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Nan WANG
Chinese trademark attorney
Trademark Department
Linda Liu & Partners

 
Article 49 of the Chinese Trademark Law stipulates that where a registered trademark has not been used for three consecutive years without justified reason, any organization or individual may apply to the Trademark Office for the cancellation of the registered trademark. In practice, the “application for cancellation of registered trademark that has not been used for three consecutive years” (hereinafter referred to as “non-use cancellation”) are mostly to remove the obstacle that blocks its own trademark registration , or to remove those filed out of bad faith but failed to be eliminated through the legal remedies such as opposition and invalidation. Due to the existing large number of idle trademarks in China’s registered trademarks, the success rate of non-use cancellation cases is relatively high. According to the latest official statistics (statistics for the first half of 2019), 39,594 non-use cancellation cases were concluded by the Trademark Office, among which, a total of 28,337 were cancelled, accounting for as high as 71.6%. Therefore, non-use cancellation has become a crucial countermeasure in trademark practice.

The legislative purpose of the establishment of the non-use cancellation system is to encourage trademark registrants to actively use their registered trademarks and avoid the idleness and waste of trademark resources, thus cancellation is only a means rather than an end. Also, there is no evidence exchange proceeding at the Trademark Office stage, which led to less strict examination of evidence at this stage. At present, only about 30% of trademarks in the non-use cancellation cases were maintained for registration by Trademark Office, and among those maintained a considerable percentage were cancelled in the appeal by overturned decisions. According to the Monthly Statistics of Trademark Adjudication Cases , the statistics of the 3rd, 4th, and 5th issues in 2020 showed that the number of trademarks that continued to be maintained for registration in the appeal of non-use cancellation is no more than 30%, and even less than 20% in the latest two issues.
 

 

Based on the above situation, it is advisable for the applicant of non-use cancellation to actively take follow-up relief procedures and initiate appeal proceeding when receiving a decision maintained the registration of the trademark, in particular to those maliciously registered trademarks. There is an evidence exchange procedure in the appeal proceeding of non-use cancellation. The applicant (of appeal of non-use cancellation against the trademark that is maintained for registration in the non-use cancellation) can submit cross-examination opinion and point out the defects of the evidence to the examiner in respect to the use evidence submitted by the trademark registrant. Then, how to find defects from  trademark use evidence? Through summary of practical experience, it is hoped this article will provide readers with some thoughts in cross-examination of evidence.

When conducting cross-examination of trademark use evidence, two perspectives can be investigated and considered. The first is whether the trademark use behavior is in line with the laws and regulations. This is mainly to investigate whether or not the trademark use behavior meets the statutory requirements set by laws and regulations. The second is whether the trademark use materials per se meet the requirements of three attributes, namely truthfulness, validity and relevancy.
 

I.Whether the trademark use behavior is in line with the laws and regulations

According to the relevant provisions of the Trademark Law, Regulations on the Implementation of the Trademark Law, and Trademark Examination Guidelines, the trademark user is limited to the trademark registrant and the licensee of trademark use. And the trademark right is of territoriality, and the trademark use evidence of should be formed within mainland China. Secondly, the period for the trademark use evidence requested in the non-use cancellation case is three years dated back from the filing date of  the non-use cancellation. Use materials not formed during this period shall not be regarded as valid evidence. Thirdly, the distinctive features of the registered trademark shall not be changed in the use evidence provided by the trademark owner, and the use should be limited to the goods or services approved for registration. To be specific, it can be analyzed from the following five aspects.
 

(1) Whether the evidence shows the trademark user is the trademark registrant or the licensee of trademark use;

(2) Whether the evidence is formed within mainland China;

(3) Whether the evidence is formed within the requested three-year period;

(4) Whether the distinctive features of the trademark are changed in the use evidence;

(5) Whether the goods or services involved in the evidence materials are those on which the involved trademark is approved for use;

In practice, the above five aspects are flexible to a certain extent. A simple analysis is as follows.

As for the aspect (1), the trademark user is limited to the trademark registrant and the licensee of trademark use. In the absence of a trademark license agreement, the scope of licensee may  cover the trademark registrant’s subsidiary or its affiliates, but the use by other unrelated parties should not be regarded as valid use of the trademark.

