Discussion on Article 15(2) of China’s Trademark Law

By Zhou Dandan, Unitalen Law Office in Beijing,[Comprehensive Reports]

Article 15 was a new addition to the Trademark Law of China in the 2001 revision, which provides “where an agent or representative, without authorization of the client, seeks to register in its own name the client’s trademark and the client objects, the trademark shall not be registered and its use shall be prohibited.”


In April 2010, China’s Supreme People’s Court promulgated the Opinions on Certain Issues Concerning the Trial of Administrative Cases of Authorization and Recognition of Trademark Rights (the Opinions) in which Article 12 provides that a civil court should find malicious registration of a mark of a principal or of a representee by an agent or a representative that is a trademark agent, representative, or a distributor, in business sense, in its own name without authorization. In judicial practice, some malicious registration acts occur while the agency/ representation relationship is still being discussed, i.e. malicious registration took place before the relationship is formed. This should be deemed an act of malicious registration by agent/ representative. A trademark applicant that has conspired with such agent/ representative should be deemed as agent or representative therefor. The act of conspiracy may be presumed by the circumstances such as the trademark applicant’s status in relation to the aforesaid agent/representative.


A new second paragraph was added to Article 15 of the new Trademark Law, effective as of May 1st 2014, providing for disproval of registration of a mark that is identical or similar to another’s mark in prior use, covering the same or similar goods, and under dispute by that other, where the applicant has unequivocal knowledge of the existence of such other’s mark due to contract, business relationship, or other privities, other than as provided under the preceding paragraph.


In the views of this author, it can be seen from the above provisions of Article 15 of Trademark Law that the new addition to the Trademark Law clearly takes a broader view of the meaning of the “agent” by including the relationship under contract, business relationship, and other privities; it also recognizes proprietorship of a disputed mark “in prior use.” Such an expansive view will inevitably give Article 15 of Trademark Law more maneuverability, and make it more consistent with the legislative purpose of Trademark Law in order to carry out the principle of good faith and to protect reliance interest.


Article 15 of Trademark Law will be applicable, in judicial practice, in the following conditions that: 1) a principal or representee is the proprietor of the disputed mark; 2) there is agency or representation relationship between the parties in dispute; 3) the mark in dispute covers same or similar goods/ services as those of the principal’s; and 4) the disputed mark is identical with or similar to the trademark of the principal/representee. Of these, core to the application of Article 15 of Trademark Law is the recognition of proprietorship of a disputed mark and the agency relationship. This essay will try to explore the impact of the two issues by analyzing the language of the provisions of the Article 15(2) of the new Trademark Law as revised.


I. Determination of proprietorship of a disputed mark in a principal

In practice, it is usually a hard problem to determine the proprietorship of an unregistered mark arising from an agency relationship if there is no clear agreement over such proprietorship between the agent and the principal during their joint relationship. Article 15(2) of Trademark Law as revised clearly lays down a standard for determination, i.e. , the “prior use.” If the disputed mark has been first used by the principal, proprietorship can be presumed in the principal. That leads, however, to a question of what “prior use” is. Some courts, in applying the law, required that a principal carry the burden of proving that it actually used the mark in China in order to be entitled to protection. Such a requirement, in the author’s view, is too rigid. In reality, malicious registration takes place most likely at a moment when agency relationship, or exclusive distributorship, is being formed where a foreign entity’s mark is first used only by the sole Chinese domestic agent. Under such circumstance, the use of the mark is actually made by the agent and the principal has no way to produce evidence of use of the disputed trademark within China. Hence, restriction of the prior use by a principal within China will undoubtedly be incapable of protecting the legitimate interests of the principal. Therefore, the author thinks that prior use should be expansively interpreted, as to include use of mark in other countries or areas outside China. Here, admissibility of evidence of use outside China, instead of extraterritorial protection outside China, of a trademark, will attribute only to establishing proprietorship of the disputed trademark.


II. Determination of agency relationship between the contending parties

According to Article 15 (2) of Trademark Law, agency relationship is not limited to the trademark agent, or the agent in the sense of distributorship, but extends to any other relationship of contract, business, or other privities. That is to say, registration is denied as long as a representee can prove that the applicant of the disputed mark has a contract, business or other privities with it, so as to know its disputed mark. In judicial practice, however, it may be more complicated. For example, Company A authorizes Company B for exclusive use of the disputed mark whereby the owner of Company B sets up a Company C to apply for the registration of the mark; or Company A has a contract relationship with company B, where some employee of Company B sets up Company C to apply for registration of the disputed trademark after learning of such a trademark. Some courts strongly believe that an agency relationship can only reach a direct agency relationship such as distributorship, and not more. But as the author sees it, such direct relationship as agency or contract relationship obviously does not exist between Company A and Company C. Therefore, in China’s reality, it is fairly easy to evade such rules to the detriment of protecting legitimate interests of a principal based on reliance relationship and of stopping malicious registration of trademark applied for by an agent. The author thinks that the relationship in the foregoing case should be constructed as the creation of agency relationship according to the Article 12 of the Opinions. That is to say, Company C can be construed as the agent of Company A because there is a conspiracy between Company C and its agent, Company B, for malicious registration of the disputed trademark.


In conclusion, the author suggests that it is necessary to avoid a mechanical understanding of prior use and agency relationship in the application of Article 15 of Trademark Law so that the real preemptive registration will not be the fish escaped from the seine, and that there should be a full respect for the good faith principle embodied in Article 15 in order to be more flexible for all kinds of complicated situations in judicial practice. There is no doubt that the provision of Article 15 (2) of Trademark Law will provide direct and clear guidance for the future trial of preemptive registration of trademark conducted by the agent.


(Translated by Yuan Renhui)


 

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