On Reform and Perfection of China’s Trademark Dispute System

Issue 31 By Shi Xinzhang,[Trademark]

The concept of “trademark dispute” is defined in both broad and narrow terms in different provisions of the Trademark Law of the People’s Republic of China. Article 2.2 of the Trademark Law provides that “the industrial and commercial administration of the State Council shall establish a trademark review and appraisal board for handling trademark disputes.” This section uses the concept of “trademark dispute” in a broad sense, which means an administrative ruling system where a trademark review and appraisal authority exercises its review and appraisal functions according to law, to hear reexaminations of trademark rejection, oppositions and cancellation and registered trademark disputes. However, with respect to Chapter 5 of the Trademark Law, determination of registered trademark dispute (herein trademark dispute), is used in a narrow sense, as a type of trademark reexamination cases. Understanding trademark dispute in a broad sense, with the purpose of clarifying the design of the legislation system for trademark opposition, registered trademark dispute and trademark cancellation as in the Trademark Law, this author proposes a few recommendations with the hope of helping in the coming amendment to the Trademark Law.

I. The procedural values of trademark dispute system
The trademark dispute system, as a procedural mechanism to solve disputes, includes the following important procedures:

First, the trademark dispute system is significant in preventing and stopping malicious trademark squatting, to reduce flaws in trademark registration and support strongly an equal and fair system of trademark registration. In China, a party which intends to obtain an exclusive registered trademark will have to be examined by a competent administrative authority of trademark, however in this examination process, the Trademark Office cannot determine whether a mark under application conflicts with any prior right other than any trademark right or whether such application constitutes a trademark squatting. This deficiency of the examining system may be made up for by the trademark dispute procedure. To protect a prior right, the holder may oppose the registration of a disputed trademark by resorting to the trademark dispute system. As a result, the legal rights and interests of the holder can be protected and a fair and competitive market can be maintained.

Second, with respect to the relationship between substantive law and procedural law, the trademark dispute system, though a procedural system, is mixed largely with litigation rules, such as the debate principle and the disposition principle, as mainly embodied in the Rules of Trademark Review and Appraisal.

Third, with respect to the functional relationship between administrative authority and judicial authority, since trademark dispute matters are highly professional and the number of trademark dispute cases has remained high for many years, the trademark dispute system is built into the administrative procedures, to give full play to the talents and professionals of the administrative authority; otherwise, if too many trademark dispute cases were handled directly by the judicial authority, the judiciary under the existing institutional system would have too heavy a burden to bear.

In summary, the trademark dispute procedure is extremely valuable for protecting exclusive trademark use, preventing unfair competition in trademark ownership affirmation, protecting the interests of consumers and relevant public, and maintaining a fair and competitive platform for trademark ownership affirmation.

II. The status quo of the trademark dispute system in China and analysis
Recently, theoretical and practical areas have voiced the need for reform in the trademark dispute system. Incidentally, this is a reflection of several unsatisfactory points which exist in the current system.

According to the Trademark Law, the trademark examination and appraisal authority is responsible for the handling of four types of trademark dispute cases. However, since there is lack of recommendation on the reform of the trademark rejection reexamination system, the other three types are discussed here:

(I) Problems of trademark opposition and opposition reexamination system
Numerous scholars have criticized the opposition system. The problems of the opposition system are covered in the following:

1. The functions of the opposition system cannot be fully realized
The opposition system under the Trademark Law was established originally to correct any misses by the trademark examiner by mobilizing the general public to participate in the trademark examination process. However, in practice, as the subject for raising a trademark opposition anybody may, and the causes of opposition are unlimited, the current system design leaves opportunity for malicious exploiters of the opposition system. Some opposers have no interest in trademarks they oppose; rather, they are attempting to prevent others from obtaining the trademark and related rights so that they can ask for unjust gains from others that apply to register those trademarks. This phenomenon markedly reflects the dissimilation of the trademark opposition system.

2. The relationship between trademark opposition and opposition reexamination is vaguely defined
Actually, it would be effortless for one to think of trademark opposition and opposition reexamination as similar to first-instance trial and second-instance trial. However, the relationship between trademark opposition and opposition reexamination is distinctively different. An opposition reexamination case can be regarded as an entirely new case, which is based on the causes and evidence provided by the parties at the opposition reexamination stage, where the object reexamined is whether to allow an opposed trademark to be registered rather than the original ruling of opposition. Nevertheless, this definition has not been accepted by judicial authority, which explains the reasoning for the loss of various cases by the Trademark Review and Appraisal Board.

