(By You Yunting) China is a heavily administrated and controlled country. If administrative approval is not obtained, business activity such as producing and selling of Alcoholic beverages, medicine, etc., could be ruled to be invalid by the court. According to the Trademark Law of China, once the trademark has not been used for three continuous years, it could be eliminated. There is a significant amount of people who uses their right to their trademark however, many people fail to obtain the proper administrative approval or violates administrative rules. This brings us to the issue of whether or not such a trademark should be removed even though it has been used. For this kind of cases, we find an example in the 10 annual cases of 2011 promulgated by the Supreme People’s Court of China. In that case, the Supreme Court overturned its opinions expressed in the previous year, “Kangwang Trademark Dispute”, in which the court determined that despite a shortage of administrative approval, the using of the trademark is sufficient according to the Trademark Law.
On July 8th 2005, CASTEL FRERES (“CASTEL”), a French company applied for trademark revocation against the trademark “卡斯特” (read as “Ka Si Te” in mandarin, similar to the pronunciation of CASTEL in Chinese), whose holder is Li Daozhi. Due to a lack of response within the statutory period from Li, the Trademark Office adjudicated to revoke the trademark “卡斯特”.
Afterwards, Li filed an application for review to the Trademark Adjudication and Review Board (“Board”), who then revoked the Trademark Office’s decision, because the trademark has not been unused for 3 consecutive years. Dissatisfied with the decision, CASTEL filed an administrative lawsuit in Beijing No.1 Intermediate People’s Court. According to the opinions of the 1st instance court, the revocation due to inactivity of 3 consecutive years is used to settle whether the trademark is in use or not, and not how the trademark is used. With regards to the problems of the trademark user to obtain manufacturing license, sanitary license, export & import license and other aspects, it requires different laws and regulations, and to be investigated by different bodies of the government.. Basing on these, the court denied the claim by CASTEL.
Dissatisfied with the ruling, CASTEL appealed to Higher People’s Court of Beijing. CASTEL argued that in the first instance, it presented evidence that proved that Banti Company, namely the trademark holder who was approved of the license for export and import in late September 2004. However, it could also prove that the first sale of “卡斯特” wine was prior to receiving the administrative approval, which violates the administrative laws. The argument focused on the Trademark Law and Implementing Rules of Trademark Law, the legal usage of the trademark, which states that as long as the use of trademark conforms to Article 44 in the Trademark Law, it shall be viewed as fair use of the trademark. According to the Higher People’s Court of Beijing, to determine whether the trademark has been fairly used, it should be based on Article 3 of Implementing Rules for the Trademark. Following this, it denied the claim that the product was sold before the administrative approval, which shall be taken as illegal.
Still unsatisfied, CASTEL filed the appeal to the Supreme People’s Court. In the end, the Supreme Court ruled in favor of the Higher People’s Court of Beijing, dismissing the appeal..
The case described herein corrected the opinions expressed in Kangwang Trademark Dispute. According to Article 44 of the Trademark Law, when the trademark has not been used for an uninterrupted period of three years, the trademark office is responsible to correct or revoke the registered trademark. In the previous trademark revocation case due to 3 years of inactivity, the Supreme Court defined the term “using” of Article 44 of the trademark law as open, truly, and legal use of commercial activities.
“Trademark usage by operators that violates the statutory regulation or prohibitive regulation in the laws and regulations, shall not be determined as using from the legal standpoint; for the order of rectification within certain period of time as provided in Article 44 of the trademark law, it shall not be applied for cases when the trademark ceased using for 3 continuous years. For others’ application to revoke the trademark, when there are no evidence of the trademark being used, or if that usage is illegal, and there is no justification for the inactivity, then the trademark shall be revoked.”
However, this opinion has caused a big debate. To the author’s understanding, according to the purpose of the trademark legislature, revoking the trademark after three continuous years of inactivity is designed to target trademarks from being unused. Therefore, it is acceptable when the right holder has the intension to use the trademark. If we include the administrative licensing for trademark into consideration of whether the trademark use is legal or not, there would be interference against the normal law enforcing trademark holder’s right, damaging the stability to enforce the law.
The changes in the case also explain the change of law enforcement in the judicial organ. The trademark law is actually a private right, and due to the long term central planning economy, the trademark administration and the judicial organ could always take away the right of those illegally using the trademark. In Kangwang Trademark Dispute, we see that again. But as China’s economy continues to grow, public’s opinion on respect for private right is also changing. After the decision in Kangwang case, many scholars have openly criticized it. Then, the Supreme Court also reexamines it, listing it as one of the 10 main cases of 2011. This could be seen as a kind of remedy to past mistakes.