As for the aspect (2), the flexibility is mainly reflected in the use evidence formed in OEM production. Other use of the trademark outside mainland China shall  not be regarded as valid use.

As for the aspect (3), the evidence formed beyond the requested three-year period is not valid evidence in principle.

As for the aspect (4), the comparison between the actually used specimen of the trademark and that approved for registration is based on the principle that the main parts and distinctive features of the registered trademark should not be changed, however, in practice, consideration shall also be given to the general cognition of the relevant public, business practices, industry characteristics and registration situation of the trademark holder, etc. Among the precedent cases, in one case the trademark No. 4587241 “” was maintained for registration based on use evidence of the trademark “JIM” by the court in the judgment (2016) Jing Administrative Final No. 608, even though the registrant owned the trademark No. 9220695 “”, while in another case the use evidence of “” was not deemed effective use evidence for the trademark “” No. 3159414, with font changed, but the main identification elements  remained, in the judgment (2015) Higher Administrative (IP) Final No. 3613. The judgment held that its use evidence directed to another registered trademark“” No. 8570965 owned by the trademark holder. It can be seen that for the cases where a trademark is used in a modified form, there are variations when it comes to whether it can be regarded as the use of the registered trademark. Therefore, in the cross-examination, in addition to questioning the change made to the main or distinctive features of the registered trademark, it is necessary to particularly confirm whether the trademark registrant has registered a trademark in the same image of change reflected in the use evidence. If there is such a trademark, it can be pointed that the use evidence is actually directed to another trademark which is advantageous in cross-examination.   

As for the aspect (5), The Trademark Examination Guidelines stipulate that trademark registrants should use registered trademarks on the goods approved for use. Where a trademark is used on the goods approved for use by the registrant, the registration on the similar goods may be maintained. The use of the registered trademark on similar goods other than those  approved shall not be regarded as the use of the registered trademark. According to this standard, the scope of right of the trademark in question is determined by the goods/services on which the trademark is used. Therefore, it is necessary to conduct a comprehensive analysis on whether the actual use evidence submitted is the use evidence on the approved goods or services when cross-examining the trademark use evidence, especially when the goods/services targeted by the non-use cancellation cover multiple subclasses of goods,.

In a specific case, first of all it should be made clear what goods/services of non-use cancellation are obviously beyond the scope of the actually used goods/services, and the trademark registration on these goods/services should be cancelled. Secondly, if the targeted goods/services of the non-use cancellation are only similar to those actually used, the registration on such goods should also be cancelled according to the above standard if they do not belong to same goods or if they are not goods where the broader one can cover the specific one. From practical experience, although the use of registered trademarks on the goods/services that are similar to the approved goods/services is more likely to be considered as valid evidence of use in most cases, however, in one of the typical trademark adjudication cases released in 2017-appeal of non-use cancellation regarding the trademark  “ARTE COLL & device” No. 9369681, the use evidence on “beauty mask” was not regarded as effective use evidence on the approved similar goods “cosmetics” in the decision. Therefore, the difference between the actually used goods / services and those approved is still likely to be a key point in the final decision, which should be paid attention to.

The comparison between the goods/services that are actually used and those approved for use in the non-use cancellation case should be conducted by mainly investigating their physical attributes such as the function and purpose of the goods and the content of the service, with a focus on the analysis of their difference in order to try every efforts to ascertain they do not belong to same goods and they are not goods in subordinate and superordinate relationship.
 

II.Whether the use evidence  is true and valid
 

Article 48 of the Trademark Law stipulates that the use of trademarks in this law refers to the use of trademarks on goods, goods package or containers, and goods transaction documents, or the use of trademarks in advertising, exhibitions and other commercial activities, to identify the source of goods. Regarding the “use of trademarks” stipulated in this law, the prevailing view is that there should be real intentions of use rather than a small quantity of occasional and token use. And it should be an open and legal commercial use in the market circulation channel that is capable of distinguishing the source of goods/services. Generally, if it is merely the internal use of the trademark within the company, it will not be regarded as effective use evidence of the trademark. Therefore, when conducting cross-examination of the use evidence of the trademark in question, it can be started from two fundamental points, i.e. “whether there is real intention of use” and “whether it enters the market circulation channel” to seek defects of the evidence. There are various kinds of evidences of trademark use. Taking trademarks of goods as an example, based on the author’s practical experience, trademark registrants often provide trademark use evidence in the following aspects.
 

