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Sophia XIAO
Trademark Attorney
Linda Liu & Partners

 
Article 41 of Chinese Trademark Law is the legal basis to solve trademark disputes.  This article mainly introduces the rejection on retrial application concerning the administrative dispute case among Changzhou Chuanglian Power Supply Co., Ltd., the Trademark Review and Adjudication Board of the State Administration for Industry & Commerce, and Changzhou Chenglian Power Supply Co., Ltd.  Analyzing this case clarifies the meaning and application of  Article 41of China Trademark Law.
 

A.  Basic information about the case

Name of the case

Administrative Litigation Lawsuit concerning the Adjudication Decision on the Disputed Trademark No.1981494 “Chenglian & device” [No. 2709 S-P-Z (2005)]

Trial of the First Instance: (2005) No. 1 Intermediate Court Administrative First Trial No. 1088
Trial of the Second Instance: (2006) High Court Administrative Final Trial No. 283
Rejection Notification on Retrial Application: (2006) Administrative Supervision Trial No. 118-1

Involved parties

Retrial Applicant (the plaintiff of the first instance, appellee of the second instance): Changzhou Chenglian Power Supply Co., Ltd. (hereinafter “Chenglian”)
Defender of the Retrial Application (the defendant of the second instance, appellee of the second instance): the Trademark Review and Adjudication Board of the State Administration for Industry & Commerce (hereinafter referred to as “TRAB”).
Defender of the Retrial Application (the third party of the first instance, appellant of the second instance): Changzhou Chuanglian Power Supply Co., Ltd. (hereinafter “Chuanglian”)
 
B.  Course of events

Chenglian filed a trademark application with the Trademark Office for the trademark “Chenglian & device” (hereinafter “the disputed trademark”) in Class 9 with electric switch as the designated goods on September 29, 2001.  The disputed trademark was approved for registration on February 14, 2003, with registration number of 1981494. The registration period is from February 14, 2003 to February 13, 2013.

Chuanglian filed a request to cancel the disputed trademark on March 3, 2004. The TRAB made the “Adjudication Decision on the Disputed Trademark No. 1981494 “Chenglian & device” [No. 2709 S-P-Z (2005)]” (hereinafter “Decision No. 2709”) on September 8, 2005. The disputed trademark registration was considered “acquired by fraud or other unfair means,” which is prescribed in the first paragraph of Article 41 of China Trademark Law. The disputed trademark was thus cancelled.

Chenglian was not satisfied with the Decision No. 2709 and filed an administrative litigation before Beijing No. 1 Intermediate Court (hereinafter “court of the first instance”) on October 26, 2005.  The court of the first instance made the judgment “(2005) No. 1 Intermediate Court Administrative First Trial No. 1088” on April 20, 2006 (hereinafter “judgment of the first instance”).  The judgment of the first instance determined that the related evidence filed by Chuanglian in the trademark adjudication period was insufficient to support the claim that the disputed trademark was first used by Chuanglian.  The Decision No. 2709 made by the TRAB which was based on violation of the first paragraph of Article 41 was judged devoid of facts and cancelled by the court of the first instance.

Chuanglian was not satisfied with the judgment and filed an appeal before the Beijing Higher People’s Court (hereinafter “court of the second instance”) on June 14, 2006.  The court of the second instance accepted the case files of the first instance in the civil litigation case in the Court of Tianning District, Changzhou, filed by Chuanglian as corroborative evidence.  The court of the second instance determined that Chuanglian was in a position to prove that it used the disputed trademark for the first time before October, 2000.  The court determined that the disputed trademark registration was “acquired by fraud or other unfair means,” which is prescribed in the first paragraph of Article 41 of China Trademark Law. The disputed trademark should thus be cancelled. The court supported the request of the appellant and maintained the Decision No. 2709.

Chenglian was not satisfied with the judgment of the second instance and filed a retrial application before the Supreme People’s Court (hereinafter “retrial court”).  The retrial court issued the “Rejection Notification on Retrial Application, (2006) Administrative Supervision Trial No. 118-1” on September 24, 2008.  The retrial court determined that though there were some improprieties in the legal application of the Decision No. 2709 and the judgment of the second instance court, the determination was justified and there is no need to initiate the supervision procedure to modify that decision.  The retrial court finally rejected the retrial application by Chenglian.

The rejection by the retrial court ended the five-year trademark right attribution case. However, the different understandings and applications of the first paragraph of Article 41 of the Trademark Law in the law enforcement and judicial examination process in this case require further contemplation.

Flow chart of the course of events：



C.  Disputed points of this case:

(1) Whether the disputed device and word combined trademark was first used by Chuanglian; and

(2) Whether the disputed trademark was “acquired by fraud or other unfair means” as prescribed in the first paragraph of Article 41 of the Trademark Law.
 