3. The design of four tiers of trial for an opposition case is too complicated
The new Trademark Law effective in 2010 adds provisions on judicial examination. As a result, an opposition case has to go through four departments at four ranks in terms of administrative and judicial procedures, before a final decision can be reached. These overly complicated procedures increase the burden of the parties. Moreover, during these proceedings, the ownership of the trademark rights cannot be certain, which is not good for the stability of the social relationship. Therefore, we need to consider simplifying the trademark opposition procedures.

(II) Problems of registered trademark dispute system

In comparison with the trademark legislation of other countries, the main problem with the registered trademark dispute system of China is that the Trademark Law does not clearly differentiate trademark invalidity declaration from trademark cancellation.

In theory, trademark invalidity declaration means that a competent trademark administration declares as invalid and extinct from the very beginning in accordance with the relevant legal procedures a trademark whose registration has been approved, but did not satisfy the registration requirements under the Trademark Law at the time of application for registration. Trademark cancellation means that a trademark which has been registered and obtained legally but will lose its validity in the future because of any subsequent illegal use of this trademark or on the basis of public interest considerations. Therefore, as a matter-of-fact, the registered trademark dispute in Article 41 of the Trademark Law is actually included in the trademark invalidity declaration. However, today, with respect to the Trademark Law, the concept of cancellation is used to denote these two different systems - trademark invalidity and trademark cancellation. As a result, the word cancellation or cancel contains totally different meanings in different provisions of one law. In Paragraphs 1, 2 and 3 of Article 41 of the Trademark Law, cancellation is actually declaration of invalidity.

Only cancellation in Articles 44 and 45 of the Trademark Law has the general meaning of cancellation acceptable in the trademark legislation theories of all other countries. Thus, for the coming amendment to the Trademark Law, we may consider dividing invalidity and cancellation systematically, so that the Trademark Law will be clearer in its logical structure.

(III) Problems of trademark cancellation and cancellation reexamination systems

1. The causes of trademark cancellation need better definitions

Under the current Trademark Law, the causes of cancellation include any self-initiated change to a registered mark; any self-initiated change to the matter registered under a registered trademark; any self-initiated transfer of a registered trademark; three years of nonuse of a registered trademark; and that the goods under a registered trademark are manufactured in an inferior way, imitate superior goods or cheat the consumers. Both theoretical and practical fields have had many criticisms and recommendations on the causes of cancellation in the current Trademark Law. An opinion says that the current legislation of China pays too much attention to orderly trademark administration, but neglects the civil private properties of trademark. Also, three of the current four causes of cancellation almost never occur in practice, i.e., any self-initiated change to a registered mark, any self-initiated change to the matter registered under a registered trademark, and any self-initiated transfer of a registered trademark. Therefore, this trademark cancellation causes system needs better definitions.

2. The soundness of the trademark cancellation reexamination procedures invites discussion

Similar to the opposition system, a trademark cancellation case has four tiers of trial. The simplification of these complicated procedures should be considered in the future.

III. Recommendations on reform of trademark dispute system

(I) Opposition system should be restructured
To improve the efficiency of the trademark opposition system and reduce the occurrences of malicious oppositions, the opposition system can be perfected in the following respects:

1. The opposer’s qualification should be subject to restrictions. Efforts should be made to change the provision that states, “Anyone may raise an opposition for causes whatever” and impose restrictions on the qualification of the opposer and the causes of opposition. The opposition causes can be limited to relative ones, that is, the opposed trademark conflicts with a prior trademark or any other civil right. Correspondingly, the opposer’s qualification should also be limited to a person who holds a prior right or is otherwise interested in the opposed trademark.   

2. The opposition reexamination part should be removed. The administrative procedure will keep only the opposition process to improve the work efficiency, and reduce the burden over the parties.

(II) Invalidity declaration and cancellation should be differentiated
Although they are both causes for trademark termination, cancellation and invalidity declaration contain distinctive connotations. Trademark cancellation is generally a result of nonuse or nonconforming use of a trademark, and trademark invalidation is often because a trademark registration constitutes a cause that forbids registering the trademark under the Trademark Law. For the coming amendment to the Trademark Law, a trademark invalidity declaration system should be established on the basis of differentiation between cancellation and invalidation, and the causes of cancellation and invalidation should be amended and perfected as necessary. Moreover, to simplify the procedures, the cancellation reexamination procedure may be removed.

