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Exploring China’s stance on trade mark coexistence agreements




Paula Pei of Panawell explains the advantages and disadvantages of trade mark coexistence agreements as well as the legal formalities that must be fulfilled to create them

Chinese Trademark Law and relevant regulations do not expressly provide for the enforceability of trademark coexistence agreements but do allow similar trade marks to coexist under certain circumstances. Additionally, there is a difference between the preliminary examination of similar trade marks before the Chinese Trade Mark Office (CTMO) and infringement examination of similar trade marks before the court, which definitely leaves space for the application of trade mark coexistence agreements.

Trade mark coexistence in Chinese Trademark Law and relevant regulations

There are two provisions in Chinese Trademark Law implying trade mark coexistence.

One of them is Article 45 which stipulates that "where a trade mark registration violates the provisions of Article 10 Paragraph 2 and Paragraph 3, Article 15, Article 16 Paragraph 1, Article 30 (similar marks), Article 31, Article 32 of this law, any holder of prior rights or any interested party may, within five years from the date of registration, request that the Trademark Review and Adjudication Board make a ruling to invalidate the trade mark's registration. Where the registration was obtained with ill will, the owner of a famous trade mark shall not be bound by the five-year limitation."

This provision describes the coexistence of two registered similar marks. In this case the governing authority is in no position to initiate a proceeding to remove it from the register providing the holder of the prior registered mark takes no action.

The other is Article 59 which stipulates that "where an identical or similar trade mark has been used in connection with the same goods or similar goods by others before the registrant's application, the exclusive right holder of said registered trade mark shall have no right to prohibit other people from using the aforesaid trade mark continuously within the original scope, but may request its users to add proper marks for distinction."

Apart from the above two types of trade mark coexistence, coexistence is legally allowed when it arises out of historical coexistence of the marks in question.

In the trade mark dispute case of Ya Wang (Duck King) and Article 1 of Opinion of the Supreme People's Court on the Trial of Administrative Cases Related to the Granting and Determination of Trademark Rights, where a disputed mark has been used for quite a long period of time and acquired a certain reputation in the market and among the public concerned, the governing authority shall correctly deal with the relation between protection of the earlier commercial signs in Trademark Law and maintenance of the market order, and respect the reality that the public concerned is able to distinguish the disputed trade marks, in order to maintain the existing and stable market order.

In conclusion, the above three types of coexistence are accepted by the law for the purpose of balancing the interests of the parties concerned, maintaining the market order and respecting the choice of consumers.

Difference between the preliminary examination of similar trade marks before the CTMO and court trials on infringement

As stated in Article 30 of Trademark Law, "where a trade mark application does not comply with the relevant provisions in this law or is identical or similar to a registered trade mark used in connection with the same or similar goods, its application shall be refused by the Trademark Office after examination and the mark shall not be published."

In this provision, identical/similar marks can be classified into the following four groups: identical sign, identical goods; identical sign, similar goods; similar sign, identical goods; similar sign, similar goods. If an application falls in one of the above groups, the CTMO is entitled to refuse it in compliance with Article 30.

Trade marks that fall within the first group will be deemed as infringement. Trade marks falling in the other three groups will be deemed as infringement on the precondition that confusion is easily caused.

Examiners in the preliminary examination of an application in compliance with Article 30 are stricter. They like to leave as much exclusive room for the development of registered trade marks as possible. Judges and examiners in infringement trial and appeal against refusal proceedings before the Trademark Review and Adjudication Board are more practical in determining whether there is likely confusion because they have a chance to access evidence submitted by the parties concerned. As evidence, trade mark coexistence agreements help examiners or judges see, from the perspective of the parties, whether there is a likelihood of confusion. It is the parties concerned who are eager to avoid confusion in order to protect their interests. Therefore, their judgment on confusion is more reliable.

To balance the exclusive space of the registered trade mark and the grant of exclusive right to the junior trade mark without causing actual confusion, trade mark coexistence agreements come out as non-confusion evidence to help the grant of protection to the junior trade mark.

