Foreign Companies Get Dose of Reality Over Chinese Non-Use Trademark Laws

By Joseph Mandour on December 12, 2011

chinese_flag-thumb-200x149-31742 California – The China Trademark Law of 2001 does not require that a registered trademark be used in commerce by the registrant (or licensed use by a third party) in order to claim exclusive trademark rights against unauthorized use.

However, recent case law has placed an even greater burden on trademark registrants to prove actual use of their trademarks, both in order to prove that consumer confusion exists and also as a prerequisite for damage claims. Thus, the trend has resulted in the third amendment of the Trademark Law.

Article 52 of China’s Trademark Law of 2001 states that:

“A person infringes the exclusive right to use a registered trademark if he…”

(1) uses a trademark that is identical with or similar to a registered trademark in
Relation to identical or similar goods without consent of the owner of the
Registered trademark.

Currently, the law does not indicate that a trademark registrant have used the trademark in commerce in order to claim infringement. Chinese courts have heard and rejected numerous defenses that were based on the claim that the registrant had not actually used the trademark in business. However, some courts are reaching a different conclusion, as a result of bad-faith litigants taking legal action against large companies, claiming trademark infringement even thought they had never used the trademarks in commerce, and seeking legal damages over the alleged infringement.

In the 2008 infringement case over the trademark RED RIVER, the Supreme Court in China threw out two previous court decisions and held that since the plaintiff had not used its registered trademark RED RIVER on beer, the trademark had failed to establish a uniqueness of its own and was unable to distinguish itself from others. Therefore, the Court concluded, consumers would not associate or confuse the defendant’s RED RIVER beer with the plaintiff’s trademark.

The draft amendment of the Trademark Law deviates from previous law in that it changes the status of the plaintiff’s alleged loss if the trademark has not been used in commerce, using the following logic:

(1) If the registrant has not actually used the trademark for commercial use, then the unauthorized use of the trademark by a third party would not cause consumer confusion.
(2) Since no confusion would exist, the trademark registrant would not have suffered any loss.
(3) If no loss has been suffered by the plaintiff, then no damages would be due.

This major change will undoubtedly cause many foreign companies to change their strategies concerning intellectual property in China. The amendment to the China Trademark Law will surely give foreign companies a reason for commercial use of their registered trademarks in China, in order to maintain validity of their registrations and to have proof of use before taking legal action against any unauthorized third parties.

Related Articles: