“It’s immoral!” – Pitfalls of failing to register your trademarks; increased risks in China.

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Background:

For a number of reasons, it is generally recognised as best practice is to secure a trade mark registration for your brands.

Despite your best endeavours, however, trade mark applications can be rejected on a range of different grounds, including “absolute” grounds. Absolute grounds relate to the intrinsic qualities of the mark in question, while relative grounds relate to conflicts with earlier trademarks belong to others. Using a trade mark that has been rejected on relative grounds brings the risk that your use will infringe an earlier right. Using a trade mark that has been rejected on absolute grounds is not without some risks, but typically those risks are perceived to be low, and often the unregistered mark will be used.

This article focuses on increased risk of repercussions in China of using a mark that has been rejected on certain absolute grounds.

Article 10:

Article 10 of the China Trademark Law precludes a range of signs from being used as trademarks including (but not limited to) those identical or similar to:

• the state name, national flag, national emblem, military flag, military emblem or decorations, as well as names or symbols of the Central State government organisations
• the State names, national flags, national emblems, military flags of foreign countries, unless consent has been given by the government of the relevant country
• the names, flags or emblems of International inter-governmental organisations, unless consent has been given by the relevant organisation
• official signs or hallmarks indicating control and warranty, unless consent has been given
• symbols of the Red Cross or the Red Crescent
• having the nature of discrimination against any nationality
• being fraudulent, which will mislead the public as to the features such as qualities of the goods, or the place of origin of the goods
• those detrimental to socialist morality or customs or having other unhealthy influences.

Any sign that is considered to fall foul of Article 10 will be refused registration. On the face of it, preventing consumers from being deceived or misled is to be applauded.

Some of these prohibitions to registration are relatively simple to anticipate; some of them less so.

Recent changes in China:

In May 2018 China established the State Administration for Market Regulation (“SAMR”), taking over responsibility from Bureaus previously responsible for anti-trust enforcement, antimonopoly and anti-unfair competition. The aim of SAMR being to strengthen enforcement of anti-trust and anti-unfair competition laws, with a broad mandate ranging from drug safety supervision, quality inspection, fair competition and commercial bribery, issuance of business registrations as well as management of intellectual property rights.

A “Special Action Plan to Combat the Use of Unregistered Trademarks in Violation of ‘Forbidden to Use’ Articles of China Trademark Law” has recently been announced, the main points of it being to:

1. target marks filed in 2017 and rejected based on Article 10 of the China Trademark Law, but still being used in China.
2. the China Trademark Office has been required to prepare a list of trademarks rejected from registration since 2017 for violating Article 10. In accordance with the action plan, during the period July to October 2018 the lists will be used as the basis of further investigations and potential enforcement against offenders.

Immoral & unhealthy or not?

Of particular interest in this article are marks that are considered to be detrimental to socialist morality or customs, or having other unhealthy influences. The following are examples of marks found by the China Trade Mark Office as being detrimental to socialist morality or customs or having other unhealthy influences, but accepted for registration in other territories:

For inter alia cosmetics, massage articles, massage oil, pharmaceutical preparations, contraceptive preparations and substances, condom is and vibrators.

Career Of Evil

For inter alia electrical apparatus and instruments, computer software; pre-recorded films, vinyl records, audio tapes; telephones and parts for mobile phones; downloadable publications and data; printed matter; advertising; business management, office functions; market surveys: scientific and technological services and research and design; legal services.

For inter alia alcoholic beverages; non-alcoholic beverages, beers, mineral and aerated waters.

For inter alia advertising, business administration, distribution of advertising materials; computer file management; organisation of exhibitions; rental of advertising space.

For inter alia broadcasting television programmes; broadcasting programmes via a global computer network; broadcasting services and provision of telecommunication access to video and audio content; organising, arranging and conducting extreme athletic events: providing website content featuring entertainment information in the field(s) of extreme sports.

Enforcement & penalties:

Prior to the establishment of SAMR enforcement against use of a mark that would fall foul of Article 10 was possible, but not common.

In terms of penalties for using a mark that violates Article 10 these are set out by Article 52 of the China Trademark Law. Under that Article, sanctions include:

• Cessation of the use of the unregistered trademark that violates Article 10
• Payment of a fine. In the event that the illegal business revenue exceeds CNY 50,000,(approx. £5600) a fine up to 20% of such revenue may be imposed; in the event that there is no illegal business revenue or the business revenue is less than CNY 50,000, a fine up to CNY 10,000 may be imposed.

What next:

It is not currently known whether the action plan will be repeated, and if so when. Nor do we know the extent of outcomes of the current action plan, but increased enforcement against use of unregistered trademarks has to be anticipated.

Under the remit of the current action plan, if during 2017 you have attempted to register your trademark in China, but it has been rejected under the provisions of Article 10 there appears to be a real risk that any use in China associated with that mark could result in an enforcement action being brought against you and penalties imposed.

An extension to the scope of the current action plan is quite feasible, and accordingly, use in China of any unregistered trademark that might fall foul of Article 10 runs the risk of being subject to an enforcement action and penalties imposed.

If you are using a mark in China that you have not registered or have tried to register but failed to do so, we recommend you take specialist advice.

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If you have read this article and would like further advice, please contact a member of our Trade Mark team who will be happy to assist you.

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Category: Latest Insights | Author: Sarah Darby, Vanessa Lawrence | Published: September 2018 | Read more