Use it or Register it? How to protect an unregistered
In China, just like in most countries, registration is the
quickest and cheapest means to get trademark protection: just 9
months and 100 $. Normally, you have no reason
not to register if you really want to be protected.
But, if you are already using your trademark, but for
whatever reason, you have not registered it, and someone else
has already filed or even registered the same trademark, what
can you do ? If you do not have another prior right (copyright,
design, personnel name...) that could invalidate the "obstacle"
trademark, what is the solution? In that case, you still have
several possibilities that are based on when and how you use
your own trademark and also on the subjective status of the
prior trademark owner.
Well-known trademark (13.2)
If your trademark is well-known in China after your
extensive use or for other reasons (international traveling,
spillover effect of TV or Internet, or just promotion), you
can, according to article 6bis of the Paris Convention
and article 13.2 of the China Trademark Law, oppose or
invalidate this prior trademark and attack the registrant
directly if he uses it.
Representative or agent (15.1)
If your trademark is not well-known trademark (actually,
this is difficult to prove), but the owner of the prior
trademark was your representative or agent, you can , according
to article 6quinqies of the Paris Convention and
article 15.1 of the China Trademark Law, oppose or invalidate
the registration and attack the registrant if he uses the
Minimum use and blatant bad faith
But very often, the owner of the prior trademark is not your
agent or distributor. In this case, article 15.2 of the new
Trademark Law (2013), brings a possible solution. If (1) your
trademark has been used (anywhere in China and no requirement
of extensive use) and (2) if you can prove that, for reasons
related to contractual or business contacts or to geographical
circumstances, the owner of the prior trademark definitely knew
the existence of your trademark, this is a valid ground for
opposition or invalidation
Certain influence and relative bad faith
Finally, if you have none of the above, you still have
article 32 of the Trademark Law to fall back on:
"…nor shall an applicant pre-emptively register in
an unfair manner a mark that is already in use by another party
and enjoys a certain influence". In this case, you do not
need to prove any relationship with the prior trademark owner,
you just need to prove that, because of your own use, your
trademark had obtained "a certain influence" when the
prior trademark was filed.
There is a seesaw effect between the two factors,
reputation and bad faith. When you have a relatively high
influence, you need a low level of applicant's bad faith, and
vice versa. There is no minimum influence as such. It all
depends on how much evidence of the prior trademark applicant's
bad faith you can produce: the less evidence you have the more
you need to elaborate on your own use.
Sometimes, none of the above works, or maybe you missed the
statutes of limitation deadlines (3 months after preliminary
publication for oppositions, or 5 years after registration for
In that case you could be sued….
Certain influence and right to continuously use
But, even if you are sued, you might still be able to get
away and be allowed to continue using your trademark. Article
59.3 of the new Trademark Law can save you. If you had started
using your trademark before (a) the application date of the
prior registered trademark, and (b) the owner of the prior
trademark started using his own mark, and if you can show that
you had acquired a certain influence, then you are safe. The
owner of the registered trademark cannot stop you from
continuing using your trademark "within its original use
scope". All he can do is ask you to add some other signs
in order to facilitate the distinction…
This concept of "original use scope" is not defined in the
law, and is rather vague…
the 2015 top ten influential cases of Beijing IP protection),
the Beijing IP court enumerates a lot of factors to define the
"original scope" (such as the same person, same or similar
goods…) but does not mention any geographic limitation.
This could be good news for the prior user, but bad or even sad
news for the later registrant who will be unable to stop a
prior use from growing. The court should find a balance between
the use and registration.
How to file? Directly in China with the CTMO or
through international extension to China?
In China, a trademark application can be directly filed with
the China Trademark Office (CTMO) or be extended to China via
the Madrid system. Which one is better? Both have their pros
and cons but in the end, it seems that the national application
might have a little more advantages.
Necessary work to be done before
Whether you wish to extend your trademark to China or file
it directly with the CTMO, you need to perform a few
verifications. You need to verify that the trademark is
intrinsically registrable in China (there are, sometimes,
obstacles due to local culture that you might not know about)
and, of course, that it is available. So, even if you prefer
the simplicity of the Madrid system, do not hesitate to seek
local Chinese advice for this verification. It might save you
some expenses in the future.
Which one is simpler?
Extending a national registration or application to several
countries, and for several classes at the same time, definitely
seems the simplest way. You work "from home", with your
national trademark agent, and all he/she has to do is to notify
However, this simplicity may only be apparent.
