Analysis on the Application of Article 15.2 of China Trademark Law - Taking the ‘CASUSGRILL’ Trademark Invalidation Case Handled by the Team of Charles Feng as an Example

Written by Mr. Charles Feng, external Expert of the China IP SME Helpdesk, and Lian Xue from Tahota (Beijing) Law Firm.

Introduction

Article 15.1 of Trademark Law regulates the behavior of the party with specific relationships which refers to contractual, business or other relationship except agency or representative relationship in squatting the unregistered trademarks in prior use by another party. In cases where there is no agency or representative relationship as stipulated in Article 15.1, if there is evidence proving that the applicant is aware of the existence of unregistered trademarks in prior use due to other business cooperation, trade dealings, or other relationships, the trademark squatting behavior by the party with specific relationship can be regulated under Article 15.2, to protect the legal rights and interests of the prior user and the related parties. 

This article will analyze the application of Article 15.2 of Trademark Law in conjunction with the specific circumstances of invalidation case against ‘CASUSGRILL’ trademark handled by the Team of Charles Feng.

I. Legislative Background 

Article 15 of Trademark Law was added during the second amendment in 2001, but at that time, it only stipulated that ‘where an agent or a representative applies for registration of a trademark of the principal or the represented party in the agent’s or the representative’s own name without authorization, the trademark shall not be registered and shall be prohibited from use upon opposition from the principal or the represented party.’ This provision only limited the applicable subjects to agent and representative, and did not clarify the criteria for determining agency or representative relationships. 

Regarding the scope of application of agency and representative relationships, the “Provisions of the Supreme People's Court on Several Issues concerning the Trial of Administrative Cases involving Trademark Authorization and Confirmation” released in 2010 clarified it as ‘trademark agents, representatives, or agents or representatives in the sense of sales agency relationships such as distribution or agency.’ However, there were still many limitations in judicial practice. 

The third amendment of the Trademark Law in 2013 added Article 15.2, which stated, ‘where an applicant for registration of a trademark identical with or similar to an unregistered trademark in prior use by another party on the same or similar goods has any contractual, business or other relationship except the relationship described in the preceding paragraph with the other party and knows the existence of the unregistered trademark, the trademark shall not be registered upon opposition from the other party.’ This, together with Article 15.1, now constitutes the current regulation of pre-registration by specific related parties under Trademark Law.

II. Basic Facts of the Invalidation Case against ‘CASUSGRILL’ Trademark Handled by the Team of Charles Feng

NOVO FUTURA APS is a Danish startup company. The CASUSGRILL trademark consists of two parts: CASUS and GRILL. The distinctive part, CASUS, is derived from the first two letters of the founder Carsten's name and the first three letters of his wife Susanne's name

In February 2016, NOVO FUTURA APS concluded a non-disclosure agreement with SINOSCAN GROUP A/S, entrusting it to find processor for CASUSGRILL brand products in mainland China.

In March 2017, SINOSCAN GROUP A/S concluded general supply contract and non disclosure agreement with an industrial company in Suzhou regarding the commissioned processing of NOVO FUTURA APS’s CASUSGRILL brand eco-friendly grill products. Subsequently, it signed equipment agreements, start-up capital agreements, and mold production contracts with the industrial company through its subsidiary, Sinoscan (Shanghai) Trade Co., Ltd. From May to June, NOVO FUTURA APS entrusted the industrial company to produce approximately 50,000 CASUSGRILL brand eco-friendly grill products through Sinoscan (Shanghai) Trade Co., Ltd.

NOVO FUTURA APS discovered that its CASUSGRILL trademark had been registered by a media company in Changshu during the same period. During the trademark opposition stage, NOVO FUTURA APS entrusted another large law firm to file an opposition application, mainly alleging that the media company in Changshu had an agency relationship with NOVO FUTURA APS as stipulated in Article 15.1 of Trademark Law. However, due to the misunderstanding and incorrect application of relevant legal provisions, and lack of evidence proving an agency relationship between NOVO FUTURA APS and the Changshu media company, NOVO FUTURA APS did not receive a favorable decision.

