Pre-application trademark searches and post-application notices from the China Trademark Office (CTMO) are increasingly revealing conflicts with preexisting rights (i.e., trademark registrations or pending trademark applications). It’s not surprising, given the vast number of trademarks being filed. See China Still Has Too Many Trademarks.
But a cited conflict, whether in a search or from the CTMO examiner, isn’t necessarily the end of the road for a trademark application. Chinese trademark law and practice offer a potential solution: the non-use cancellation. In China, any trademark that has been registered for more than 3 years is vulnerable to a non-use cancellation as of three years after the registration date.
Almost every country has a use requirement for trademarks: trademarks that aren’t used in commerce for a given period of time (usually about 3 years) are deemed abandoned and may be cancelled. In the U.S., when a registered trademark is cited as a conflict, the odds are fairly high that the trademark is still in use, especially if the mark has been registered for 10 years or less. The U.S. requires the trademark owner to provide sworn proof of use at the time of registration, between 5 and 6 years after registration, and again between 9 and 10 years after registration. That doesn’t leave a large window of time for the mark to be abandoned.
Meanwhile, China has no affirmative use requirements to register, maintain, or renew a mark and many trademark applicants take advantage of this loophole to register in additional subclasses and thereby cover a wider range of goods. See China Trademarks: Register in More Classes, Take Down More Counterfeit Goods. The only way a Chinese trademark registration will be cancelled for non-use is if a third party files a non-use cancellation and the trademark owner is unable to provide proof of use in commerce during the previous three years. See China Trademarks: When (and How) to Prove Use of a Mark in Commerce. Accordingly, the vast majority of Chinese trademark registrations that have been effectively abandoned are nonetheless still valid.
Determining whether to file a non-use cancellation turns on whether a conflicting trademark is actually being used in commerce. Here, the ubiquity of e-commerce in China comes in handy. With few exceptions, any product or service deemed valuable enough to protect with a trademark registration will be marketed and sold online. And a thorough Internet search will reveal the traces. And I do mean thorough: for starters, going several pages deep on search engine pages (Baidu, Bing, etc.); checking company registrations; scouring social media pages (Weibo, WeChat, etc.); and poring through e-commerce sites (Alibaba, JD.com, etc.). If you find something credible, stop – one documented use in commerce is sufficient to defend a trademark against a non-use cancellation. But much of the time, our searches reveal no evidence that the trademark was ever used.
When you file a non-use cancellation, you indicate whether you wish to cancel the entire registration, or just with respect to certain subclasses. If your goal is to eliminate an obstacle to your own trademark, a partial non-use cancellation with respect to the subclass that matters to you is sufficient – and also more likely to succeed. If you attempt to cancel an entire trademark registration, the trademark owner only needs to demonstrate use on a single item in order to defeat the non-use cancellation. Why overreach when it doesn’t gain you anything?
After you’ve done all the research and determined whether to file, it’s just matter of completing the paperwork and waiting the 9+ months to hear back from the CTMO. Sometimes you can shortcut this timeline by contacting the owner of the conflicting mark. This option is most applicable when a conflicting mark covers a number of subclasses but is not being used on any of them, and you only need coverage in one or two subclasses. You could file a cancellation against the entire mark, but the owner of the conflicting mark would undoubtedly prefer to keep some protection. If you are appealing a rejection, the cooperation would work like this: the trademark owner would provide a letter agreeing that your trademark can coexist with theirs, and in exchange you don’t file a non-use cancellation against the full registration.
Unless motivated by spite, people file non-use cancellations to eliminate trademarks that stand in the way of their own trademark applications. They do so at one of two times: before filing an application (to eliminate potential obstacles) and after their application has been rejected (to eliminate cited obstacles).
In an ideal world, you would link a cancellation to a trademark application so that the CTMO examiner (or TRAB panel, as the case may be) would note the linkage and suspend their efforts until the cancellation was decided. But we do not live in an ideal world, and the CTMO does not suspend examinations or appeals until cancellations are decided. Instead, you have to work out the timing yourself and play the odds that the non-use cancellation will be decided first.
It’s an inexact science. If you are appealing a rejection, the window to file an appeal is so short that you have little choice but to file the appeal and non-use cancellation at the same time. But if you haven’t filed an application yet, the best way to ensure that the cancellation will be decided first is to file the non-use cancellation, wait a few months, and then file an application. Don’t wait too long, though: once the trademark owner has been notified (usually within 2-3 months of filing the non-use cancellation), they might file their own (new) application. Many applicants don’t bother trying to game the system; they file a non-use cancellation and a trademark application at the same time, and if they are unlucky enough to have the application examined first, they just file an appeal, secure in the knowledge that the cancellation will definitely be decided before the appeal is.
Filing a non-use cancellation against a trademark squatter has some unique challenges. Many trademark squatters never use the mark in commerce: their sole goal is to monetize the trademark by selling it to the “real” trademark owner, or to the highest bidder on the secondary market.
A trademark squatter could take a couple actions to foreclose the possibility of a non-use cancellation. First, they might sell a few branded goods via e-commerce, thus satisfying the use in commerce requirement. The CTMO does not require much evidence to satisfy the use requirement, and in my experience they won’t look past the basic facts to determine whether the evidence reflects a bona fide arms-length transaction (versus a fake sale to a friend or relative). Still, it takes some effort to create and maintain this evidence, and not all trademark squatters do it.
Second, the trademark squatter could file another, identical application before the three-year term is up, thereby preserving their rights with a new application even if the first registration is cancelled. But two can play that game. The real trademark owner could also file an application before the three year term is up – and then file a non-use cancellation exactly three years after registration. Sure, the application may be initially rejected if it’s decided before the cancellation, but you can then file an appeal, and the cancellation should be complete by the time the appeal is decided. This strategy takes time to execute, and it is not without risks. (What if the trademark squatter filed a new application before you? What if the cancellation fails because the trademark squatter actually had used the mark in commerce?) But if it works, you can retrieve the mark at a much lower cost, without involving the courts, and without having to pay off a trademark squatter. Or if you don’t want to wait for the various proceedings to wrap up, you could use the pending filings as leverage to negotiate a lower price from the trademark squatter.
Yes, it would be nice if China provided recourse against trademark squatters by more straightforward means. The letter of the Trademark Law provides remedies against trademark applications filed in bad faith: trademark oppositions (for pending applications) and invalidations (for existing registrations). But in the real world, trying to take on trademark squatters head-on has a very low chance of succeeding. Unless you’re willing to pay tens of thousands of dollars to retrieve “your” trademark, using the Chinese trademark system against them is usually the best hope.
Needless to say, cancelling a trademark squatter’s registration is predicated on the assumption that the squatter hasn’t used the mark in commerce. The more research you can do before filing a non-use cancellation, the better. Because if the squatter has in fact used the mark such that they can defeat a non-use cancellation, they’ll probably increase the sale price, figuring that you must really want the trademark.