You only know if the trademark is registered in China at the
expiration of the period of 12 or 18 months, if the CTMO has
not notified any objection to WIPO. During that examination
period you have no contact with the examiner of the CTMO. So,
if for any reason, the examiner finds a problem with the
trademark, you only find out after it has been refused and
then, you have to file an application for review with the
Trademark Review and Adjudication Board (TRAB).
Which one is more flexible?
The CTMO does not accept domestic applications that are too
general and too vague in regard to a certain type of products.
It is necessary to list exactly what products are designated.
Besides, the CTMO divides each international class into several
sub-classes, and the similarities of the goods and services are
basically judged on the basis of the sub-classes. The same
trademark covering goods that fall into different sub-classes
could co-exist, e.g., balls for games, body-training apparatus,
machines for physical exercises, gloves for games are not
similar as they respectively fall into sub-classes 2804, 2805,
2807 and 2809. As a result, it is advisable to have full
discussion with a Chinese counsel on what goods and services to
be covered to make sure the trademark could be well protected
by covering all the related sub-classes. Also, the Class
heading will be classified into the specific sub-classes, and
can't cover the goods and services in the whole class.
So, even when filing an international extension, it is
necessary to carefully select the list of products and
services, otherwise you might believe that your trademark is
protected for certain products because you believe they are
similar, and you will find out later that it is not.
Actually, in certain circumstances, the international
application may still have an advantage over the domestic
application. The examiners of international applications are
not the same as those of domestic applications. They are less
strict and less prone to refuse an application for certain
products, due to a lack of precision or other reason. The CTMO
seldom objects the descriptions of goods and services for an
international trademark unless the goods/services are not
accepted in China such as gambling. Thus, if some
goods/services are not accepted in a domestic application, the
applicant might still be able to have such goods/services
covered by the Madrid system trademark.
Which one is faster?
For domestic applications, CTMO must conclude the
examination within 9 months. Compared with the international
trademark application (12 or 18 months according to the Madrid
Agreement and Madrid Protocol) the advantage to domestic
application is obvious. This difference of time can have
disagreeable consequences: it is not unusual that the CTMO does
not input right away into its system the data received from
WIPO about international trademark extensions. So, if an
international trademark is filed only one or two months before
a domestic application, the examiner would not be aware of the
existence of this international trademark when he performs the
examination of the domestic application. Therefore, the
domestic application will be accepted and published, even
though there was a prior application, which eventually will
mature to registration. And in the end, the owner of the
international trademark has to file an opposition against the
domestic trademark application.
Which one is easier to enforce?
In theory, there is no difference in the validity and
enforceability of both domestic and international
In practice, there is a difference, because the enforcement
authorities of China (administrative or judicial) require the
submission of a national trademark certificate, to be issued by
the CTMO. The certificate issued by WIPO is not accepted, and
the right holder has to specifically request the issuance of
registration certification by the CTMO to prove its trademark
rights, which can take an additional two to four months.
Moreover, where there is any modification, assignment,
renewal of the international trademark, the owner has to
request a new registration certification to prove its right.
According to the current practice, it may take months for the
CTMO to update the renewal and/or assignment record of an
international trademark in its system, and during this period,
the right holder can not enforce its rights because no
registration certification can be produced to prove the
existence of the right.
Discretion of the Madrid system
In a potentially conflictual background, it happens that you
want to file a trademark even though know that it might be
opposed by others. In that case, it may be advisable to go
through the Madrid system. Indeed, it is more difficult to
monitor the International Trademark Gazette for opposition
purposes. Therefore, the risk of opposition is lower.
Filing a trademark in foreign language and/or in
In China, if you want to find a McDonald's store and ask for
directions saying "McDonald's", you may probably get nowhere.
However, if you say "Mai-Dang-Lao", which is the Chinese
transliteration of McDonald's, then you will immediately be
directed to the closest shop. This example shows why it is
essential to file a trademark in Chinese language in China.
A well-chosen Chinese mark is easily accepted by Chinese
consumers, and this can help marketing the product in China. A
good example is Coca-Cola's Chinese name
"可口可乐" (Ke-Kou-Ke-Le, literally
means "tasty and pleasing" in Chinese).
China follows the "first-to-file" principle. Therefore,
whenever you prepare for filing your trademark in your own
language, do it in Chinese at the same time.
