The Impact of Letter of Consent Issued by Owner of Cited Trademark on the Granting of Trademark

In current trademark application practice, many trademark applications are rejected due to the similarity with the cited trademark. When rejection happens, to safeguard its interest, trademark applicant usually will take remedy measure as follows:

-  Filing appeal to Trademark Review and Adjudication Board (the Board) arguing the     existence of significant differences between the trademark for application and the cited trademark, which will not cause public confusion.
-  Filing opposition or invalidation application against the cited trademark.

In addition to the above remedies, some of trademark applicants may consider submitting a letter of consent issued in the name of the owner of the cited trademark, which allows the registration of the trademark by the applicant, or a co-existence agreement concluded by the applicant and the owner of the cited trademark. However, with regard to the legal effect of such letter of consent or co-existence agreement, the Board and the court give different opinion.

In a trademark application involving trademark STELUX (trademark No. 7522204), the applicant is STELUX Holdings (Group) Limited (“STELUX Group”), the designated commodities for this trademark include boxes of precious metal, watches, jewels, etc in class 14.

After examination, the Trademark Office granted the trademark on boxes of precious metal while rejected the registration request on other commodities such as watches, etc. The given reason is the trademark for application is similar with the cited trademark.

The cited trademark is STELLUX (trademark No. G984611). The designated commodities for the cited trademark include watches, watch glasses, jewels, etc, in class 14. The trademark for application and the cited trademark only differ by a letter L.

After that, the trademark applicant filed appeal to the Board claiming that the trademark for application had been used as its trade name and after long time using, the trademark for application has enjoyed the market recognition. Meanwhile, the trademark applicant raised opposition against the cited trademark. However, the result of the appeal and the first instance administrative lawsuit were not in favor of the trademark applicant.

It is worth mentioning that after the first instance of lawsuit was brought, the trademark applicant submitted to the court a letter of consent issued by the owner of the cited trademark, as well as a co-existence agreement concluded by the applicant and the owner of the cited trademark, which were notarized and legalized. According to the letter of consent, the owner of the cited trademark agreed that the applicant can register and use the trademark filed and the commodities allowed for the trademark include clocks, watches, wrist watches, the works of a clock or watch, watch glasses etc.

After this case entered into the second instance in Beijing High People’s Court, the Court is of the opinion that the letter of consent and the co-existence agreement shall be deemed as the disposition of the right by the prior trademark owner. The disposition does not obviously harm the interest of the public, which shall be accepted by the Court.

On that basis, Beijing High People’s Court finally cancelled the decision made by the first instance court and requested the Board to make a new decision.

At present, the trademark file by the applicant has been preliminary examined and put on publication to the public.

Therefore, we conclude that the letter of consent issued by the owner of the cited trademark shall have substantial influence to the grant of the trademark filed by the applicant.

The Impact of the Revision of the Trademark Law on Trademark Application in China

The third revision of the Trademark Law of the People’s Republic of China will come into force on May 1, 2014. We notice that the new revision makes substantial improvement concerning the application of trademark in aspects including expanding the scope for trademark registration, simplifying the process of the trademark registration, improving examination procedure, shortening time limit for examination/opposition, etc. The details are as follows:

I. The scope for the trademark registration is expanded.

The Trademark Law prior to this revision limits the scope of trademark registrable to text, graph, alphabetic letter, number, three-dimensional symbol, combination of color or any combination thereof. Therefore, visible mark is the condition for the trademark registration. The revised Trademark Law has further expanded the scope of the registered trademark and allowed sound to be registered as a trademark, which greatly enriches the connotation for trademark registration.

II. The process of the trademark registration is optimized.

The Trademark Law prior to the revision adheres to the principle of one trademark on one class, i.e. one trademark application is only allowed for commodities/service under one class. If the applicant requires the same mark on multiple classes, separate filings have to be brought. The revised Trademark Law now allows cross-class application which means the applicant can apply for one trademark for commodities or services under multiple classes in one trademark filing. Thus, the process for registration is simplified. The applicant will be able to seek cross-class protection in one trademark filing.

III. The examination procedure is further improved.

In the trademark application prior to the revision of Trademark Law, the Trademark Office will only review and examine the content of the mark as it is submitted. Due to the limit in searching the same or similar marks prior to the filing, in case of existence of same or similar cited trademarks, the application will be directly rejected by the Trademark Office.
In order to reduce the occurrence of rejection due to the said reason, the revised Trademark Law stipulates that during the process of examination, the Trademark Office may require the applicant to explain or correct the content of the trademark filed, which will give the applicant chance of correction so that the possibility of rejection can be reduced and the chance of success is increased.

 IV. The time limit for trademark examination and opposition is clarified

The Trademark Law prior to the revision gives no specific time limit for examination towards the trademark application. In fact, a trademark filing will take approximately 12 months before it is granted. To increase the efficiency of the examination, the revised Trademark Law specifies the Trademark Office shall complete the examination within 9 months and put on publication for those meeting the requirements for registration.

In addition, in the event an opposition is filed against a trademark which has been put on publication, the revised Trademark Law specifies that the Trademark Office shall determine whether the trademark shall be granted within 12 months starting from the expiry of the period of publication after listening to the facts and reasons from both the opposer and the opposed party. Under special circumstances, the term can be extended for another 6 months.

For any decision of not granting the trademark made by the Trademark Office, the opposed party is entitled to file an appeal to the Trademark Appeal Board within 15 days upon receipt of the decision. The Board shall make a decision within 12 months upon receipt of the appeal from the opposed party. Under special circumstances, the term can be extended to another 6 months.

Malicious Trademark Registration Further Regulated by the Revised Trademark Law in China

The trademark application in China follows the principle of “Earlier Application, Earlier Being Granted”. In reality, due to the weak awareness for IP protection, many companies including oversea companies have frequently found their business marks squatted in China. Once the business mark is squatted, the party suffered will have to spend long time and high cost to take legal action. However, even so, the result is not guaranteed.

The revised Trademark Law coming into effect on May 1^st, 2014 further regulates the behavior of malicious trademark registration, including:

I. Clarifying “Good Faith” as the basic principle governing the trademark registration and the use of trademark. 

Article 7 of the revised Trademark Law clarify that the application and use of trademark shall follow the principle of “Good Faith”. Such principle will be legal ground for regulating various behaviors in respect to malicious trademark registration.

II. The behavior of malicious registration by agents or representatives is prohibited.

In many cases we handled, we found a lot of trademarks being squatted happen to international business partners. For example, some Chinese agents will seek to register its business partner’s trademarks without prior consent of the partner. The revised Trademark Law has clarified that the registration of trademark by a business agent/representative without consent of the trademark owner is prohibited.

In addition, even if the agency relationship does not exist, as long as one party is aware of the existence of other party’s prior used trademark due to their contractual, business or other relationship, the registration application by such party will not be granted if the other party raises opposition.

III． The prior trademark user’s interest is protected

In consideration of the fact that a lot of business marks are used without being registered, to avoid the impact brought to an innocent user due to malicious registration by others, the revised Trademark Law specifies that if a trademark has been already used by one party on goods/service on the same or similar class prior to the registration of the trademark by others, such party is allowed to continue using the trademark within the original scope. However, a special mark shall be added to avoid confusion upon request by the trademark applicant.

Such rules, to some extent, allow the legal use of the squatted trademark by the innocent party. However, we believe this is an alternative measure for protecting the interest of the innocent party who fails to protect its own benefit in time. Obviously such protection is not perfect to the party whose business mark is squatted. Anyway, this is the balance between the principle of “Earlier Application, Earlier Being Granted” and the principle of “Good Faith”.