A. The determination of the TRAB

(1) Chuanglian first printed the trademark and publication materials in Qianzhen Printing Factory in April, 2000, which was prior to the application date of the disputed trademark. Although the invoices do not show the wording “Chuanglian & device,” they can prove that the trademark used by Chuanglian after its establishment is identical with the disputed trademark according to the actual use and the declaration made by customers who bought the products of Chuanglian.  At that time, Chenglian was not established. Therefore, it can be determined that Chuanglian first used the disputed trademark.

(2) Wu Meifang (Wife of Zang Qizhun, former shareholder of Chuanglian), and Zang Qizhun were the core staff of Chuanglian.  Zang Qizhun held the position as manager of Marketing Department in Chuanglian at one time.  Therefore, Chenglian knew the device trademark used on the products of Chuanglian.  Aware of the device mark of Chuanglian, Chenglian filed disputed trademark which contained the device first used by Chuanglian for registration and also filed the trademark “Chuanglian & device” being used by Chuanglian for registration. Therefore, the disputed trademark was determined to be “acquired by fraud or other unfair means” and should be cancelled.
 
B. The determination of the court of the first instance

(1) Of the evidences filed by Chuanglian, which came into being before the application date of the disputed trademark, nothing showed the prior used form claimed by Chuanglian. Therefore, the prior used form of the disputed trademark cannot be obtained from the evidence. Although the product publication materials contain the device of the disputed trademark, they do not directly show the time of print and publication. Therefore, the first use date is unknown.  The rest of the evidence came into being after the application date of the disputed trademark.  The evidence is comprised of recollections of witnesses regarding previous events. There are neither any signatures of the legal representatives of the corresponding entity they work for nor the signatures of the witnesses, and no witnesses testified in the court hearing.  Due to the non-existence of other evidence to support, the evidence should not be accepted. Therefore, the evidence submitted in the trademark adjudication period cannot prove that Chuanglian firstly used the device of the disputed trademark before the application date of the disputed trademark.
 
(2) The evidence submitted by Chuanglian in trademark adjudication period can not prove that it first used the device of the disputed trademark. Therefore, the reason listed in the Decision No. 2709 of TRAB, in which Chenglian was determined to acquire the registration of the disputed trademark by fraud or other unfair means, that is, Chenglian was aware of the trademark of Chuanglian but filed the trademark which contains the prior used device of Chuanglian and the trademark in use “Chuanglian & device” for registration, can not stand. Therefore, the adjudication decision of the TRAB to cancel the registration of the disputed trademark which was based on the first paragraph of Article 41 of the Trademark Law is devoid of facts.
 
C.  The determination of the court of the second instance

(1) The evidence submitted by Chuanglian to the court of the second instance (the case files of the first instance in the civil litigation in the Court of Tianning District, Changzhou) were submitted in the trademark adjudication procedure before the TRAB. Chuanglian claimed that the evidence which could show the use of disputed trademark in the aforesaid civil litigation in the Court of Tianning District, Changzhou was submitted before the application date of the disputed trademark.  Therefore, the newly submitted evidence belongs to the supplementary evidence to the original submitted evidence and thus should be accepted.

The production publication brochure contained disputed trademark “Chuanglian & device” on the cover. The contact person on the brochure was also “Mr. Zang (Zang Qizhun)” with his telephone number. Although the brochures do not show the print and publication time themselves, they were submitted in the dispute case concerning prohibition of business strife by Changzhou Sida Power Supply Co., Ltd. to People’s Court of Tianning District in Changzhou. The hearing of this case was proceeded in October 2000. Therefore, it can be determined that the disputed trademark was used in the sales and promotion of the power supply products before October 2000. Chenglian was registered in the authority of industry and commerce in September, 2001, therefore, it should be determined that Chuanglian first used the disputed trademark before Chenglian filed the disputed trademark for registration. Although the evidence based on which the Decision No. 2709 was made was insufficient, the determination made in the Decision was justified.

(2) Wu Meifang, Zang Qizhun of Chenglian were former staff of Chuanglian.  Zang Qizhun was the manager of the Marketing Department, and the foresaid brochure also showed the contact telephone number of Zang Qizhun. Furthermore, Chenglian was aware of the device of Chuanglian but filed not only the prior used disputed trademark of Chuanglian but also the trademark in use “Chuanglian & device.” Therefore, the registration of the disputed trademark was “acquired by fraud and other unfair means,” which was in violation of the first paragraph of Article 41 of the Trademark Law.  The Decision No. 2709 of the TRAB was justified.
 
