Last year, the Supreme People’s Court issued the final decision in the protracted dispute between LACOSTE and CARTELO. The decision clarifies cases involving long brand history and could guide future hearings on similar disputes in courts of all levels. In the decision, LACOSTE lost the lawsuit, and no infringement was found on the part of CARTELO. In the judgment, the Court took the first steps towards establishing a system of “trademark coexistence,” which means the coexistence of similar trademarks in the same class, for use in China’s trademark cases. Today’s post will provide an analysis of the application of this system in China.
I. The reason for the trademark coexistence system
As a general rule, the trademark right is an exclusive legal right; once registered, no application for similar trademarks can receive trademark rights. This is to prevent later applicants from filing similar trademark applications with the intent of creating confusion with the registered trademark and misleading consumers. However, due to territoriality and the first-to-file principle in China’s Trademark Law, there is the non-bad-faith application or use of trademarks similar to other registered trademarks, which might have gained reputations through years of operation. If we simply use the first-to-file principle, the users of such trademarks will no doubt suffer damage. In order to prevent the occurrence of this situation, the trademark coexistence system has developed.
II. Preconditions for the trademark coexistence system
Within the current Trademark Law and its relevant rules and judicial interpretations, there are no regulations concerning the trademark coexistence system. For this reason, China’s courts and administrative organs are still at an exploratory stage for when they can use this system. In the author’s view, the when to use this system should consider the following factors:
1. The trademarks cannot be fully identical
The basic function of the trademark is to distinguish the source or origin of the product or service. If two trademarks are fully identical and are also used in the same class, it will inevitably lead to confusion among consumers. This also jeopardizes the basic origin distinguishing function of the trademark. For example, in the iPad dispute, although Apple’s iPad was very famous, its name was exactly the same as Proview’s trademark. So, it was likely that consumers could be unable to distinguish between the two. Therefore, the author believes that trademarks in coexistence cannot be fully identical, but may be similar, for then they could meet the condition of not leading to consumer confusion.
2. The latter trademark has achieved commercial success
The coexisting trademark that is similar or identical should have definite popularity from acquiring commercial success. This enables consumers to definitively know the origin and makes it so that there is no confusion with the earlier trademark registration. Like in the aforesaid LACOSTE vs CARTELO dispute, the written decision admits that CARTELO achieved commercial success in mainland China and regards this as one of the reasons that market confusion will not be created. Moreover, the court also points out that “the primary requirement is that there is a relatively large possibility that the mark will not lead to confusion; it is not required that any person in any situation have no possibility of mistake.” Commercial success undoubtedly is the most important factor for the requirement of not causing market confusion.
3. Confusion shall be the ultimate basis in the judgment
The reason the use of similar or identical trademarks is not allowed for the same kind or class of products and services is because consumers will become confused about or mistake the source of the good or service. The ultimate purpose of the trademark coexistence prerequisites discussed above is the hope of the having the two trademarks not create confusion. In addition, the decision on confusion, always should consider consumers’ level of intelligence, public attention, the sales channels of both the plaintiff and the defendant, and the subjective intent of the latter applicant. Therefore, the essence of the conditions for trademark coexistence is that no confusion or mistaking be made between the trademarks.
III. China’s trademark coexistence practices
Although trademark coexistence is still in the exploratory stage, we have seen the application of the system in judicial and administrative practice. The details are as follows:
1. Court are conservative and only apply the system in major or influential cases.
By the author’s research, beyond the CARTELO vs. LACOSTE case, it is rare for cases to be judged using trademark coexistence.
2. Administrative organs only passively apply the system
The application, granting, and review of trademarks are decided by administrative organs (the Trademark Office of China and the Trademark Review and Adjudication Board). Therefore, whether or not the coexistence system can be used is also essential to administrative organs. The author’s inquiry revealed that the Trademark Office and Trademark Review and Adjudication Board generally do not actively examine the conditions to apply coexistence, unless there has been an agreement on coexistence concluded between the first and latter applicants, like in the case of Hong Kong Tian Mei Jian.