(By Luo Yanjie) Recently, the lawsuit filed by Nike against China’s Trademark Review and Adjudication Board (“TRAB”) (note: the link is in Chinese) was heard in the Beijing No. 1 Intermediate People’s Court. The case was brought because TRAB refused Nike’s application to trademark Liu Xiang (刘翔) for the reason that the trademark had been registered by another company twenty six years ago, namely in July of 1986. At that time, a company named Shanghai Liuxiang Company applied for the trademark Liu Xiang Brand (刘翔牌) in the class of clothing, and the exclusive period for the use of that mark will last until 2017. Incidentally, the Liu Xiang Brand trademark happens to have the same name as the famous Chinese athlete, Liu Xiang. The case is currently being heard, but the author believes Nike has little chance of winning the case. Today’s will examine the issues involved in this case.
I. What is the “first to file” principle?
The basic function of the trademark is to differentiate products and services from different producers and operators. Therefore, exclusive use rights can only be held by one registered trademark. But, because some popular words have great trademark value, they attract many applicants. To solve this problem, China’s Trademark Law adopts the “first to file” principle, which means when two or more persons are applying for identical or similar trademarks for the same or similar products, the Trademark Office should refuse the later application and approve the first one. And, based on this rule, TRAB rejected Nike’s application for Liu Xiang because the similarly named trademark, Liu Xiang Brand, existed prior to Nike’s application.
II. Exceptions to the first to file principle
As mentioned above, China follows the first to file principle for trademark registration. But, it is necessary to note that this principle only applies for normal trademark applications, and the law also regulates some exceptions to the first to file principle, the most common of which are listed below:
1. Bad faith registration or “trademark squatting”
As regulated by the Trademark Law, if bad faith registration or “trademark squatting” can be shown, the latter applicant can challenge the prior application. There are two primary forms of trademark squatting. The first is “squatting by agents” as provided in Article 15 of the Trademark Law. According to the Trademark Examination Standards, “agent” includes not only the attorneys stipulated by the General Principle of Civil Law and Contract Law, but also those merchants familiar with trademark registration through past business dealings. The second is “improper means to register a trademark that has been used by others and has definite influence” as regulated by Article 31 of the Trademark Law. Bad faith of the first applicant primarily refers to when the squatter has a cooperative relationship with the actual user of the trademark, and the latter applicant points to the certain name recognition of its unregistered trademark in order to expand protection.
2. Infringement of first rights
As regulated by Article 31 of the Trademark Law,
“An application for the registration of a trademark shall not harm the prior right held by another person.”
Infringement of prior rights can be seen in two different situations. The first is damage to an absolute right, like copyright, design patent, and etc. No matter what the situation, if the trademark contains such elements, it constitutes infringement. The other is damaging relative rights. Under this situation, the first right must meet some conditions before its use as a trademark constitutes infringement, such as infringement of the trade name right of a renowned company or the name right of a celebrity.
Now, let’s reexamine Nike’s Liu Xiang trademark. If the news report is correct, in the author’s opinion, considering the first applicant was registered in the 1980s, there is no way it could have had a cooperative relationship with Nike, meaning that it could not constitute squatting by agent. Additionally, at that time Liu Xiang the athlete was only three years old and could not have used the trademark, so it could not be a situation of “improper means to register a trademark that has been used by others and has definite influence.” At the same time, although Liu Xiang is a celebrity name that should receive protection, it was not famous in the 1980’s, so the registration made by the first applicant also does not damage any first rights.
III. If there will not be confusion, will the first to file principle still be honored?
In this case, Nike has also stated that “due to Liu Xiang’s enormous name recognition, there will not be consumer confusion between the Liu Xiang trademark applied for by Nike and the Liu Xiang Brand trademark,” so TRAB should approve its Liu Xiang trademark. The author does not agree with Nike’s opinion.
As stated by Nike, consumers probably will not think there is any relationship between the trademark Liu Xiang and the first applicant Liu Xiang Brand. Yet, the author still feels that if TRAB approves Nike’s application, the earlier registered brand would be necessarily damaged, reducing the distinctiveness and recognition of the Liu Xiang Brand trademark. From another perspective, Nike’s use of Liu Xiang as a brand is suspected to constitute infringement of the prior trademark registration. Just because an infringing trademark gains name recognition does not mean it becomes non-infringing. Therefore, if the news report is true, this situation is very similar to the case of the Apple iPad trademark (the later trademark is more famous than the previous one). If Nike wants to acquire the Liu Xiang trademark, the author believes it will be difficult to succeed in administrative litigation and review, and private consultation with the prior rights holder may be the only way to acquire the trademark.