Imitation pain

Tingxi Huo and Zhanqing Tang discuss the strange case of a trademark office approving a third party’s application for the patent office’s logo

On June 13, the Chinese Trademark Office (CTMO) granted provisional approval to a trademark similar to the logo of the State Intellectual Property Office (SIPO) and published the trademark in the Chinese Trademark Gazette. Unlike governmental organisations in other countries where the patent and trademark authorities are under the same roof, CTMO, separate from SIPO, failed to notice the similarities between the logos and inappropriately granted provisional approval.

This approval has put both SIPO and CTMO into an embarrassing situation. As an intellectual property governmental organisation, SIPO, accustomed to protecting others’ rights, needed to protect its own.

Although the owner has decided to voluntarily withdraw the application, this matter has attracted much attention from all circles and given rise to sarcastic and heated discussions. Assuming that the application had not been withdrawn, we will analyse from a trademark practitioner’s perspective the possible outcomes, resolutions and influences on the relevant parties to better understand Chinese trademark law and practice.

Possible outcome one: SIPO duly files an opposition

Under Article 33, SIPO is entitled to file an opposition on or before September 13, on the basis of absolute or relative grounds, directly by itself or indirectly through a trademark agent.

If an opposition were to be filed, SIPO should seek legal basis of absolute grounds according to Article 10.1.1 and/or 10.1.8, or relative grounds according to Article 32 of the Chinese Trademark Law.

Article 10.1.1 prohibits trademarks that are “identical with the names or symbols of state central authorities, or specific names of places where central state authorities are located or the names or images of landmarks”, while Article 10.1.8 prohibits “those that are detrimental to socialist morality or practices or that have other unhealthy effects”.

Article 32, meanwhile, states: “No trademark application shall infringe upon another party’s existing prior rights. Nor shall an applicant pirate in an unfair manner a mark that is already in use by another party and enjoys substantial influence.”

Under Article 10.1.1, the two marks or signs shall be identical with each other. This article shall not be applied to similarity issues. The two marks in question are not identical. Instead, the two marks are only similar. SIPO’s logo carries five stars, with a layout similar to that of China’s national flag, whereas the imitated mark carries two more stars, not to mention the different colours. Some opine that this article shall not be simply applied to perfectly identical marks, but also marks that are very similar. As such, if SIPO seeks protection under Article 10.1.1, there can be some uncertainties.

Therefore, Article 10.1.8, which is generally regarded as an all-functional article, may be a more appropriate basis of the opposition on absolute grounds.

On relative grounds, regretfully, SIPO does not have any prior applications or registrations for its logo for the same or similar services. But according to Article 32, it is possible for SIPO to base the opposition on its existing prior copyright to its logo, as its logo has a relatively high level of originality and the imitated mark is very similar.

On the basis of absolute grounds set out in Article 10, any other party, in addition to SIPO, is entitled to file an opposition. The same principle is also applicable to possible invalidation cases.

Possible outcome two: CTMO declares the mark invalid after registration

Under Article 44: “A registered trademark shall be declared invalid by the trademark office if it constitutes violation of Article 10, Article 11 or Article 12 of this law, or its registration is obtained by deceptive or other improper means.
Other entities or individuals may request the Trademark Review and Adjudication Board (TRAB, namely the appeal board) to declare such a registered trademark invalid.” There is no time limit for this type of invalidation.

Although embarrassing to declare invalid a registered trademark to which CTMO itself granted approval, CTMO remains in a position to thus rectify the situation, according to Article 10 and Article 44, although the owner, if dissatisfied, remains entitled to appeal to the TRAB or further to the courts.

Possible outcome three: SIPO requests for TRAB to declare the mark invalid after registration

An invalidation action is an option if SIPO fails to file an opposition in due course and misses the deadline. SIPO can also intentionally choose to request the TRAB for invalidation, to avoid CTMO’s examination again as the opposition shall be examined by CTMO’s opposition division.

After registration, SIPO, as well as other entities, can request the TRAB to declare the mark invalid according to the absolute grounds in Article 10 and Article 44.

In addition, SIPO can also request for TRAB’s invalidation declaration according to Article 45.1: “If a registered trademark violates the second or third paragraph of Article 13, Article 15, the first paragraph of Article 16, Article 30, Article 31 or Article 32 of this law, the prior rights holder or a materially interested party may, within five years of the date of registration of the trademark, request that the TRAB declare the registered trademark invalid.”

If a request is filed according to this relative ground on the basis of SIPO’s prior legitimate rights, only SIPO or any interested party is qualified to do so within five years after registration.

Possible outcome four: the owner shall be forbidden to use the mark

The forbidden signs under Article 10 shall not be used as trademarks. If the mark is finally not registered whereas the owner still uses the mark in practice, penalty might be available according to Article 52, namely “If an unregistered trademark is illegally passed off as a registered trademark or if use of an unregistered trademark violates Article 10 of this law, the local administration for industry and commerce shall stop this, order rectification within a specified period, and may additionally circulate a notice on the matter.

If the illegal turnover is RMB 50,000 or above, it may impose a fine of up to twenty percent of the illegal turnover. If there is no illegal turnover or if the illegal turnover is less than RMB 50,000, it may impose a fine of up to RMB 10,000.”
However, if the mark finally matures into registration and if the owner uses the mark, it turns out that there is no legal ground for possible penalty against such use under the Trademark Law. Accordingly, it will be more advisable for the SIPO to duly file an opposition, to avoid further embarrassment.

Possible outcome five: the agent will be safe

Article 10 actually forbids use of the listed signs and forbids registration. The imitated logo should be deemed in violation of Article 10. To regulate trademark agents, Article 19.2 provides: “A trademark agent shall clearly advise an applicant of the fact that the trademark entrusted for registration may fall under the circumstances prescribed by this law under which registration is not allowed.”

In other words, an agent is obliged to advise the applicant of the forbidden signs. If the agent is unable to prove that it had advised the applicant of the forbidden signs and the potential violation of Article 10, the agent shall be held liable. Again, it turns out that the Trademark Law fails to provide specific penalties against such violations.

Whatever the outcome, CTMO should have rejected this trademark at the very beginning. But how did this inappropriate approval happen?

Since China revised its Trademark Law for the third time and put the revised law into effect in 2014, examination of a new application must be finished within the statutory nine months, counting from the filing date without extension.

China has been the top trademark filer for 14 consecutive years since 2002. CTMO received 2.876 million new applications in 2015 alone. CTMO is faced with a heavy workload and has been forced to expedite examination through reform. Its senior experienced examiners are very careful, but they can only examine a limited number of applications. CTMO even recruited a large number of new examiners and set up an Examination Assisting Center. But the new examiners in the centre received very brief training before actually examining applications.

In the past, there were double checks. However, to further reduce backlogs and expedite examination, the procedure of double checking was abolished and only one examiner is now appointed to examine an application. That single examiner’s decision will be immediately final inside CTMO. Consequently, mistakes and negligence have increased.

In our opinion, this accident should set CTMO thinking about long-term solutions to similar problems. More importantly, it is high time that CTMO worked harder to optimise its internal examination procedures to improve the quality of examinations.
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