III. Case Handling Approach

After being entrusted by NOVO FUTURA APS, the Team of Charles Feng thoroughly analyzed the existing evidence, concluding that there was insufficient evidence to prove the agency relationship between the media company in Changshu and NOVO FUTURA APS. The actual agency relationship was with the industrial company in Suzhou, instead of the media company in Changshu. Charles Feng suggested that according to Article 15.2 of Trademark Law, it can be claimed that although there was no agency relationship between the media company in Changshu and NOVO FUTURA APS, there were contractual, business or other relationship between the two parties and the media company in Changshu was aware of the existence of the unregistered trademark in prior use of NOVO FUTURA APS.

1. Determination of ‘Prior Use’

Articles 13.2, 15, and the latter part of Article 32 of Trademark Law all protect unregistered trademarks. Among these provisions, Article 15.2 has lower requirements for the degree of ‘prior use’, which means that as long as there is actual use or actual preparations for entering the market, it can be considered as ‘prior use’ and there is no need to prove the time of use, the scale of use or the influence generated by the use of the trademark.

In the CASUSGRILL trademark invalidation case, although the industrial company in Suzhou was commissioned to process CASUSGRILL brand eco-friendly grills, the products were not actually sold in China. Therefore, the Team of Charles Feng collected domestic media reports on the CASUSGRILL brand eco-friendly grills through the internet and other channels as evidence to prove that the CASUSGRILL trademark had been used in China.

2. Determination  of ‘Specific Relationship’

According to Article 15.2 of Trademark Law, ‘specific relationships’ includes contractual, business or other relationship. The “Trademark Examination and Trial Guide” issued in 2021 lists several common contractual and business relationships, including buy-sell, commissioned processing, franchising (trademark licensing), investment, sponsorships, jointly organizing events, business inspections, negotiation, advertising agency, and other business relationships. Other relationships include familial relationships, subordinate relationships, and proximity of business addresses between the trademark applicant and the prior user. The “Provisions of the Supreme People's Court on Several Issues concerning the Trial of Administrative Cases involving Trademark Authorization and Confirmation” also list examples of other relationships: (a) the trademark applicant and the prior user have family relationship; (b) labor relationship; (c) proximity of the business address; (d) had negotiations to reach an agency or representative relationship, but not formed an agency or representative relationship; (e) had negotiations to reach a contract or business relationship, but not formed a contract or business relationship.

In practice, the situations are more complex than those listed in law and judicial interpretations. Therefore, specific relationships are not limited to the listed examples. The “Trademark Examination and Trial Guide” issued in 2021 supplemented with an additional provision that ‘if the prior mark is aware because of other relationships other than the above-mentioned examples, the relationships can be identified as ‘Specific Relationship’ under this provision.’

From these provisions, it can be concluded that Article 15.2 adopts an illustrative plus catch-all legislative model for defining ‘Specific Relationship’, which means that if there is evidence proving the awareness of the prior used unregistered trademark due to other relationships, Article 15.2 can be applied for regulation.

3. Determination of "Other Relationships"

The focus issue in CASUSGRILL invalidation case was whether the registration of CASUSGRILL by the media company in Changshu in its own name constituted the situation stipulated in Article 15.2 of Trademark Law.

Firstly, the Team of Charles Feng submitted the non-disclosure agreement between NOVO FUTURA APS and SINOSCAN GROUP A/S; the non-disclosure agreement between SINOSCAN GROUP A/S and the industrial company in Suzhou; the equipment agreement, start-up capital agreement, and mold production contract between Sinoscan (Shanghai) Trade Co., Ltd. and the industrial company in Suzhou, in order to prove the agency relationship existed between NOVO FUTURA APS and the industrial company in Suzhou.