If you don't, you might have to face negative and costly
Choose and register Chinese mark without
New Balance vs Lelun Zhou
New Balance Athletic Shoes Inc. ("New Balance"), owns the
English mark "NEW BALANCE" on shoes since 1983, but the Chinese
trademark "新百伦" (Xin-Bai-Lun), was adopted
and used much later in 2003.
Before that, a Chinese individual, Lelun Zhou, had filed
applications for the Chinese mark "百伦" (Bai-Lun)
in 1994 and "Xin-Bai-Lun" (Xin means "new") in 2004.
New Balance had opposed Zhou's trademark "Xin-Bai-Lun", but
failed and it was approved for registration.
In 2013, Lelun Zhou sued New Balance and its distributor for
trademark infringement. In 2015, the Guangzhou Intermediate
Court recognized the infringement and ordered New Balance to
pay an amount of US$15 million as damages, half of New
Balance's profits in China. The court held that, New Balance
was aware of the risk but still continued the use of the
New Balance appealed. The case is now under trial by the
Castel vs Daozhi Li Yu
CASTEL FRERES S.A.S ("Castel") had been using the Chinese
mark "卡斯特"(Ka-Si-Te) on wine since August
1998, but Castel did not register this Chinese mark.
A Chinese company in Wenzhou applied for the registration of
the trademark "Ka-Si-Te" in September 1998, and obtained the
registration in March 2000. The mark was later transferred to a
Chinese-Spanish Daozhi Li Yu.
Castel tried to settle the issue by trademark purchase
negotiation, non-use cancellation and invalidation, but all
failed. Meanwhile, Castel was still using the Chinese mark
In 2009, Daozhi Li Yu sued Castel and its distributors for
trademark infringement. In 2012, the Wenzhou Intermediate Court
recognized the trademark infringement and ordered Castel to pay
an amount of US$5 million as damages. Castel appealed. The
higher court maintained the judgment. Castel filed a re-trial
application to the Supreme Court and decided to change its
Chinese mark to "卡思黛乐"
("Ka-Si-Dai-Le"). In January 2016, the Supreme Court rendered
its judgment, reducing the amount of compensation to US$77,000,
which was a relief for Castel.
Conclusion: When you launch a
product under a foreign brand, do not assume that this will be
sufficient to protect you against the use of a Chinese
equivalent. Always create and use the Chinese equivalent. Of
course, be careful when you choose the Chinese mark, and do
risk assessment before deciding whether to continue using the
trademark if it is in conflict with a prior right.
Be tolerant and smart when dealing with a
Pfizer vs Viamen
Pfizer Inc. ("Pfizer"), is the owner of the mark "VIAGRA",
which was filed in China in October 1996. Two years later,
Pfizer adopted a Chinese name "万艾可"
(Wan-Ai-Ke) and filed the application in July 1998. However,
the Chinese media and consumers had already created a sort of
"nick name" for the Viagra blue pill, "伟哥"
(Wei-Ge), which means "big brother". This name was already
popular and widely accepted.
A Chinese company, Guangzhou Viamen Pharmaceutical Co., Ltd.
("Viamen"), filed the application for "Wei-Ge" in June
Pfizer opposed Viaman's application, lost, appealed, and
lost again. The court found that, Pfizer had never advertised
its products under the name "Wei-Ge", and on the contrary,
claimed that its Chinese mark was "Wan-Ai-Ke". Pfizer sued
Viamen, in a civil action, trying to stop the use of "Wei-Ge"
but failed again, as Viamen was able to resist such action by
claiming its registered trademark.
Sony Ericsson vs Jianjia Liu
Sony Ericsson Mobile Communications AB, is a joint venture
set up in 2001, between Sony Group and Ericsson Group. It is
the owner of the Chinese mark
which is the transliteration of "Sony Ericsson".
However, such a long name was soon shortened by the
consumers to become "索爱" (Suo-Ai) and this short
version became widely accepted. But, Sony Ericsson did not
admit this abbreviation, at least not until October 2007.
A Chinese individual, Jianjia Liu, had filed a trademark
application for "Suo-Ai" in March 2003 and had obtained the
registration in August 2004.
Sony Ericsson filed an invalidation application against this
mark in June 2005. The TRAB refused the invalidation and
maintained the registration of "Suo-Ai".