Trade mark coexistence agreements in China

Initially, neither the TRAB nor the court liked to take trade mark coexistence agreements into consideration and rulings were not well accepted.

Under these circumstances, the TRAB in 2007 published a guide for examiners to the effect that it is not reasonable to wholly disregard trade mark coexistence agreements. Whether the TRAB will approve the registration of a junior trade mark application depends on three factors: the extent of similarity between the senior and junior trade marks, the extent of similarity between goods and the fame of the trade marks in question. Theoretically the more similar the trade marks and the goods designated and the more famous the trade marks, the less likely the junior mark will be approved for registration even if a trade mark coexistence agreement is submitted before the TRAB or court.

Since the publication of the TRAB Guide and the ruling of the Supreme Court on the trade mark UCG, more and more refused trade marks have been allowed due to the provision of trade mark coexistence agreements. The TRAB and the court now regard trade mark coexistence agreements as supporting evidence of non-confusion in determining trade mark similarities.

The legal status of trade mark coexistence agreements

As stated by the World Intellectual Property Organisation (WIPO), "trade mark coexistence describes a situation in which two different enterprises use a similar or identical trade mark to market a product or service without necessarily interfering with each other's businesses." Further the International Trademark Association (INTA) states that "coexistence agreements are indispensable tools for resolving present or possible future disputes between two parties about the use and/or registration of arguably similar marks for related goods or services." In view of the private nature of trade mark rights, the WIPO and the INTA believe that trade mark owners are allowed to dispose of their trade marks by coexistence agreements.


The TRAB in 2007 published a guide for examiners to the effect that it is not reasonable to wholly disregard trade mark coexistence agreements


However, in China neither Trademark Law, the Implementing Regulations of Trademark Law, nor the interpretations by the Supreme Court have made clear the status or effect of trade mark coexistence agreements in determination of trade mark similarities so far. All we can find is the fact that more refused trade marks have been revived due to the provision of trade mark coexistence agreements in appeal before the TRAB or court.

As for the status or function of trade mark coexistence agreements, the court pointed out in relevant cases that the prior trade mark owner's consent to use and registration of the later trade mark establishes that it believes that confusion is not likely or such confusion is tolerable. Trade mark coexistence agreements are the disposal of trade mark rights by the prior trade mark owners and such disposal should be respected subject to no prejudices to social order or interests of the public concerned.

Trade mark coexistence agreements in nature are contracts which set forth the rights and obligations of senior and junior trade mark owners. As a result, they are only legally binding on the contracting parties exclusive of the TRAB or the court due to the principle of privity of contract.

In order to avoid voluntary termination by prior trade mark owners and maintain stability of the later trade mark once registered, trade mark coexistence agreements are required to be notarised (if domestic) and notarised and legalised (if formed abroad) when submitted as evidence to the TRAB or the court.

Risks of trade mark coexistence agreements

In practice, not all senior trade mark owners like to provide consent to the use and registration of junior trade marks.

According to Chinese Trademark Law, registered trade mark owners have exclusive right to use of their registered trade mark on approved goods or services and can restrain use of identical or similar trade marks on identical or similar goods or services by others. Therefore, trade mark coexistence agreements are regarded as voluntary disposal of the restraining right of prior trade mark owners.

Senior trade mark owners are under risk for the following reasons. Firstly, prior trade mark owners limit their restraining right and permit the legal existence of junior trade marks. Secondly, trade mark coexistence agreements are irrevocable once notarised and legalised. Even if actual confusion occurs to some extent in the future and the fame and function of senior trade marks are affected, trade mark coexistence agreements are still binding upon the contracting parties provided they are not revoked by the governing authorities. What is more, senior trade mark owners are not entitled to initiate litigation on grounds of trade mark infringement claiming an injunction or damages as long as the use of the junior trade marks is reasonable and in compliance with the trade mark coexistence agreement.