Since company registration information did not directly show the relationship between the media company in Changshu and the industrial company in Suzhou, it could not directly indicate that they were affiliated companies. To prove their relationship, the team of Charles Feng arranged investigations of the industrial company in Suzhou. During communicating with the director and business manager of the industrial company in Suzhou via WeChat, they respectively admitted and confirmed that the director of the industrial company in Suzhou was also a shareholder of the media company in Changshu. These WeChat chat records were notarized

To further verify the relationship between the director of the industrial company in Suzhou and the media company in Changshu, the Team of Charles Feng conducted an on-site investigation of the industrial company in Suzhou. During the investigation, the business manager again confirmed that the director of the industrial company in Suzhou was also a shareholder of the media company in Changshu, further proving that the media company in Changshu was an affiliated company of the industrial company in Suzhou. The Team of Charles Feng notarized the relevant recordings, which became key evidence proving the relationship between the media company in Changshu and the industrial company in Suzhou.

In addition to the media company in Changshu and the industrial company in Suzhou, the team of Charles Feng also discovered that a trading company in Changshu was controlled by the same person and sold disposable grill products that completely copied the design of NOVO FUTURA APS's products through relevant websites. These products were produced by the industrial company in Suzhou and sold by the trading company in Changshu. And the media company in Changshu was responsible for registering relevant trademarks. For these important evidence, the team of Charles Feng arranged for webpage notarization to fix them.

Based on this, the team of Charles Feng filed an invalidation application with National Intellectual Property Administration, alleging that the media company in Changshu was an affiliated company of NOVO FUTURA APS's CASUSGRILL brand product processor, the industrial company in Suzhou. Therefore, the media company in Changshu had other relationships with NOVO FUTURA APS and was aware of the existence of NOVO FUTURA APS's CASUSGRILL trademark due to this specific relationship. The media company in Changshu registered NOVO FUTURA APS's trademark in its own name without the authorization of NOVO FUTURA APS. According to Article 15.2 of Trademark Law, NOVO FUTURA APS applied for invalidation against the trademark ‘CASUSGRILL’.

IV. Favorable Decision

After examining the case, the National Intellectual Property Administration supported NOVO FUTURA APS's arguments of invalidation application, and the decision stated as follows:

 “Other relationships” refer to relationships other than direct commercial dealings between the parties. In this case, firstly, based on the evidence submitted by the applicant, such as award certificates, product commission processing agreements, invoices, and related reports, it can be concluded that ‘CASUSGRILL’ is a trademark used by the applicant on grill products. Secondly according to the facts 2,3 and 4 found by the Administration and the chat records in evidence 14 and 15 submitted by the applicant, there is a close relationship and commercial cooperation between the trading company in Changshu, a sole proprietorship founded by the legal representative of the respondent, and the industrial company in Suzhou. Besides, both parties dealt in grill products, the respondent should have been aware of the fact that the applicant had already used the trademark ‘CASUSGRILL’ in advance. Therefore, the ‘other relationship’ under Article 15.2 of Trademark Law existed between the applicant and the respondent.

In addition, the designated goods of the disputed trademark, such as portable barbecue grill and grill, are the same or similar goods as the goods in prior use by the applicant, such as grill. Moreover, the disputed trademark was identical in word composition with the applicant's prior-used trademark and the application for the disputed trademark was filed in obvious bad faith. Therefore, the respondent's behavior of applying for registration of the disputed trademark in its own name constitutes the situation as specified in Article 15.2 of Trademark Law.

V. Conclusion

Through analyzing the invalidation case against ‘CASUSGRILL’ trademark handled by the Team of Charles Feng, this article aims to clarify the differences between Article 15.1 and Article 15.2 of Trademark Law and further clarify the application conditions of Article 15.2. Specifically, even if there is no direct relationship such as an agency or representative relationship between the trademark registrant and the brand owner, if there is evidence proving that the registrant, due to contractual, business, or other relationships, is aware of the existence of the unregistered trademark in prior use, the registration should be declared invalid under Article 15.2 of Trademark Law. 

In summary, this article hopes to provide new remedies to the parties who have not used their trademarks extensively in China, but have suffered from the infringement by the specific parties, such as their business partners and related companies, on their unregistered trademarks in prior use.