A. Important Policies, Guidance and Judiciary Interpretations
In 2021, Chinese intellectual property administrative agencies and the Supreme People’s Court (SPC) have published and implemented several important policies, guidance, and judicial interpretations that will have profound impacts on the protection of intellectual property rights in the future.
The Interpretation of the Supreme People’s Court on the Application of Punitive Damages in the Trial of Civil Cases of Infringement of Intellectual Property Rights became effective on March 3, 2021. The 2021 Punitive Damages Interpretation contains specific provisions on the applicability of punitive damages in civil intellectual property cases, the definitions of intentional infringement and serious circumstances, and the bases and multipliers for calculating punitive damages.
On April 22, 2021, the SPC released the People’s Court Intellectual Property (IP) Judicial Protection Plan 2021–2025. In this guidance the SPC emphasized the need for strengthening the protection of trademarks. Among other things, the guidance laid out a plan to do so by, among other things, improving the quality of trademark administrative trials, increasing the penalties for malicious trademark registration and hoarding, strengthening the role of trademark use in determining the protection scope of trademark rights, and actively guiding the actual use of trademarks. And on May 31, 2021, the SPC published relevant judicial interpretation explaining that if a plaintiff’s IP infringement lawsuit is found to constitute an abuse of rights, the defendant may request the plaintiff to compensate their reasonable expenses incurred in the defense against such malicious litigation.
Finally, on May 10, 2021, the China Intellectual Property Administration (CNIPA) issued the notification on Deepening the Reform of “Delegation, Administration, and Service” in the Field of Intellectual Property, and on Optimizing the Innovation Environment and Business Environment (the “Notification”). Through this influential Notification, CNIPA directs the China Trademark Office (CTMO) and the Trademark Review and Administrative Department (TRAD) to shorten the examination periods for key trademark administrative proceedings, crack down on malicious trademarks registrations and irregular patent applications, promptly report textbook cases of bad faith filings, and strengthen the supervision and punishment of intellectual property agents who act in bad faith.
B. Improved Professionalism in Administrative and Judicial Enforcement Proceedings
Chinese courts and intellectual property administrative agencies have recently not only displayed a greater intolerance towards bad faith applications and malicious infringement but have also demonstrated their sophistication and professionalism in handling complex trademark infringements and unfair competition lawsuits.
For example, in BRITA v. DEBRITA, an infringement action by the renowned drinking water filter brand BRITA, the Shanghai Minhang District Court, in addition to finding serious trademark infringements and false advertisement by the defendant, held that the defendant had engaged in unfair competition by filing twenty-one bad faith trademark applications, one invalidation, and six oppositions against the plaintiff’s legitimate trademarks. The court concluded that the defendant’s malicious abuse of the trademark invalidation and opposition procedures was part of the defendant’s larger-scale infringement. This case is important because it represents the first civil judgment in China where the defendant’s filing of bad faith trademark applications and lodging of a malicious invalidation and oppositions against the plaintiff’s legitimate trademarks were determined by the court to constitute acts of unfair competition and would support an award of damages. This landmark decision has been critically acclaimed among intellectual property practitioners and the courts alike, and was selected for publication on April 23, 2021, by the Shanghai High People’s Court as a representative case.
In Mascotte Holdings, Inc. v. CNIPA & Xiamen Yezhi Trading Co., Ltd., an action seeking to protect an American celebrity’s (“Ye,” commonly known as Kanye West) legitimate trademark rights to “Yeezy,” the Beijing High People’s Court found that, due to Kanye West’s continuous co-branding with Nike and other business partners, “Yeezy” had become a protectable unregistered trademark for shoes. The court concluded that the bad faith trademark filing for YEEZY by Xiamen Yezhi infringed upon Mr. West’s existing trademark rights and violated Mr. West’s personal publicity rights to the name Yeezy. On April 22, 2021, this widely commented case was selected as one of the “Top Ten Cases on Judicial Protection of Intellectual Property Rights by Beijing Courts in 2020.”