 

 
For the cross-examination of the aforementioned materials, we can mainly conduct investigation and analysis from the following aspects to seek for defects.
 

1.The subjects appearing in the evidence materials mainly are the trademark licensee and the companies involved in various contract, invoices, and witness testimony. Generally, the "National Enterprise Credit Information Publicity System" can be used to verify the corporate information (pay attention to the time of establishment and the time of corporate name change), business scope and other information. If the company involved does not exist or has been deregistered, or the time involved in various contracts and invoices is earlier than the time when the related company was established or the company name was changed, it can be questioned whether the relevant materials are forged. Attentions should also be paid to whether the business scope, qualifications, production scale, and sales capabilities of the relevant company are consistent with the goods/services designated by the trademark in question. If they are completely irrelevant, the rationality of the relevant materials can be challenged.
 

2.As the photos of physical goods, product manuals, etc., are self-made materials and it is difficult to prove their time of formation they can only be adopted by combining with other objective evidence. For example, a complete chain of evidence is considered being formed to prove its authenticity only when there is a sales contract and relevant invoices of the relevant product, will a complete evidence chain be considered as. In addition, if the evidence provided by the trademark owner is no more than some materials that prepared at the preliminary stage, and if the evidence in the case fails to prove that the customized outer package of the goods is actually put into the market circulation, its authenticity can also be questioned and it is possible to claim such evidence is merely symbolic use to maintain trademark registration. Therefore, for this kind of evidence, special attention should be paid to whether other evidences in the case are relevant, for instance, whether the product models indicated in the package are consistent with those in the sales invoices occurred in commodity circulation links. Moreover, what should be highlighted is for special products, such as cosmetics in class 3 and health care products in class 5, etc., when special production permit, hygiene permit, import and export permit, etc., are requested for its production and sales. Generally, their outer package will be printed with the relevant license numbers, and a sign of “blue hat” (a sign for health care food approved by the State Food and Drug Administration) on health care products. These should be borne in mind when verifying the outer package, product instructions, product inspection reports, and hygiene licenses of such products.
 

3.Evidences such as product manuals, product inspection reports, product qualification certificates, hygiene permits, and goods inspection reports are not direct evidence of trademark use. If such evidence is single evidence without being related to other evidence in the case, it can be directly claimed that it has no relevance and should not be admitted.
 

4.For the cross-examination of goods production and sales materials, it is mainly to verify whether the trade contracts and the supporting materials (such as invoices, remittance vouchers, etc.) are true and mutually supported. First of all, it is of outmost significance to verify whether the parties to the contract, the content of the trademarked goods involved in the contract, the time of signing, the amount, and the signature and stamp are in line with business practices, and whether the contract is too simple and lacks basic and necessary matters. For the company involved in the contract, it is necessary to verify the time of its establishment, business scope, whether the company name has been changed, whether it is interested party with the trademark registrant or licensee, etc. If the establishment time or the time of name change is later than the date of contract signing, or its business scope is far from the approved goods/services of the trademark in question, the authenticity of the contract is obviously in doubt. At the same time, when doing cross-examination at the appeal stage, in the absence of original documents, special attention should be paid to whether the key content of the contract has been tampered with, e.g. the difference in the shades of paper and word fonts, and whether the cross-page seal is complete. When the key terms of the contract, especially those related to the goods of the trademark, look unnatural in appearance, it is necessary to proactively report to the authority and request for the verification of the original contract and challenge the authenticity and legitimacy of the evidence.
 