D. The determination of the retrial court

(1) The evidence submitted by Chuanglian in the second instance further proves the evidence submitted in the trademark adjudication procedure was printed and used before August 2000 at the latest and belongs to corroborative evidence. The acceptance of evidence by the court of the second instance was justified. The determination of the TRAB and the court of the second instance on the prior use of the disputed trademark by Chuanglian was correct.

(2) In the first paragraph of Article 41 of the Trademark Law “a registered trademark stands in violation of the provisions of Articles 10, 11 and 12 of this Law” is equivalent to “the registration of a trademark was acquired by fraud or any other unfair means.”  They are both absolute grounds for canceling a registered trademark.  These acts jeopardize the public order and public interests, and also interfere with the order of trademark registration administration. Therefore, according to this article, the Trademark Office can cancel the registrations of such trademarks ex officio.  Other entities or individuals can request the TRAB to make an adjudication to cancel such registered trademarks within an unlimited timeframe.  The second paragraph of Article 41 of the Trademark Law concerns trademark registration damages to certain rights holder’s civil rights and belongs to the relative grounds to cancel registered trademarks.  To respect the will of the rights holders and urge them to timely protect their rights, this paragraph adopts the principle of “no condemnation without accusation” and provides a time limitation of 5 years (the preemptive registration of well-known trademarks in bad faith are not subject to this limitation).  The subjects who can file the cancellation request are mainly trademark proprietor and interested parties. In the trademark dispute adjudication cases concerning prior rights, the second and third paragraphs of Article 41 should be applied. In this case, Article 31 and the second paragraph of Article 41 should be applied. Chenglian claimed that the first paragraph of Article 41 cannot be applied as the reason to cancel the disputed trademark, which is tenable; Article 31 and the second paragraph of Article 41 should have been applied in this case, so the applied law on the decision of the TRAB and the judgments of the courts of first instance and second instance were improper.

(3) One of the grounds Chuanglian based his request for cancellation of the disputed trademark was under Article 31 of the Trademark Law.  Chuanglian provided the evidence that proves that it first used the trademark, and the trademark has a reputation.  As one of the investors and senior managers of Chuanglian, Zang Qizhun was aware of Chuanglian’s use of the device of disputed trademark but established a company of similar trade and preemptively filed the device and the trademark being used by Chuanglian for trademark registration on similar designated goods.  At the time of Chenglian’s establishment and application of the disputed trademark, Zang Qizhun was still the senior manager of Chuanglian. Therefore, the registration of the disputed trademark was in bad faith.  In accordance with the specific situation of the case, it should be determined that the trademark firstly used by Chuanglian enjoys certain reputation, and the disputed trademark should be cancelled according to Article 31 and the second paragraph of Article 41 of the Trademark Law.
 

According to the aforesaid different determinations, there are two points worth attention:

A. The form of the perfect evidence chain is the key to the final success of Chuanglian



As mentioned above, to prove Chuanglian’s prior use of the disputed trademark, Chuanglian provided a lot of evidence in the trademark dispute adjudication procedure. Among them, the brochure is very important evidence. Although it showed the device of the disputed trademark, it did not show the time of print and publication. Therefore, the evidence cannot show when the device was firstly used. Since the testimony of Chengdian Company, print certificate of Qianzhen Print Factory and evidence provided in 2004 by Aled Company, Changzhou Electronic Institute, Chengdian Company, Tian Ma Hui Company, and Taijixianxing Company submitted by Chuanglian all belong to testimony of witness which were not supported by other evidence. Therefore, they were not accepted or supported by the court of the first instance.

In the second instance, Chuanglian submitted the case files of Tianning District Court of Changzhou. Changzhou Sida Power Supply Co., Ltd. submitted the brochure in the dispute case concerning prohibition of business strife in October 2000 to Tianning District Court of Changzhou, which proved the time of use of the disputed trademark. The court of the second instance determined that Chuanglian used the disputed trademark in sale and promotion of power supply products, and confirmed Chuanglian firstly used the disputed trademark.

Furthermore, the court of the second instance also stated that it was justified that the judgment of the court of the first instance determined that the evidence submitted by Chuanglian in the dispute adjudication procedure was insufficient to prove its prior use of the disputed trademark, and further determined that the cancellation decision of the TRAB had been made devoid of facts. However, since there was evidence which could prove that Chuanglian firstly used the device and word of the disputed trademark, the determination of the case was fundamentally changed and the original judgment was converse. It is thus shown clearly that the corroborative evidence submitted in the second instance which made the chain of evidence perfect in this case is the key for the final success of Chuanglian. Therefore, ensuring perfection in the chain of evidence is a subject that deserves careful study.
 
