Judgment Gist

Before the trademark registrant applies for trademark registration, if another person has used a trademark that is identical or similar to the registered trademark and has a certain influence on identical or similar goods before the trademark registrant, the exclusive right holder of the registered trademark has no right to prohibit the user from continuing to use the trademark within the original scope of use, but may require it to attach appropriate distinguishing signs. According to the provisions of the third paragraph of Article 59 of the Trademark Law, the establishment of the defense of prior use shall meet the following requirements: 1. The accused trademark has been used before the trademark registrant applies for trademark registration; 2. The user uses the accused logo before the trademark registrant; 3. The prior used unregistered trademark has certain influence before the trademark registrant applies for trademark registration; 4. The user can only use it within the "original scope of use".

Case Information

Case Summary

Mitsubishi Pencil Company, Limited (hereinafter referred to as "Mitsubishi Pencil Company") is a world-renowned manufacturer of writing utensils. "PURE MALT" is a trademark with high distinctiveness created by Mitsubishi Pencil Company, and is used with respect to pen products as its high-end brand. In July 2019, Fanghua Qianwei Co., Ltd. (hereinafter referred to as "Fanghua Qianwei") filed a trademark application for "PURE MALT" in China, and obtained registered trademark rights on "PURE MALT" on pens, stationery and other goods in March 2020.

In May 2021, Fanghua Qianwei filed a trademark infringement lawsuit with Dongguan Second Primary People's Court, Guangdong (hereinafter referred to as the "court of first instance") on the grounds that Mitsubishi Pencil Company's production of pen products with the "PURE MALT" logo and authorization of more than 30 Tmall stores to sell the pen products bearing the "PURE MALT" logo constituted trademark infringement.

In the first instance, in response to Fanghua Qianwei's claims and grounds, Mitsubishi Pencil Company argued: 1. Mitsubishi Pencil Company is a world-renowned manufacturer of writing utensils, with a long history and high popularity, and its popularity will naturally have a positive impact on the products bearing the trademark involved in the case it produced and sold. 2. "PURE MALT" is a trademark created by Mitsubishi Pencil Company for business development. Mitsubishi Pencil Company had no malicious intent in creating and using the trademark and its use is legitimate. The meaning of the trademark corresponds to the body material and shape of its series of products. Mitsubishi Pencil Company was the first company using "PURE MALT" on pen products. 3. The "PURE MALT" logo has been publicized and used by Mitsubishi Pencil Company, and had a certain degree of popularity before the application and registration date of the trademark involved in the case. The use of "PURE MALT" by Mitsubishi Pencil Company constitutes prior use of an unregistered trademark. 4. Not only does Fanghua Qianwei have no actual business premises, no business activities, but also it has no actual trademark use, and the defendant is not liable for any compensation according to the relevant provisions of Article 64 of the Trademark Law. 5. Fanghua Qianwei is a Hong Kong company. Mitsubishi Pencil Company set up a subsidiary in Hong Kong as early as 1988 to conduct business. In view of the popularity of Mitsubishi Pencil Company, it is impossible for Fanghua Qianwei not to know that Mitsubishi Pencil Company uses the "PURE MALT" trademark. 6. Mitsubishi Pencil Company has filed invalidation against the trademark in accordance with the law, and the basis of the trademark rights claimed by Fanghua Qianwei is entirely unstable.

The court of first instance concluded that the issue of the dispute in this case was whether Mitsubishi Pencil Company's prior use defense against the involved sign could be established, and summarized that prior use defense shall meet all the following conditions according to the provisions of the Paragraph 3 of Article 59 of the Trademark Law: 1. The accused sign was used before the trademark registrant applied for trademark registration; 2. The user used the accused sign earlier than the trademark registrant who applied for trademark registration; 3. The prior unregistered trademark has already established certain influence before the trademark registrant applied for trademark registration; 4. The user could only use the sign within the "original scope of use".