Sony Ericsson appealed. The first instance court overturned
the TRAB's decision and cancelled the trademark, finding that
"Suo-Ai" is widely accepted by the Chinese consumers as the
source identifier of Sony Ericsson's products and that Jianjia
Liu had not been acting in good faith when he registered the
Jianjia Liu appealed. The second instance court reversed the
judgment, finding that, Sony Ericsson had no evidence of prior
use of "Suo-Ai", and had even denied many times that "Suo-Ai"
was the abbreviation for "Suo-Ni-Ai-Li-Xin". So, Sony Ericsson
did not own the mark "Suo-Ai". Sony Ericsson filed a re-trial
application with the Supreme People's court, but was
Conclusion: It was not a good
option for Pfizer and Sony Ericsson to deny the relation
between their names and the Chinese nick names created by the
consumers. If they had taken appropriate actions when the
nick-name came out, the situation may have been in control. A
nick-name is not always bad, and it can constitute an extension
of your protection.
The names of celebrities are easy
Michael Jordan vs Qiao Dan
Michael Jordan, famous NBA player, is widely known and
recognized by Chinese people as "乔丹" (Qiao-Dan,
Chinese transliteration of his last name Jordan). Michael
Jordan and Nike Inc. ("Nike") cooperated to launch the world
famous basketball shoes since 1985. Nike registered the mark
"MICHAEL JORDAN" in June 1991, but never registered the
corresponding Chinese transliteration.
A Chinese company, Jinjiang Mai Ke Shoes and Plastic
Company, which later change its name to Qiao Dan Sports Co.,
Ltd., in 1999, filed the logo mark (flying man), and in 2000,
the words "Qiao-Dan" in Class 25. Both were recognized as
well-known trademarks by the Trademark Office. It later
registered over 200 Qiao-Dan related trademarks, including " "
(jersey number 23), "杰弗里乔丹"
(Jie-Fu-Li Qiao-Dan, the Chinese name of Michael
Jordan's elder son Jeffrey Jordan),
Qiao-Dan, the Chinese name of Michael Jordan's younger son
Nike Inc. took opposition/invalidation actions against the
earlier trademarks, but failed. Then, Michael Jordan himself
came out and continued the fight, but lost before the courts
Michael Jordan filed re-trial applications to the Supreme
Court, and the court hearing was conducted in April, which may
be a positive signal.
Conclusion: Foreign celebrities
are commonly referred to by the Chinese transliterations of
their last names. This should be included into your filing
Designation goods or services by using general
terms or a more specific description?
When registering a trademark, it is essential to provide the
exact description of the goods and services to be designated by
the trademark. This determines the protection scope of the
registered trademark and also, can be a protection against
possible future non-use attacks. However, due to the complexity
of the sub-class system adopted by the CTMO and to the
Examiner's attitude when examining trademark applications,
which is sometimes capricious and rigid, it is not always easy
to select the right goods and services. Yet, the description
must be accurate and specific.
Referring to the class heading does not mean
protection for the whole class
We see this quite often with international trademarks. The
description of goods mirrors the class heading of the Nice
Classification. But, in the sub-class system, the class heading
usually only covers a few sub-classes in that particular class.
For instance, the official Nice heading for Class 25 is
"clothing, hats and shoes". If you file a Madrid
application with that class heading, you might think your
trademark will cover all products in Class 25, but in fact your
trademark will not have any protection for socks, gloves,
scarves or belts.
The specific description may help to obtain the
The amount of trademark applications increased sharply in
China in the recent years. In 2015, the CTMO received over 2.87
million new trademark applications. The total amount of
registered trademarks now exceeds 10.3 million. With such a
large amount of trademark applications and registrations, the
likelihood of conflict with earlier marks increases. Therefore,
a specific and precise description of goods may help the
applicant to find space and co-exist among earlier marks.
In October 2013, Microsoft applied to register the trademark
"LAUNCHWORKS" in respect of "game software", but was
refused by the CTMO due to the earlier trademarks "LAUNCH"
which was registered in respect of "management software for
motor vehicle maintenance and repair" and "computer
peripheral devices". All these goods fall into the
sub-class 0901 according to the Classification Book. Microsoft
appealed against the refusal decision but was dismissed by the
TRAB. Microsoft further filed an appeal to Beijing IP Court.
