status back before 1998 (the date of the counterparty’s earliest registration), we strategically assisted the client to first go against the counterparty’s more recent registrations and applications, and established the fame and reputation of the client in China, and at the same time the bad faith on the part of the counterparty. We assisted the client to build up the case of bad faith, and coupled with our investigation efforts, we collected sufficient evidence to convince the CNIPA to finally invalidate the counterparty’s oldest registration on the ground of bad faith alone, without the need for the client to establish well-known status.
This case demonstrates that with careful planning ahead, we do not have to go for the impossible in establishing well-known status back some 25 years ago, yet we can still help the clients to clear up the bad faith squatter’s mark effectively when non-use cancellation may not be a viable option.
Overcoming Descriptiveness Refusal before the Courts
It is common ground that rejection on the ground of descriptiveness is difficult to overcome in China. Normally, once such refusal is raised, the chance of success in obtaining registration for the mark will not be optimistic.
Our client is a global cosmetics company, and we filed a trademark application in Class 3 comprising a French term which may be translated to mean “a set of jewelry”. However, when examining the case, the examiner relied upon some online translations and consider that this French term may mean “gold set”, which was considered to be descriptive for the applied-for items in Class 3, and hence rejected the application.
While it is always difficult to convince the CNIPA and the Court to deviate from the initial finding of absolute ground of refusal, we advocated for the client before both the Beijing IP Court and the Beijing High Court, that online translations are inaccurate and we should refer to authoritative dictionaries instead. With our effort and presentation of the arguments, both the Beijing IP Court and the Beijing High Court accepted our case and overturned the CNIPA’s decision, and the mark was finally approved for registration.
By understanding the basis of the refusal and the materials relied upon by the CNIPA in raising the refusal, we may help client in overturning the difficult absolute ground of refusal.
Negotiation for Surrender Instead of Assignment
As you may know, co-existence agreements and consent letters are unlikely to be accepted in overcoming citations in China. As such, negotiation for buyback may sometimes be inevitable. However, buyback may not always be your best alternative—we offer up another option—requesting for a surrender of the registered mark.
In China, assignment of trademark may sometimes be tricky as similar marks in similar classes have to be assigned together. Buyback may mean you not only need to obtain assignment of the cited marks, but also the other similar marks owned by the same counterparty. Further, with the effort of the CNIPA in combatting bad faith squatting, the CNIPA may also actively refuse assignment of bad faith registrations.
We share our experience with two recent cases involving negotiations with prior marks owners. In the first case, we acted for a cosmetic brand, and we assisted in negotiation with a cited mark’s owner. When reaching out to the counterparty, they were reluctant to even start negotiating of a potential buyback as they wanted to keep some of the marks. We successfully closed the deal at an acceptable consideration within a short timeframe by having the counterparty surrender the requisite mark, so the obstacle against the client’s applications will be removed, while the counterparty may continue keeping their other marks. In the second case, we were negotiating with a cited mark owner who had a bad faith track record. We closed the deal by having both the assignment documents and surrender documents executed at the same time, and eventually the assignments were rejected and the client successfully relied upon the surrender documents in removing the citations.
While we may not get the counterparty’s marks directly, the goal is to have the client’s own applications to proceed to registrations, and sometimes a surrender may be the better solution.
Nullifying Fraudulent Transfer of IP Rights
We represented a client who entered into an agreement with a Chinese counterparty for sale and purchase of the client’s business in China. However, the transaction did not go well, and the Chinese counterparty breached the agreement. Moreover, it is discovered that the Chinese counterpart forged documents and applied for assignments of the client’s trademarks. The client only discovered the same after some of the assignments were duly recorded at the CNIPA.
We represented the client in appealing against the decisions of the CNIPA in recording the assignments. We challenged the authenticity of the assignment documents submitted, and successfully convinced the Court to accept that the documents were not authentic. Both the Beijing IP Court and the Beijing High Court accepted our arguments and ordered the CNIPA to re-examine the trademark assignments, and the same were eventually revoked.
The Chinese counterparty may have used the genuinely signed agreement to forge the assignment documents, and it is fortunate that the fraudulent act was discovered before any further transfer/assignment of trademark to a third party. This demonstrates the importance for brand owners to keep track of its rights in China and be aware if there is sign of breach and/or default by the counterparty.
Overcoming Wrong Subclass Designations
For IR marks designating China, the CNIPA would conduct a translation of the specifications and classified the items into subclasses according to their own interpretation. As items in the same class but different subclasses are generally regarded as not similar, this may lead to inaccurate protection. Also, wrong subclass designation may lead to additional citations even when the goods/services items are distinguishable and not similar.
We assisted a video game and software development company which filed a national mark designating China in subclass in Class 9. Because of the wrongful subclass designation by the CNIPA, some of the good items of the cited IR mark were classified into subclass 0901, which in turn block our client’s application. At the review stage, the CNIPA rigidly followed the subclassification in determining that the client’s mark was similar to the cited mark, and maintained the refusal.
We won the appeal for the client by detailing argument of the dissimilarity of the applied-for items and the registered items of the citation. We argued that there was an error in classifying the goods, and urged the Court to focus on the function, nature and usage of the items of goods that they are dissimilar. Through our efforts, the Beijing IP Court accepted our case, and ordered the CNIPA to re-issue the decision in approving the application of our client’s mark in China.
There is currently no official mechanism to rectify the wrong subclassification for IR mark. We should therefore also keep track of our own portfolio, particularly the subclassification of IR mark, and may consider national applications to designate the correct subclass when necessary.