Finally, in 2020, CNIPA promulgated Criteria for Determining Trademark Infringement (the “Criteria”) to create uniformed enforcement standards and to improve local intellectual property administrative agencies’ handling of administrative enforcement actions. Then, in April 2021, CNIPA published the first three guidance decisions under the Criteria, one of which concerns the protection of the American data and analytics service provider, Dun & Bradstreet’s Chinese house mark, 邓白氏 (Deng Bai Shi). In this case, the infringer used “邓白氏” (Deng Bai Shi), identical to Dun & Bradstreet’s registered trademark, as the keyword for searching. And on the search results page, the link title and the content of the linked page were highlighted with the term similar to the registered trademark, 邓白氏 (Deng Bai Shi). The local government agency, the Shanghai Chongming Market Supervision Administration, found that such use of 邓白氏 (Deng Bai Shi) by Shanghai Zhangyuan Information Technology Co. Ltd. created a likelihood of confusion to the internet users and therefore constituted an infringement of Dun & Bradstreet’s registered trademark. As the CNIPA explained, “the issuance of this guidance case will help to further clarify the definition of trademark use in the Internet environment.”
C. Key Developments in Trademark Prosecution Proceedings
The major developments of trademark prosecution proceedings in 2022 mainly include the acceleration of trademark administrative actions and the Trademark Review and Administrative Department’s new rules on Letters of Consent.
First, sections 1 and 2 of the CNIPA’s May 10, 2021 notification directs that “by the end of 2021, the average examination period for trademark application will be stable within 4 months, and the trademark registration period will be reduced from 8 months to 7 months in general” and that “the average examination period for trademark assignment, opposition, refusal appeal, and invalidation will be reduced to 1.5 months, 12 months, 5.5 months, and 9 months, respectively.” Recent proceedings show that the CTMO and the TRAD have followed this guidance in the majority of cases before the CNIPA. According to the statistics released by the CNIPA on July 14, 2021, more than 3.72 million trademarks were registered in the first half of 2021, with the CNIPA ruling on 82,000 oppositions and completing 188,000 trademark reviews. Furthermore, in addition to having any trademark disputes settled before the CNIPA in a timely manner, U.S. companies can currently expect to receive a trademark registration certificate in eight to nine months.
Due to such accelerated processes and the required time frame for the TRAD examiners to conclude pending refusal appeals and reluctance to consider pending actions against the blocking trademarks, however, it has become very difficult for a trademark applicant to obtain a stay pending a refusal appeal. As a result, instances of refiling for the same trademarks and repeated refusal appeals will likely increase, which has become a common concern among U.S. companies.
Another notable practical issue in trademark prosecution are the TRAD’s new rules on Letters of Consent (LOCs). One of the common approaches to overcome the refusal of a trademark application because of an existing trademark is to seek an LOC from the existing trademark owner. Based on existing precedents before the TRAD’s new rules, where the conflicting trademarks were not identical or substantially similar, the TRAD usually would consider the LOC as persuasive evidence that there is no likelihood of confusion and would allow the registration of the subsequent trademark. Recently, though, refusal appeal decisions published by the TRAD indicate that the department has changed its practice and turned down most of the submitted LOC’s. For example, in a recent widely-commented decision concerning the application to register the mark “薇娅严选” (Wei Ya Yuan Xuan) filed by a famous e-commence anchor, Huang Wei (also known as 薇娅), the TRAD refused to consider the consent provided by an earlier registrant for the mark “薇娅viya” and ruled that the coexistence of “薇娅严选” (Wei Ya Yuan Xuan) and “薇娅viya” would cause a likelihood of confusion.
As a result, the TRAD’s new rule on LOC’s would significantly impact those matters that are expected to be resolved by LOC’s. Specifically, in refusal appeal cases, it is now advisable as a practical matter that the subsequent applicant take non-use cancellation action to clear the blocking mark if such prior mark is vulnerable to non-use cancellation attack, because seeking an LOC no longer appears helpful in overcoming a citation in the TRAD review proceeding.