After the hearing, the Judge found that "game software" is
provided to the game players for amusement, while the
"management software for motor vehicle maintenance and
repair" is a tool provided to the drivers for auto
repairing and maintenance, and such goods can be deemed as
dissimilar goods due to their different function, providers,
sales channel and consumer groups. Thus, the Judge ruled to
cancel the refusal decision made by the TRAB.
Inaccurate description of goods may be vulnerable
to non-use cancellation
The requirement of evidence proving that a registered
trademark is used has become more and more strict. If the goods
description is different from the products on which the mark is
actually used, even they could be regarded as similar goods,
the trademark registration faces a high risk of being cancelled
In previous practice, the evidence of use on one designated
item was enough to maintain the entire registration on all the
designated goods before the CTMO. The TRAB was stricter, but
normally the use of one item at least could maintain the
registration on all the similar goods in the same sub-class.
However, in a recent decision made by the TRAB in March 2016,
the TRAB accepted the use evidence provided for "facial
creams, skin-care creams" but still cancelled the
registration in respect of the similar goods "perfume,
lipsticks, hair lotions, etc.". In late April, the Supreme
Court issued its 2015 Annual Report citing a retrial case in
which the use on "scraping-wall greasy powder" fails to
maintain the registration on "paints" in a non-use cancellation
Inaccurate description may jeopardise the
enforcement of the trademark
The accurate description is also of high importance for the
enforcement of the trademark, especially in a criminal case
which requires the use of an identical trademark on identical
In early 2012, a Chinese company named DU GAO was raided by
the police for manufacturing and selling "ink-jet printing
machines" with the trademark "DOMINO", which was identical
to the registered trademark " ", owned by DOMINO PRINTING
SCIENCES PLC. ("DOMINO"). The Court of first instance found
that "ink-jet printing machines" should be deemed
identical to the designated goods item "ink jet marking
apparatus" of DOMINO's trademark. The Court ruled,
therefore that DU GAO company and its proprietors had committed
the crime of counterfeiting a registered trademark. But, this
case had a big turnaround in the second instance. The Court of
appeal found that the "ink-jet printing machines"
manufactured by DU GAO company is a kind of industrial machines
and should be classified into Class 7, while the "ink jet
marking apparatus" of DOMINO in Class 9 are provided for
the domestic or commercial purpose, so they could not be deemed
as the same products. Therefore the Court said that DU GAO did
not commit a crime.
Using the registered trademark "as is" or using
In principle, you should use your registered trademark in
your business exactly as it is registered. However, sometimes,
for various reasons (change of the brand image, suit the needs
of the market in a certain area, etc.), you may actually be
using a variant of the registered trademark. Is there a
Unfortunately, yes… there may be a risk. If the
alteration is such that it changes the "distinctive feature" of
the registered trademark, you might end up losing it or be
unable to enforce it against others.
The risk of being cancelled for the alteration
In principle, according to article 49.1 of the Trademark
Law, the AIC may order you to rectify the alteration, and if
the rectification is not implemented within a given period, the
CTMO can cancel the registered trademark ex-officio.
However, till now, this has never happened. In fact, it
would be easy to defend against such an action by claiming that
the (variant) used trademark is a different and unregistered
trademark. So, no need to worry too much about this
On the other hand, you might be in the opposite situation: a
third party has registered a trademark and, in actual use, has
substantially transformed such trademark to the point that the
"variant" has become an infringement of your own. Then you
might want to enforce fully the potential of article 49.1. Just
be aware that this is not easy…
The risk of being cancelled for non-use
According to article 49.2 of the China Trademark
Law, a trademark can be cancelled if it has not been used
for a period of three consecutive years. In an Opinion
issued in 2010, the SPC specified that if the trademark is so
altered that the distinctive feature of the registered
trademark has been "substantially" changed, such use of the
modified trademark shall not be deemed as use of the registered
trademark. Therefore, if you only use the substantially changed
version, your registered trademark can be cancelled for non
The law does not specify to what extent a trademark needs to
be altered so that it runs into the risk of being considered as
not used. In practice, usually, the changes in the font/case of
English characters or in the type of Chinese Characters
(simplified/traditional), and in the orders of the components
(words/device) will not be deemed as substantial change.