Secondly, whether the relevant contract is supported by objective materials such as invoices and bank remittance certificates that prove the performance of the contract. If there is no such supporting material, it can be challenged that the contract has not been performed. If there are such supporting materials, among all the evidences of trademark use, the objective materials as invoices are important for making the decision. Therefore, it is necessary to carefully check whether such evidence is true and effective. As for handwritten receipts, self-made delivery orders, etc., it is very difficult to verify authenticity of such materials from public channels. However, since most of them are self-made evidences, their probative forces would be low if there is no other objective evidence to support, and the possibility of these evidences being admitted is not high. Therefore, in practice, the focus is on verifying the authenticity of machine-printed invoices. Such invoices can be verified through invoice query systems such as the invoice verification platform and the website of the provincial tax authority of the place where the invoice is issued. Special attention should be paid to the key information including the invoice date and invoice amount. In addition, keep an eye on whether the number, amount, and information of supplier and buyer in all sales-related invoices are in line with business practices. For example, if the invoices are dated with large time span but bear serial or very close numbers, it can be reasonably questioned that it is a small-scale token trademark use. Another example is whether the invoice amount is consistent with the general market price of the goods involved, whether it meets the actual economic development level of the region where the subject of the invoice is located (for instance, in a place where the economy is relatively less developed, the goods involved are not consistent with local consumption level, etc.), etc. These are the factors that could be considered when judging the authenticity of the invoice. In addition, from common sense, for example, value-added tax invoices are rarely issued to individuals, especially when the amount involved is small, the possibility of forgery is higher. All in all, for the cross-examination of invoice evidence, apart from verifying the authenticity through the invoice query system, it is also necessary to look for clues and make comprehensive judgments on the basis of the characteristics of the product's industry, the transaction object and its location, and common sense.
 

5.For promotional materials, such as  advertising materials, the authenticity of the promotional media itself could be verified. For example, the ISSN of newspapers and magazines can be checked and verified to confirm whether they are published. The original of the published materials can be retrieved in the national library, etc., to verify whether relevant advertisements actually exist. Secondly, it could also be verified whether the audience of the commercial advertisement carriers overlap with the relevant public of the goods involved. For example, if the advertisements of industrial products that do not directly face  the terminal consumers are published in social life newspapers, such advertising behaviors that are obviously inconsistent with actual sales needs can be used to question their lacking of real intention to use trademark.

 

6.For other materials, such as award materials, the qualification of the issuing authority, the credibility of the issuing party, and the content of the award can be verified. Now that Internet is highly developed, generally the report on award-winning would be available online. If relevant award-winning reports are retrieved, such report could be used to verify whether the award-winning information is relevant to the trademark, goods, and period of use involved in the case. For witness testimony materials, usually the witness is an interested party to the trademark registration or user, and most testimonies are made after the trademark is applied for cancellation. The verification of such testimony should focus on whether there are other objective trademark use evidences to support the statement of the witness. Without such evidence, it can be claimed that the probative force of the testimony is low because the witness has a stake in the case.
 

Upon verification of all  the above-mentioned evidential materials, for those evidences having no major defects, a comprehensive analysis on whether they could form a complete evidence chain could be made taking account of two key aspects, namely whether it can be proved that there is a real intention to use the involved trademark, and whether it is public use in the market circulation channels, based on which a complete cross-examination opinion can be established.

In addition, it is worth mentioning that the Supreme People’s Court affirmed the approach of the second instance court taking the fact that the trademark registrant applied for more than 50 trademarks that are identical or similar to other well-known trademarks into consideration when determining whether the trademark registrant had real intention of use in its (2015) IP Administrative No. 181 Judgment. This provides us with an idea of “lack of real intention of use” in a potential case, especially in respect to a trademark that is registered out of bad faith in the cancellation case. It may produce positive effect on judger’s inner conviction more or less if we actively prove the fact that the trademark has been registered maliciously..

To sum up, when cross examining the evidence of trademark use, we should be skeptical and verify the evidences in depth and details to look for all possible defects that could make the authority reasonably doubt the evidence and make a decision favorable to our side.

References:
 

1.Analysis of trademark registration work of the Trademark Office of the CNIPA in the first half of 2019

2.Monthly Statistics of Trademark Adjudication Cases (3rd, 4th and 5th Issues of 2020)

3.Judgment (2016) Jing Administrative Final No. 608 Judgment (2015) Higher Administrative (IP) Final No. 3613

4.Review decision of non-use cancellation against the trademark  “ARTE COLL & device” No. 9369681

5.Judgment (2015) IP Administrative No. 181

 

（2020）