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Collection of evidence is key in non-use trademark cancellation attacks

Foreign companies operating in China with registered trademarks must understand the rules and regulations involved in non-use cancellation attacks, particularly to convince the authorities to allow the challenged mark to remain in use. A strong knowledge of the details and criteria will facilitate good practice and an effective defense strategy. 


In China, it is not necessary that the brand is in use at the time of application for registration. However, non-use still has a negative impact on registration because a trademark’s substantive value lies in its actual use.  

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According to Article 49.2 of China’s Trademark Law, if a registered trademark is not used for three consecutive years without a justified reason, any entity or individual can initiate a non-use cancellation action and challenge the mark’s validity.  


The objective of the non-use cancellation system is to eliminate so-called ‘zombie trademarks’ and release idle trademark resources. Nonetheless, due to the vast trademark landscape, coupled with the sharp rise in applications in China, there are still a considerable number of marks that have long been out of use.  


The China National Intellectual Property Administration (CNIPA) informed in its report that about 80% of trademark applications are cancelled after review of the non-use cancellation procedure. This indicates that the strategy of non-use cancellation has served as an effective measure to remove obstacles to application. 


Evidence 


In China, the rights holder of the challenged mark has the responsibility to present evidence to convince the examiners to allow the contested mark to remain in use.   


Considering the long-term examination timeline in trademark assignment and coexistence negotiations, non-use cancellations have become a popular way to clarify uncertainties, especially if prior citations have been registered for over five years, or if they have been filed in good faith, even if they are confusingly similar. 


It is important to understand the essence of the goods or services in the application for cancellation, especially for the sub-class that they fall under.  


Rights holders should gather the most effective and helpful evidence to form a complete evidence chain. This could include evidence that reflects the trademark samples applied for, such as pictures of the goods/services, packaging, promotional materials, commercial advertisements, and exhibition scenery. 


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It is also useful to collect evidence of the whole production and operation process for the goods or services, including any relevant license documents, contracts, actual use evidence such as receipts, payment and delivery documents, or invoices, and a general introduction to the production and operation of the trademark registrant.  Evidence of trademark use should be presented within the specified time limit of preparation. If possible, it is best to conduct a full defense according to these standards from the outset. In this case, if the other party initiates the review of non-use cancellation or other follow-up procedures, it will not be necessary to repeat the supplementary collection of evidence.  


When using trademarks and collecting evidence, companies should: 


  • Save different types of documents generated during manufacture and export, including but not limited to the purchase agreement/order, commercial invoice, bank slip, packing list, bill of lading, customs declaration, certificate of origin etc.; 

  • Try to indicate the trademarks in all documents—in particular purchase agreements/orders, commercial invoices, bills of lading and customs declaration—rather than just in product packaging, product specification sheets, catalogues, or brochures. The latter may be deemed as self-made evidence bearing lower probative value; 

  • Keep and use Chinese Customs’ official documentation; 

  • Use the same order/invoice number and product information in the relevant documents to form a complete evidence chain to enhance the probative value; 

  • Request the relevant parties, including the Chinese manufacturer, freight agent etc. to stamp their company seals on their documents. Signature alone is often weak; and 

  • Submit Chinese translation for non-Chinese documents. 


Where electronic evidence like emails needs to be filed, it is highly advisable to have such evidence regularly notarized and, if applicable, legalized. Printed emails or electronically docketed emails are often challenged. 

 

Rules and regulations  


Unlike other litigation procedures, in non-use cancellation cases laws and regulations do not strictly stipulate legal document exchange and cross-examination. In practice, after the Trademark Office formally accepts the non-use cancellation application, it will not share the materials with the respondent, but it will issue a notification asking the respondent to submit actual use evidence within two months or provide legitimate reasons for a lack thereof.  


After receiving and examining this, the office will make the decision directly. 


In the review of non-use cancellation procedures, the Trademark Review and Adjudication Department will forward the petition and materials to the respondent, invite them to respond. Then, they will give the same materials to the applicant for review and challenge, in accordance with the Regulations on the Implementation of China’s Trademark Law and the Trademark Review and Adjudication Rules. 


In administrative litigation, the court strictly exchanges both parties’ petitions and uses evidence in compliance with the requirements of the procedural law. The parties can fully review and cross-examine evidence in multiple rounds, and debate or file rebuttals during the court hearing procedure. 


Optional strategies 


When there is no solid use evidence for the trademark, or there are no valid reasons for not using it, is it convenient to have a different strategy in place.  


One option is to offer coexistence agreements in exchange for the other party’s application withdrawal. Most non-use cancellation actions are filed to remove any obstacles to a specific target trademark - given this and assuming that there is some difference between the marks, a coexistence agreement can be used to resolve any issues amicably. 


To make this effective, the applicant must be willing to accept the solution and a coexistence consent document must be officially adopted, so that the target trademark can be registered. It also needs to be tightly linked, so it is best to withdraw the non-use cancellation application before any final decision is made. 


If a coexistence agreement is out of the question, it is best to consider filing a new trademark application as soon as possible. Provided that the challenged mark is still active, this should be helpful when it comes to streamlining the registration of the new trademark application. 


Another option is to strengthen the standardized use of trademarks throughout the whole process of production and management. When engaging in business activities directly related to the scope of goods or services designed by the registered trademark, the mark should be fully used as far as possible throughout.  


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The header of the business contract, commercial invoices, product packaging, service documents, promotional materials, official network account tweets and newspaper advertisements could be useful.   

It is becoming increasingly common to submit new evidence in the administrative proceedings of rehearing the cancellation. Some trademark registrants even fabricate and submit false use evidence at this stage, and rights holders should bear this in mind when involved in non-cancellation attacks. 


Conclusion 


Many foreign companies choose to file numerous defensive applications to protect their marks in China and prevent squatters from rush-


registering. To avoid the risks of non-use cancellations, owners should ensure that their goods and services correspond to the core business field and that they prioritize completing the core trademark registration on the specific goods or services. 


Companies may gradually file defensive trademark applications depending on their business development and future business expansion. It is not recommended to blindly pursue full registration out of actual needs, nor hold many similar trademarks just to reduce the cost of rights protection. 


Registration is the most important step to protect a trademark in China. However, the true value of a trademark depends on long-term, honest, and effective commercial use. Having a trademark plan and protection strategy will benefit its future use. 



 

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Woodburn Accountants & Advisors is specialized in inbound investment to China and Hong Kong. We focus on eliminating the complexities of corporate services and compliance administration. We help clients with services ranging from trademark registration and company incorporation to the full outsourcing solution for accounting, tax, and human resource services. Our advisory services can be tailor-made based on the companies’ objectives, goals and needs which vary depending on the stage they are at on their journey.

 

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