Feynman LIANG Patent & Trademark Attorney	Published on December 7, 2021

Article 4, which was introduced into the Amendment of the Trademark Law of P.R. China (Hereinafter referred as “Amendment”) in 2019, provides that any bad faith application not intended for use shall be rejected [1]. Article 4 can also be a ground for opposition and invalidity proceedings. Since the implementation of the Amendment, this article has become an effective solution for tackling trademark squattering issue for both China National Intellectual Property Administration (Hereinafter referred as “CNIPA”) and brand owners in recent years. In the first 6 months of 2021 alone, CNIPA has issued more than 27,000 refusals for bad faith trademark applications [2].

I. Overview
The new Trademark Examination and Trial Guideline (hereinafter referred as “Guideline”) was just released in November 2021 and it will be implemented since January 1, 2022. The new Guideline provides detailed requirements and case law for implementation of Article 4 of the Amendment. The new Guideline would be helpful for the brand owners to have better assessment and preparation for their cases against trademark squatters in China.

As explained in the Guideline, “trademark applications that are not intended for use” in Article 4 of the Amendment should be defined as trademark applications neither for the purpose of actual use / intending for use, nor with any possibility of actual use with reasonable inference [3].

II. Requirements

When examiner considers rejecting the application based on Article 4 of the Amendment, or when brand owner contemplates opposing the application or invalidating the registered mark on the ground of bad faith registration not intended for use stipulated in Article 4 of the Amendment, the following factors should be taken into consideration.

1) Background information of the applicant
Duration of applicant’s entity; actual paid-in capital (Registered capital is an integral part of establishing a company and subsequent filings in China; registered capital is defined as subscribed capital, rather than paid-in capital; there is no general requirement to pay in registered capital before the liquidation of the company); industry characteristics and business scope; business status; abnormal status record such as revocation, cancellation, closure, liquidation.

2) Filing history of the applicant
Total number trademark applications; designated goods/services; trademark filing frequency; application number in short period of time and designated goods/services; etc.

3) Trademark logo
Whether the mark in application is identical or similar to a well-known mark or distinctive mark of another entity; whether the mark includes name of a city / region, mountain, tourist attraction, terminology of particular industry or other public resources; whether the mark includes name of celebrity, trade name of another entity, name of an online marketplace, well-known and recognizable commercial slogan, art work, designs or other commercial expression.

4) Selling or transferring activity of the applicant before or after trademark registration Whether the applicant has history of selling or transferring the pending / registered marks to any third parties; whether the applicant is able to provide evidence of its/his/her intention to use the mark or provide any proper explanation for the non-use of the mark before the transfer or sales activity;

Before or after trademark registration, whether the applicant actively sells or offers to sale the pending / registered trademark, forces another entity to enter into cooperative relationship, or blackmails another entity for high transfer fee, licensing fee, damages, reconciliation fee for the purpose of seeking illegitimate benefits, etc.

5) Other considerations in opposition and invalidation proceedings
absence of true intention to use when the application is pending;
absence of actual use or preparation for use after the mark is registered;
Evidence proving absence of sufficient evidence on the intention to use or reasonable explanation on non-use;
Evidence proving the infringement proceedings is initiated by the trademark owner solely for the purpose of seeking illegitimate benefits.

6) Other factors
(1) Effective administrative decision or judgment on bad faith registration or trademark infringement.
(2) Negative record in the China social credit system due to bad faith trademark applications or trademark infringement.
(3) Number of applications/pending applications as well as designated goods/services filed by entity or individual which/who has particular relationship with the applicant/owner.
(4) Transaction, offer or invitation for offer of trademark by entity or individual which/who has particular relationship with the applicant/owner.

III. Case Law
A. Case 1
Company A filed several hundred trademark applications for over 30 classes.
1) The background information of the applicant
The company is a Sole proprietorship limited liability company with a registered capital of CNY 1 million (around USD 154,000). However, the amount of actual paid-in capital has not been disclosed.

The registered business scope of the company is as follows: consultation service for solar power water heater, consultation service for tourism, planning of corporate image etc.

2) Filing history of the applicant

Company A filed several hundred trademark applications. The applications cover 30 classes such as class 14, 29, 30, 32, 36. Notably, more than 100 trademark applications have been filed in December 2019 alone.

Within these 30 classes, while the goods/services in some classes (e.g., Food in Class 30) are quite distant from the registered business scope of the applicant, the goods/services in some classes (e.g., Financial Service in Class 36) requires specific regulatory requirements on qualifications. The designated goods/services are far beyond the business scope of the applicant and the application activities are obviously contrary to business norm.

The applicant has filed unreasonable number of applications and has obviously gone beyond the regular business operation. As a result, the applications were decided to be categorized as bad faith application not intended for use as provided by Article 4 of the Amendment.

B. Case 2
Individual B filed more than 900 trademark applications in more than 30 classes. Notably, the applicant filed smaller number of applications within the period of December 2019 to April 2020. CNIPA issued an Office Action inviting the applicant to submit description and evidence of intention to use / actual use.

The applicant argued that
a. applications had been filed for his/her personal interest in trademark;
b. the applicant had been providing trademark designing service for company client;
c. the applicant had filed the application for future use;
d. the marks in application were protective marks for the registered marks owned by the same applicant.

1) The background information of the applicant
The registered capital of the individually-owned business is CNY 10,000 (around USD 1,540) and registered business scope is “consultation service on economic information; sales of clothing, jewelry, art work, hardware, daily necessities, feed, cosmetics, home appliances, computer graphic design”.

2) Filing history of the applicant
The applicant filed more than 900 trademarks in 30 classes, which is obviously beyond the regular use of trademark. In addition, the classes of goods/services (e.g., Chinese Liquor in Class 33, Medicine for Human Consumption in Class 5) for which the marks have been applied are distant from the services in the registered business scope.

Although the applicant argued the applications are for protective purpose, he/she fails to provide evidence of use for his/her prior registered marks.

As a result, the applications were decided to be categorized as bad faith application not for intention for use as provided by Article 4.

C. Case 3
Company C filed more than 900 trademarks in 45 classes.
1) The background information of the applicant
Company C has been registered as a scientific research trading company

2) Filing history of the applicant
Company C filed more than 900 trademarks covering 45 classes, which is obviously contrary to entity type and actual business operation of the applicant as a scientific research trading company.


The applicant filed large number trademark applications in classes unrelated to the main trademark claimed by the applicant.

Among the 900 trademark applications, some designates classes in which the goods/services (e.g., Chemical Product in Class 1, Insurance Consultancy Service in Class 36 and Wireless Broadcast Service in Class 38) requires specific requirement of qualifications.

Notably, the applicant filed more than 500 trademark applications within short time frame of 9 months and failed to provide proper reason for the filing activity.

Company C filed more than 900 trademarks in 45 classes. Among these applications, about 500 applications are filed in less than 9 months. Trademark Reexamination and Adjudication Board believed that the applicant filed large number of applications within short period of time, obviously beyond of the need of normal business operation. As a result, the applications were decided to be categorized as bad faith application not for intention for use as provided by Article 4.

Summery
For brand owners in opposition and invalidity proceedings, it is suggested to perform extensive research on business registration, business operation, trademark use as well as filing history of the trademark applicant. In addition, if the applicant or any related individual or entity approaches the brand owner for trademark transfer asking for unreasonable amount of fee, it is advisable to preserve all the evidence of communication for the future use.

[1] Trademark Law of P. R. China (Amended in 2019)
[2] https://www.zhifuzi.com/news/106919.html
[3] Trademark Examination and Trial Guideline (2021), Page 162