B. The understanding and application of the first paragraph of Article 41

In this case, Zang Qizhun was the former manager of Marketing Department of Chuanglian, and the brochure that carries the disputed trademark also contains the telephone number of Zang Qizhun.  Therefore, he obviously knew the device mark used on Chuanglian’s products. Although Zang Qizhun was aware that the device mark used by Chuanglian, he filed both the disputed trademark that contained the prior used device of Chuanglian and Chuanglian’s trademark in use “Chuanglian & device.”  Therefore, the registration of disputed trademark was improper. Both the TRAB and the court of the second instance held that the registration of the disputed trademark belongs to the circumstance of “acquired by fraud or other unfair means,” which was prescribed in the first paragraph of Article 41 of the Trademark Law. The first paragraph of Article 41 can be applied to the determination and judgment of this case, and the disputed trademark was thus cancelled.

However, in the Rejection Notification on Retrial Application, (2006) Administrative Supervision Trial No. 118-1, the understanding of the Supreme People’s Court on the first paragraph of Article 41 is completely different from that of the TRAB and the court of the second instance.  Although the Supreme Court determined the disputed trademark should be cancelled in accordance with Article 31 and the second paragraph of the Trademark Law, and did not support the retrial request of Chenglian, the Supreme Court clearly stated that the first paragraph of Article 41 can be applied to cancel trademark registrations as absolute grounds. The second and third paragraphs of Article 41 should be applied in trademark dispute adjudication cases relating to prior right of a registered trademark.

Although some of the judges of the Supreme Court held that the first paragraph of Article 41 of the Trademark Law only relates to the absolute grounds for trademark cancellation, we agree with the views of the TRAB and the court of the second instance. In practice, we have encountered a lot of improper registration acts which articles 13, 15 and 31 of the Trademark Law cannot be applied to interdict.  If the first paragraph of Article 41 cannot be applied to such cases, on one hand, it would be a converse to the original intention of legislation of Trademark Law, on the other hand, it will not help to interdict the unfair competition with obvious bad faith. Therefore, we highly suggest applying the first paragraph of Article 41 of the Trademark Law to relative grounds to determine improper preemptive registration of other’s trademark according to the specific situation before the Trademark Law is further amended and improved.
 

A. The origin of the current Trademark Law (entering into force in 2001)

As shown in the above table, the first paragraph of Article 41 of the current Trademark Law carries on the Article 27 of the Trademark Law 1993 but lacks the fifth item of Article 25 of the Implementing Rules of the Trademark Law as a cover-all clause. Furthermore, the first paragraph of Article 41 places “acquired by other unfair means” abreast with absolute grounds such as prohibitory provisions, distinctiveness, etc., which causes difficulties in the application of law.
 
B. Two suggestions about “registrations acquired by other unfair means” on the first paragraph of Article 41

(1) After the entry into WTO, China has been involved in the global economic integration, and various forms of preemptive registration acts, such as registrations by fraud or other unfair means, have increased. So far, the TRAB and courts such as Beijing Higher People’s Court have effectively stopped a lot of unfair competition acts on preemptive trademark registration according to the first paragraph of Article 41 of the Trademark Law and provide effective legal support for the trademark right holders. Therefore, in the legal practices before the amendment and improvement of the Trademark Law, we suggest not completely refusing to apply the first paragraph of Article 41 of the Trademark Law as absolute grounds to cancel registrations. On the condition that other articles were predominantly applied, if the acts are against the principle of honesty and good faith and the bad faith thereof can be proved by sufficient evidence but it is difficult to apply other articles, we suggest applying the first paragraph of Article 41 according to the specific situation. The objective of legislation and the justice of law can thus be reflected.

(2) Since there are various forms of unfair registration which the current Trademark Law can not be fully specified, we suggest restoring the cover-all clause, that is, to put the content “acquired by other unfair means” to the place after “Articles l3, l5, l6 and 3l of this Law” in the second paragraph of Article 41, and the second paragraph will become “Where a registered trademark stands in violation of the provisions of Articles l3, l5, l6 and 3l of this Law or acquired by other unfair means, the owner of the trademark or any interested party may, within five years from the date of the registration of the trademark, request the Trademark Review and Adjudication Board to make an adjudication to cancel the registered trademark. Where a well-known mark is registered in bad faith, the genuine owner thereof shall not be restricted by the five-year limitation.”

During the legal execution in trademark right attribution and the judicial examination thereof, it is always a problem whether the provision of “acquired by fraud or other unfair means” in the first paragraph of Article 41 of the Trademark can be used to protect private rights. If the above suggestion could be realized, the problem could be solved and the different determinations which were based on different understandings and applications could also be avoided.
 

（2009）