When a Preceding User of a Trademark Counters a Subsequent Registrant in China?

hannas(By Luo Yanjie) Abstract: China’s new Trademark Law still enforces the principle of “first to file,” but at the same time a prior user of a trademark only need prove to some extent that their prior use of a registered trademark had a degree of popularity, and need not prove that a subsequent user of the trademark “squatted” the trademark by registering it. If the board approves such prior use, the prior user will have the right to continue using the trademark in the original scope of use. “Improper means” as stated in Article 31 of the Trademark Law, refers to situations “where the applicant knows or should have known that the trademark had been used by others with a certain degree of influence, and preemptively registered the same, then such applicant shall be determined to have used improper means to register the mark.”

Trademark squatting is a serious phenomenon in China, and some companies don’t fully appreciate the inherent value in a trademark. Because of this lack of vigilance with respect to trademark protection, trademark squatters will commonly attempt to protect their acquired trademark rights after prior users of a trademark. In fact, at the moment nothing in the law speaks directly to this particular issue in the trademark law. However, the newest amendments to the Trademark Law have begun to stipulate such types of disputes. In today’s post, we will introduce a relevant case heard under the current laws, followed by a short discussion:

Introduction to the Case:

Yinchuan-based Mr. Gao owns the trademark “哈纳斯”(Hanas) (the “disputed trademark”) and owns an exclusive right to use the mark under class 39 for gas piping and conduits. The Yinchuan-based Hanas New Energy Group (the “Hanas Group”) was established in 2003, primarily for developing clean energy and new energy uses; “哈纳斯”(Hanas)works focused mostly on office buildings, engineering vehicles and gas radiators, as well as construction site equipment. Mr. Gao believed the Hanas New Energy Group infringed his rights in the Hanas trademark, and filed suit in court for trademark infringement.

 The case was heard through the first instance, second instance and a re-trial. After hearing the case, the courts held that, with respect to gas heating and related services, only the Hanas Group had established a reputation for itself by providing such services in Yinchuan. In addition, because there were many news items and reports on the Hanas Group, by the time the trademark was applied for in 2007, the “Hanas” mark in Hanas Group was already considered a “mark that is already in use and enjoys substantial influence” in accordance with Article 31 of the Trademark Law. Where Mr. Gao registered it as a trademark, knowing of the mark’s reputation in the market, such registration resulted in an “improper means to register a mark that is already in use and enjoys substantial influence”. Therefore, the courts decided that the Hanas Group’s use of the “Hanas” mark did not constitute trademark infringement.

Lawyers’ Comment:

This is a typical case where a preceding user of an unregistered mark will succeed in defeating a challenge for trademark rights by a subsequent registrant. The following is our analysis:

1.  Limited prior right of use of a trademark

In accordance with the Trademark Law, trademarks apply the principle of “first to file” and optional application. This covers both “registered trademarks” and “unregistered trademarks” currently existing in China’s markets. In contrast to the Patent Law, with regard to a mark that is already in use under the approved goods, services, or similar goods as well as similar services in good faith, when the mark is registered by another person, will the prior user be able to continue using its mark against such a registered trademark? Currently, there are no clear provisions on this issue. However, from our understanding of the laws and regulations, a continuous use of the mark in question could be said to be trademark infringement.

At least, these judgments are likely to demonstrate that under similar circumstances, a precedent user making continuous use of its mark is not guilty of trademark infringement when the mark in question was considered the squatting of a trademark. The reality, though, is quite the opposite, primarily because it is a rather difficult and complex process to prove that a subsequent user is a squatter. Fortunately, the newest Trademark Law will be implemented next year, and provides a reasonable provision with regard to this question, i.e., “Where an identical or similar trademark has been used in connection with the same goods or similar goods by others before the registrant’s application, the exclusive right holder of said registered trademark shall have no right to prohibit other people from using the aforesaid trademark from continuous use of such trademark within the original scope, but may request its users to add proper marks for distinction.” In other words, in case the precedent user is able to prove its prior use of a mark to be with substantial influence, there is no need to evidence the subsequent trademark to be a squatting one, and thus the precedent user could continue using the trademark within the original scope.

2. How to determine “improper means”

“Using improper means to register a mark that is already in use by another party and enjoys substantial influence” in Article 31 of the Trademark Law refers to a squatting action. Additionally, according to Article 18 of the Opinions of the Supreme People’s Court Concerning Trial of Administrative Cases in Respect of Trademark Right Granting and Confirmation, “improper means” refer to “where the applicant knows or should know the trademark has been used by others with certain influence and preemptively register the same, then such applicant shall be determined as using improper means to register.”

In this case, the plaintiff lives in the same place, Yinchuan, as the defendant. Furthermore, the plaintiff’s application for gas pipelines is an industry of administrative monopoly in China. In fact, only the defendant is qualified. Therefore, the plaintiff’s intention in registering the disputed trademark is unlikely to be for use; at the same time, the defendant’s use of the “哈纳斯”(Hanas) mark already enjoys a substantial influence in the relevant market. To conclude, the courts rejected the plaintiff’s claim, based on determining that the plaintiff knew or should have known the trademark had been used by others with certain influence and preemptively registered the same mark.


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