(III) Forced transfer of squatted trademark can be considered
According to the current Trademark Law, regarding trademark squatting, the judgment or ruling would be that the squatted trademark shall not be registered or if it has already been registered, this registration shall be cancelled. However, the fact is a trademark owner would suffer more losses from malicious trademark squatting than from infringement of trademark use. It would be insufficient to protect the interest of the trademark owner by only allowing this owner to oppose registering a squatted trademark. With reference to the Paris Convention and the legislative precedents of other countries, China should establish a forcible transfer system for disputed trademark, that is, the true owner of a disputed trademark may not only oppose to registering that squatted trademark, but during the trademark dispute procedures, request the trademark review and appraisal authority to transfer the squatted trademark to the owner. Such a system design will diminish malicious trademark squatting and save the true owner from the trouble of reapplying for registration of the disputed trademark. In this way, two goals are realized at one time, that is, to prevent squatting and return the squatted trademark to the original owner.

IV. Trademark dispute procedures and judicial procedures
Although the connection between trademark dispute procedures and judicial procedures is a question of the Trademark Law, the final solution lies in the development and perfection of the judicial system, and the study of the legal theory in China.

(I) The mode for judiciary examination of administrative trademark rulings
Currently in China, the judiciary may in administrative litigation examine the administrative ruling on a trademark, and the trademark review and appraise authority will appear in court as the defendant. This practice is criticized by many scholars as such a mode neglects the quasi-judicial characteristic of an administrative ruling. As administrative proceedings are currently used by the judiciary to examine rulings on opposition reexamination or disputes that a party is unsatisfied with, the above practice is equivalent to letting the Trademark Review and Appraisal Board, which is an administrative agency, speak for one of the parties.

This is inconsistent with the private nature of trademark and the civil dispute quality of trademark opposition or dispute. We recommend that subject to different circumstances, an appeal against trademark rejection reexamination should be tried with administrative proceedings, and an appeal against opposition ruling or invalidity declaration ruling should be tried with civil proceedings. This will maintain trademark dispute as a civil dispute and help save the limited administrative resources.

Moreover, to solve this problem, consideration should be given also to the distance between theoretical assumption and reality. From foreign experiences, the best solution for problems in the reform of the judicial examination model is to establish unified intellectual property courts and place the Trademark Review and Appraisal Board as a quasi-judicial agency. A party to an opposition or invalidation case, which is unsatisfied with the administrative ruling of the Trademark Review and Appraisal Board, may raise a civil action, and a competent intellectual property court will hear its appeal in the second instance trial. However, the above model must be pushed forward together with the judicial system reform in China. Now, without supplementation from the judicial system reform, such a solution is still inoperable in reality.

(II) The mechanism for settling conflicts between trademarks and prior civil rights
Article 31 of the current Trademark Law provides that a trademark application shall not damage any prior right of another person. In practice, the competent department of trademark administration would, during the hearing, determine whether a trademark conflicts with any other right, but would not ask the claimant to first go to a law court and obtain a judgment on the conflict of rights. Such a disposition mode is distinctive from the disposition mode under the current Implementing Rules of the Patent Law, as the latter requires that the claimant must go first to a law court and obtain a judgment on the conflict of rights, or the claimant’s application will not be acceptable to the Patent Reexamination Board.

Some scholars have recommended that it would be more appropriate for the law court to judge whether a trademark conflicts with a prior civil right. This is because the conflict of rights is actually a civil dispute whether a trademark applied for or registered infringes a prior civil right, and the constitution of infringement, particularly the determination of any copyright infringement, is beyond the scope of specialty of the trademark ownership determination authority. However, some objections believe that currently the specialty of the examiners of the Trademark Review and Appraisal Board is out of the question, and they can sufficiently adapt themselves to the above job in terms of practical result. Also, from the dynamics of amendment to the Implementing Rules of the Patent Law, the Patent Law will employ the same methods as the Trademark Law does to handle conflict of rights.

In conclusion, the trademark dispute system, as an important system in the Trademark Law, should be reformed and perfected upon reference to the beneficial experiences of foreign countries, and under the status quo of China. It will not be accomplished unless there are joint efforts of those in the theoretical field and the practical field. We wish that the above problems will be solved rationally by the legislators in the coming third amendment to the Trademark Law.

About the author:
Shi Xinzhang is an Examiner of Trademark Review and Appraisal Board, State Administration for Industry and Commerce of the People’s Republic of China. 

(Translated by Ren Qingtao)


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