However, if you really change the trademark or any of its
components, it may be a problem. For example, in the
"鐵力士TINIT" case, the registered trademark
was 鐵力士TINIT but the actual used mark was
铁力士LISHIX. The Beijing High Court held
that the use of 铁力士LISHIX is not the use
of the registered trademark because the distinctive component
"TINIT" was changed into LISHIX, and therefore upheld the
cancellation based on non-use
Risk of not being awarded damages in a civil
The new amended Trademark Law (article 64.1) provides that
the right owner needs to prove that its trademark has been
actually used when claiming the damage. And the civil courts
hold the same opinion as the CTMO about variants (sometimes
even stricter). So if it is only a variant that is used, but
the case is based on the registered trademark "as is", the
court may affirm the infringement but refuse to grant damages
because it considers that the registered trademark is not
The bright side…
In China, the courts do not accept infringement lawsuit from
one registered trademark against another registered trademark.
This is the result of article 1.2 of a SPC Interpretation
issued in 2008, which, however, provides for an exception: when
the "target" trademark has been substantially altered so that
its distinctive features are changed, it is possible to file a
lawsuit against such registered trademark.
For example, Lacoste was able to sue the registered
trademark because it had been modified into (Lacoste's TM is ),
and BMW was allowed to sue the registered , because it had been
altered into TM (BMW's TM is ).
Conclusion: you need to monitor how your registered
trademark is actually used. If, for some reason, the manner in
which you use it steps away from the original, it is advisable
to file a new trademark and make sure you maintain a sufficient
amount of use of the original.
Using the trademark in OEM export
Original Equipment Manufacturing or OEM is the business
model that is used when a trademark owner is "sourcing", i.e.,
looking for a factory to manufacture its products, using its
trademark. China is one of the most favoured countries by
business operators sourcing OEM products. If you are one of
them and want to ensure the safe exportation of the OEM
products, is there anything you need to do? And if, assuming
you do not own a registration of the trademark in China, you
want to prevent others from registering such trademark, can you
rely on your prior OEM export business?
Due to the lack of specific regulation in China, the nature
of the trademark use in OEM export business is still an
unstable issue. And the opinions of the authorities (CTO/TRAB)
and courts vary according to the type of procedure.
So it is better to understand this issue as the way
suggested by Oliver Wendell Holmes Jr., that is, "The life
of the law has not been logic; it has been experience"
(The Common Law, 1881). Below we analyze a few issues
based on recent precedents:
Can OEM use protect against a cancellation action
If you have already registered your trademark in China, but
you only use it for OEM export, anybody could claim that you
are not using your trademark in China, since you are not
selling anything in the country. Is the use of the trademark in
OEM export business sufficient to defend against a cancellation
action for non-use？
Before 2010, such cancellations actually happened, for the
above reason: no sales in China was considered as no use
This opinion changed after 2010. The Beijing High Court in
the "SCALEXTRIC" case, and, more recently the TRAB in the
"MIRRO" case (2015) accepted that OEM use, if it reflects the
true intention of using the trademark by the registrant, is
sufficient to resist a cancellation action for non use. For the
purpose of showing such true intention, single or occasional
exportations may still be weak. Comprehensive evidence of
long-time and consistent OEM exportations is necessary.
Opposition based on article 32: can OEM use
generate a "certain
Article 32 of the Trademark Law allows the prior user of a
(not registered) trademark, which has acquired a certain
influence, to oppose the registration, or request the
cancellation of a subsequent identical or similar trademark, if
such trademark has been filed by improper means
(commonly called "pre-emptive application").
The article is very often used, but… what if our
prior use is only through OEM business? Does such use count for
the application of article 32?
Well… it does not. In the famous MUJI case (2012),
the Supreme People's Court held that the use in OEM business is
not able to generate "a certain influence" because the OEM
products have not entered the local market at all,.
From then on, although there are few cases affirming that
OEM business can also bring "a certain influence" in special
circumstances, most of the cases followed the principle laid
down by the SPC.
Can OEM use be affirmed as trademark infringement
If another person has obtained the registration of "your"
trademark, and you are using this trademark in OEM practice for
export, can you be sued?
The answer to this question is the most controversial and
least stable of all. The courts have changed their minds
several times; they found that OEM export is an act of
infringement and found the exact opposite.
In November 2015, the SPC handed down a "retrial" judgment
in the famous Focker v. Yahuan case, also called the
PRETUL case, with a reasoning according to which since the
goods were exported from China the trademark Pretul that was
affixed on such goods was not "used" in the sense of the
Trademark law, and therefore, no infringement was committed.