To limit the risk, senior trade mark owners could consider including the following, for example, in trade mark coexistence agreements:

  • limiting the goods or services actually used by junior trade mark owners, goods distribution regions;
  • demanding junior trade marks be attached to reasonable signs in use;
  • a compulsory withdrawal of junior trade marks from the market and the register when certain situations occur.

Essential provisions in trade mark coexistence agreements

As contracts, trade mark coexistence agreements essentially need to contain the name of the contracting parties, trade marks in question and the express consent of senior trade mark owners to the use and registration of junior trade marks.

Trade mark coexistence agreements are required by the TRAB and the court to be notarised and, if formed abroad, legalised as well.

However, in reality the agreements may be much more complicated. Whatever the agreement contains, it is forbidden to set forth any terms or arrangement which might damage the interests of customers or lead to industry monopoly.

Common mistakes in trade mark coexistence agreements

Generally there are two common mistakes in trade mark coexistence agreements. One is that the essential elements are not sufficient or the formality requirements are not satisfied; the other is that no other arrangement is incorporated to restrict use of junior trade marks.

The former mistake might lead to non-acceptance of the agreement by the TRAB or the court. The latter might restrain development of senior trade marks in the future and cause confusion.

Disputes arising out of trade mark coexistence agreements

Trade mark coexistence agreements are binding upon the contracting parties. Therefore, the court respects the agreements subject to the fulfilment of all the legal formalities and requirements.

The case Shandong Liangzi Natural Health Research Institute Co Ltd v Trademark Review and Adjudication Board (TRAB) (hereinafter referred to as Shandong Liangzi) involving trade mark administrative disputes clearly exemplifies the point made above.

In 2001, Shandong Liangzi applied for registration of Liangzi (良子) for health care and physiotherapy in Class 42, which was moved to Class 44 afterwards. In 1998, Beijing Liangzi was approved for registration of Liangzi (良子) & device for massage and traditional Chinese medical message in Class 42, which was moved to Class 44 as well afterwards. Shandong Liangzi and Beijing Liangzi had signed a trade mark coexistence agreement setting forth that neither party was allowed to take action against the other in relation to the trade mark Liangzi(良子). However, Beijing Liangzi in 2002 filed cancellation against Liangzi (良子) of Shandong Liangzi on the grounds that Liangzi (良子) of Shandong Liangzi was similar to its prior registered trade mark in respect of similar services. Both the TRAB and the court of first instance decided to cancel the registration of Liangzi (良子) of Shandong Liangzi regardless of the coexistence agreement. Shandong Liangzi appealed and the appeal court reversed the decision of first instance and held that Beijing Liangzi violated the coexistence agreement and the principle of honesty and good faith.

As expressly stated in the ruling of the appeal court, a trade mark right is private and can be disposed of by its owner legally, providing such disposal is not contrary to the compulsory provisions of the relevant law and regulations.

Summary

Trade marks are selected from the public database and used extensively in order to establish their association with goods or service providers in the mind of the public. Different commercial entities might come up with identical or similar trade marks on identical or similar goods or services and disputes then arise. In this case, trade mark coexistence agreements are indeed one of the best solutions for such disputes.

Paula Pei
  Paula Pei is a lawyer and trade mark attorney at Panawell & Partners. Ms Pei received her Master of Arts from the University of International Business and Economics (UIBE) in 2006. Ms Pei studied civil law at Renmin University of China as an on-job postgraduate from 2012 to 2014.

Ms Pei has been working on trade mark matters since 2013 and before that had worked on CDM projects at Sindicatum Carbon Capital for seven years. Ms Pei joined Panawell & Partners in November 2016.

Ms Pei has experience in trade mark advice and searching, applications for registration, oppositions, reviews, invalidations, cancellations, appeals, trade mark change, licences, assignment and renewal and trade mark litigation. Her working languages include Chinese and English.


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