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AFD Case Study - How to Handle Preemptive Trademark Registration Filed by Intended Distributors

During the prosecution of trademark applications, it’s quite often that the real users of the trademarks find that others have already preemptively registered the trademarks. Some of the "others" may be strangers to the real users of the trademarks, while some may be acquaintances of the real users, or in other words, they may be people who once had certain relationships with the real users. In practice, the preemptive registrants we encountered are often people with certain identities, such as distributors or intended distributors. Below we will share our experience on how to "knock out" such a preemptive trademark application by using the relevant provisions of the Trademark Law.

Case Brief
Our client, a German-based high-end equipment manufacturer applied for registration of its trademark with the China Trademark Office but was told that the Chinese subsidiary of its previously intended distributor (a Hong Kong company) had already preemptively filed an application for registration of the trademark. During communication between the two parties, the intended distributor first indicated that they would urge their Chinese subsidiary to withdraw their trademark application, however, later they evasively expressed that the application could not be withdrawn but could be assigned to our client for a valuable consideration. Our client was hesitant about whether to agree with the assignment. We advised our client that pursuant to the provisions of Chinese Trademark Law, a trademark application can be withdrawn at any time before it is finally approved for registration. Obviously, the intended distributor just used that as an excuse and their real intention may be to preemptively obtain registration of the trademark and then sell it for a profit. In order to get away from the trap, we suggested the client take action against the preemptive trademark application.

In view of the facts that the preemptive trademark application related to someone who had been familiar with the true owner (our client) and their trademark and that such application was still in the opposition period, we advised our client to file an opposition against such application in accordance with the provisions of Article 15 of the Chinese Trademark Law. Considering that the relationship between our client and the intended distributor just involved preliminary negotiations for business cooperation, we particularly suggested citing the provisions of Article 15(2) of the Trademark Law to oppose the preemptive trademark application by proving that the preemptive applicant obtained the trademark by means of their business relationship with our client.

Once the applicable legal provision is determined, the next step is to collect evidence to indicate the proposition. What makes this case special is that a more thorough and complete chain of evidence must be established given that the preemptive applicant is not the party who directly negotiated with our client for cooperation but its Chinese subsidiary. According to relevant examination standard, even though it is not filed by a party who has certain relationship with the actual trademark user, if there is evidence that the trademark applicant has colluded with such party, then the trademark application shall be deemed as a preemptive trademark application as stipulated in Article 15(2) of the Trademark Law and shall not be approved for registration. Collusive preemptive trademark application, as appropriate, may be presumed based on the kinship or business relationship between the trademark applicant and the party who has certain relationship with the actual trademark user. Thus, in this case, further proof is needed as to whether an investment or other relationship exists between the preemptive trademark applicant and the intended distributor. And we found, after investigation, that the preemptive trademark applicant is a Chinese subsidiary of the intended distributor. We saved the relevant evidence and organized it with a clear logic flow.

Meanwhile, the key to success is whether the evidence of the certain relationship between the concerned parties will be accepted by the Office. Considering that our client and the intended distributor discussed the collaboration only via email, we suggested our client submit all the related email communications and the attachments thereto and meantime legalize and notarize such email communications.

When filing the opposition, we also emphasized that our client is the prior user of the concerned trademark such that the Examiner may develop discretion in favor of our client who is the true owner of the trademark. Corresponding argument and evidence were shown on the following two aspects:

1.    The trademark had been used by our client previously and was distinctive in terms of its constituents and its form of presentation;
2.    Our client had acquired certain fame worldwide in the field of the related products. 

Meanwhile, to prove our client’s prior use of the trademark, we proactively collected and submitted the evidence of our client’s public use of the trademark, such as a printout of the webpage showing the trademark from our client’s official website, and the Madrid international trademark application filed by our client, in which China was designated.  

Finally, based on the related facts and the evidence submitted by our client, the Trademark Office accepted our client’s opposition and ruled that the trademark shall not be registered, thereby eliminating the obstacles to our client's own trademark application.

AFD Comments: our success in this case lies in two aspects: one is that our client built strong evidence awareness in their daily work, which enabled them to provide a full chain of evidence of their prior use of the trademark; the other is that we provided appropriate guidance on evidence preparation, proactively collected some key evidence (which proves the parent-subsidiary relationship between the intended distributor and the preemptive trademark applicant), and made objective and persuasive arguments before the Trademark Office.

Inspirations and Suggestions
With respect to trademark portfolio strategies, it is suggested that enterprises (especially foreign enterprises) make a trademark portfolio planning in China as early as possible. If enterprises give a higher priority to market expansion than filing trademark applications, their trademarks might be preemptively registered by other parties.

For foreign enterprises, if they want to enter their products into the Chinese market, they will inevitably look for domestic enterprises as their distributors and agents. During their preliminary discussion with domestic enterprises for cooperation, they might obtain the business cards of the representatives and brochures of the domestic enterprises, and for their products on trial sale, they will receive payment vouchers from the domestic enterprises. Such materials provided by the domestic enterprises are all strong evidence of the business relationship between the two parties and shall be properly kept. In this way, in case a trademark application is preemptively filed by a domestic collaborator, the foreign enterprise who is the actual owner of the trademark can also gain an advantageous position against the trademark application based on the sufficient evidence they have obtained.

An enterprise, during their preliminary negotiation with another party for cooperation, may ask that party to sign a confidentiality agreement relating to intellectual property, which may have a certain deterrent effect on that party in case they have the intent to preemptively apply for registration of the enterprise’s trademarks.

Article 15.  A trademark shall not be registered and its use shall be prohibited if the agent or representative of the person who is the owner of a trademark applies, without authorization, for the registration of the trademark in his own name and if the owner raises an opposition.

Where a trademark for which a registration is applied is identical or similar to an early used trademark of another party that is not registered, in respect of the same or similar goods, and where the applicant being of contract, business or other relationship except the relationship referred to in the preceding paragraph, is fully aware of the existence of the trademark owned by the other party, the trademark shall not be registered, if the other party raises an opposition.

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