The Court noted, further, that the defendant owned the
trademark in the country of destination.
It is very unlikely that the Supreme People's Court intended
to deliver a message to allow the free exportation of
infringing goods from China. Letting the batch of goods be
exported to Mexico seemed a "fair" decision in the
circumstances. It remains that, if it was systematically
followed, this case would deprive all legitimate trademark
owners of the right to seek the assistance of the Customs when
infringing goods are exported.
Several weeks later, the Court of Jiangsu rendered a
judgment in another OEM case Shanghai Diesel v Jiangsu
Changjia, which did not follow the SPC's reasoning. The
court found that the defendant should have conducted some due
diligence and should have known that there was a conflict
between the Chinese plaintiff trademark owner, and the
Indonesian purchaser of the goods. The OEM factory was,
therefore, declared infringing and the good were not
Still, the Jiangsu court declared that "Generally
speaking, it would be advisable to find the Chinese OEM
manufacturer's act not constituting trademark infringement if
the OEM products are all for exportation and are not intended
for distribution in China."
Given the above, it can be preliminary concluded, for the
time being, that if you have the trademark registration in the
destination country and perform OEM business in good faith,
there will be little risk of being found infringing.
This being said, the above case law is controversial, for a
number of reasons. Affirming that a trademark is not used
because the goods are exported can be easily challenged.
Likewise, making the finding of infringement or
non-infringement contingent on the good or bad faith of the
exporter, or on whether the purchaser owns the trademark in the
destination country, is also very arguable.
Therefore the best advice is of course to use the trademark
in China, and be the first to do so before others try to
register it. But if your trademark has been pre-emptively
registered by another person and if there is nothing you can do
about it, it seems that, for the time being, OEM business is
How to make the best use of a cease & desist
In China, the cease and desist letter is commonly used to
warn infringers. Experience showed that you may have 50% of
chance to get a reply to your cease and desist letter. The
cease and desist letter usually works well with straightforward
counterfeit case and against small infringers. When it comes to
complicated case and big infringer, it is critical that you
carefully evaluate the risk of being sued before sending out
the cease and desist letter.
The recognition of non-infringement
The recognition of non-infringement lawsuit was first
accepted in a patent case in 2002. Then Article 18 of the
SPC's Judicial Interpretation on Several Issues Concerning
the Hearing of Patent Infringement Cases (2010) set up the
procedural requirements: 1) the right owner sends the cease and
desist letter; 2) the recipient urges the right owner to file
the civil lawsuit; 3) the right owner does not withdraw the
cease and desist letter or does not file the civil lawsuit
within a reasonable period; 4) the recipient can then file a
recognition of non-infringement lawsuit.
Now, the recognition of non-infringement lawsuit extends to
all IP cases, and the courts are lowering the procedural
requirements: the recipient is sometimes allowed to file a
lawsuit as soon as it receives the cease and desist letter.
The biggest inconvenience of being sued for non-infringement
is that, you lose the control of the lawsuit: 1) you have no
more choice of the jurisdiction which is very important in a
lawsuit strategy; 2) you have limited time to prepare the
evidences, and sometime even worse, the evidences will
disappear if you did not secure them before sending the cease
and desist letter.
In the Honda case (selected in the 2015 top ten IP cases by
the SPC), Honda sent cease and desist letter to Shuanghuan, a
Chinese car maker based in Shijiazhuang city, and its
distributors, asking for immediate cease of design patent
infringement. Shuanghuan filed non infringement lawsuit in
Shijiazhuang in October 2003. Hongda then filed infringement
lawsuit in Beijing in November 2003, claiming huge damages (RMB
3.4 billion). According to the SPC's first-file principle,
Beijing High Court transferred the infringement case to
Shijiazhuang Intermediate Court in 2004 for a combined
In the meanwhile, Shuanghuan filed invalidation action in
December 2003, and successfully cancelled Honda's patents in
In April 2008 and then in April 2013, Shuanghuan lodged
additional claims requiring Hongda to pay RMB 3.6 billion for
the damages caused by the cease and desist letters.
Finally, in December 2015, the SPC decided that Hongda shall
pay RMB 16 million for the damages caused to Shuanghuan.
How to use the cease and desist
It is recommended to make a website notarization and/or
notarized purchase before sending a cease and desist
If the infringer ignores the cease and desist letter, you
can arrange another round of notarization to prove the
infringer's bad faith, and then file the lawsuit.
For complicated and important case, it is advisable to do
the forum shopping and directly file the civil action without
sending the cease and desist letter.
Administrative route or civil action?
How to make the best of China's double track
Unlike most of other counties, China provides, besides the
civil action, an administrative route (AIC action) to solve
trademark infringement. When you have trademark enforcement
issues, you need to compare the pros and cons of each of the
solutions provided by Chinese law, and then deploy the most
appropriate strategy to crack down on the infringers.
The AIC action:
The AIC action has been known for its simplicity and
Anyone, not necessarily a licensed lawyer, can represent the
right owner to file a complaint. For straightforward
counterfeit case, the AIC usually cooperates with the right
owner and takes actions rather quickly. The AIC seizes the
counterfeits and in exceptional circumstances the transaction
records. A penalty (cease of infringement plus fine) will be
issued within 2-3 months and the counterfeits will be destroyed
If an infringer is punished two times for trademark
infringement in 5 consecutive years, or three times for unfair
competition in 2 consecutive years, the AIC can put him into a
"black list" for special supervision.
It is, however, becoming more and more difficult to push the
AIC to take action unless the case is a simple and
straightforward counterfeiting case. This is due to a number of
legal changes and administrative decisions. As a result, the
official statistics show that the number of AIC actions is
declining: 66,230 in 2012, 56,870 in 2013, 42,450 in 2014, and
34,000 in 2015.
The newly revised Trademark Law (2013) contains some of
these changes. It sets up a short time limit for the
examination of trademarks (9 months) and for opposition
procedures (12 months). It further stipulates that in case of
failure in the opposition, the trademark is immediately
registered (article 35.2). Finally, and this is not something
new, according to an SPC's judicial interpretation on the
conflict with prior rights (2008), a registered trademark
cannot sue another registered trademark.
The combination of the above rules explain why it is
becoming difficult to motivate the AIC: if the target explains
that it just filed a trademark, the AIC prefers to wait until
the end of the examination period. Even if an opposition is
pending, the AIC prefers to wait and make sure that it is not
going to raid a trademark that would become automatically
registered if the opposition fails.
Moreover, the AIC is now reluctant to take action against
the distributor. According to the new Trademark Law (article
60.2), when the distributor has evidence to prove that he
obtained the infringing goods through legitimate channels and
indicate the name of the supplier, the seized product shall be
returned with simple prohibition to sell.
Finally, since the right owner is not legally a party to the
AIC procedure and cannot officially "push" the case, the
efficiency of the action largely depend on the AIC motivation.
And for the reasons below the AIC's motivation is not anymore
what it was:
- The central government's recent policy is to weaken the
AIC's functions and powers in order to alleviate their
interference on the market economy;
- The AIC is merging with other enforcement agencies (TSB,
FDA, etc.) into a Market Supervision Administration. Since
the focus is food and drug security, the FDA is taking the
lead on both manpower and resources.
- The quota of fines is no more a factor of performance
evaluation for the AIC.
- The newly revised Administrative Procedure Law (2014)
requires that, in case of administrative lawsuit against an
administrative agency, the person in charge of said agency
shall appear in court.
Even so, the AIC action remains the most cost efficient way
to deal with straightforward counterfeit case.
Moreover, it can be used as well to preserve infringing
evidence or get the sales records or other information about
the supplier or counterfeiting chain in a combined litigation
The civil action:
The civil action is, of course, more expensive and time
consuming than the AIC action. But it is the primary choice
when you have to deal with complicated cases, like copy of
trade name, imitation of trade dress, use of look-alike
trademark (even already registered if you can prove your
trademark is well-known) etc. and if you want to obtain
First, the civil action is more flexible. Unlike the AIC
action in which you only rely on the ex officio investigation,
you can build your civil case, from the evidence collection to
the forum of the case.
Second, the judges are usually well trained and more
open-minded, and have a rich experience in dealing with
complicated cases. You have better chance to get comprehensive
protection in a civil action.
Last but not the least, the civil action is the only legal
procedure that allows you to get damages. The new Trademark Law
has raised the statuary damages up to RMB 3 million. The SPC is
encouraging the judges to grant punitive damages against repeat
offenders. You can also use the evidence preservation and
property preservation measures to increase the chance to get as
much damages as possible.