The court of first instance made the following determination based on the evidence in the case and the claims of the parties. Firstly, Mitsubishi Pencil Company used a trademark similar to the registered trademark "PURE MALT" on the same product. Secondly, the Notarial Certificate submitted by Mitsubishi Pencil Company can prove that in 2015, Mitsubishi Pencil Company's "PURE MALT" series of products had sales records on domestic e-commerce platforms. Combined with the exhibition photos and other evidence submitted by Mitsubishi Pencil Company, it is sufficient to conclude that Mitsubishi Pencil Company had used the logo involved in the case in the domestic public commercial field as early as 2015 which is earlier than the plaintiff’s application for the trademark "PURE MALT" on July 16, 2019, so Mitsubishi Pencil Company used the trademark involved in the case before the plaintiff. Thirdly, the Notarial Certificate showed that the products involved in the case of Mitsubishi Pencil Company were reported or introduced on many online platforms in China between 2013 and 2021; searching for "pure malt" in the search engines, most of the top links were related to the involved products of Mitsubishi Pencil Company. There were records of continuous sales of the products involved in the case on domestic e-commerce platforms. It can be seen that the product involved in the case have already been known to the relevant public in the domestic pen stationery market at least within the scope of the Internet, and the "PURE MALT" sign has the function of identifying the source of goods within this scope. Therefore, the "PURE MALT" sign used by Mitsubishi Pencil Company has a certain influence. Finally, the accused infringing goods in question were pen products and were purchased through online sales platforms, so Mitsubishi Pencil Company's use of the trademark in question did not exceed the scope of original use. In summary, the court held the prior use defense claimed by Mitsubishi Pencil Company is established. It also held that the plaintiff's application for trademark registration was close to the time of its establishment, and it did not submit evidence to prove that its actual use of the trademark involved in the case, which was inconsistent with general business practice. There is no evidence to prove that the plaintiff has goodwill or other interests that must be protected judicially, and its purpose in bringing the lawsuit in this case is hardly justified. Therefore, the court of first instance dismissed all of the plaintiff's claims.

Unsatisfied with the first instance judgment, Fanghua Qianwei appealed to the Dongguan Intermediate People's Court of Guangdong Province (hereinafter referred to as the "court of second instance ") against the first instance judgment. Subsequently, the court of second instance served the Notice of Payment of Litigation Costs to Fanghua Qianwei in July 2022, but Fanghua Qianwei did not pay the appeal court fee within the specified time limit. Accordingly, the court of second instance issued a second instance ruling on September 29, 2022 that the appeal is deemed withdrawn by Fanghua Qianwei automatically. The judgment of first instance took effect on the date of service of this ruling.

Attorney’s Opinion

The prior use defense of trademark is a system introduced when the Trademark Law was amended in 2013 and is stipulated in the paragraph 3 of Article 59 of the Trademark Law. Where there is evidence to prove that the accused infringer has used the accused trademark which is identical or similar to the registered trademark on the identical or similar goods before the application for registration of the registered trademark, and the use is continuous and makes the mark achieve certain influence, the prior user can continue to use the trademark within the scope of the original use and shall not be held to constitute trademark infringement.

This case is a typical case of the prior use defense of an unregistered trademark, and the key to the success of the defense lies in the collection of evidence of the prior use of the trademark. In addition to submitting conventional trademark use evidence such as prior exhibition materials, invoices, product manuals, etc. held by Mitsubishi Pencil Company, our lawyers also collected key favorable evidence such as netizen discussion pages in the "Pen Forum" in 2013, sales records and consumer reviews on JD.com and other online platforms in 2015 through extensive Internet searches, and carried out timely notarization and preservation of relevant evidence. In the judgment of the first instance, the court repeatedly mentioned the notarial certificate of the network notarization when determining the prior use, which shows its importance to the determination of prior use.

In addition, in judicial practice, if the party claimed prior use defense can provide evidence to prove that the disputed mark has a high distinctiveness and the party claimed protection registered the trademark out of bad faith, it will greatly affect the judge's discretion and is conducive to the determination of the prior use defense.

In this case, Mitsubishi Pencil Company's "PURE MALT" series of pen products have been sold in China for many years, and with their excellent quality, they enjoy a very high reputation among the relevant consumers in China. Moreover, "PURE MALT" originally means "pure malt; made from all malt", which itself is not a commonly used English word, and it has very high distinctiveness on pen products. The reason that Mitsubishi Pencil Corporation used this name is because pure malt whisky is of the best quality and the word can be used to describe whisky, and the pen body of the series also used the material and shape of the oak barrel used to preserve the whisky.

At the same time, in order to prove that the sign involved in the case was the original creation of Mitsubishi Pencil Company, Mitsubishi Pencil Company submitted the trademark registration certification documents in Japan and Hong Kong, which were earlier than the application date of Fanghua Qianwei, and explained and provided certain evidence on the creation concept and origin of the "PURE MALT" trademark. During the court arguments at the trial, our lawyer also specifically asked Fanghua Qianwei to explain why Fanghua Qianwei applied for a trademark that was exactly the same as the prior trademark of Mitsubishi Pencil Company, and the lawyer representing Fanghua Qianwei only replied that it was because the founder liked to drink whisky, so he applied for a whisky-related trademark. This explanation was obviously unconvincing, and it further deepened the judge's impression that Fanghua Qianwei was a malicious pre-emptive registrant.

In addition, Article 64 of the Trademark Law stipulates that "If the owner of the exclusive right to use a registered trademark requests compensation and the accused infringer raises a defense that the owner of the exclusive right to use a registered trademark has no use of the registered trademark, the people's court may request the owner of the exclusive right to use a registered trademark to provide evidence of the actual use of the registered trademark within the preceding three years. If the owner of the exclusive right to use a registered trademark cannot prove that it has actually used the registered trademark within the preceding three years, nor can it prove that it has suffered other losses due to the infringement, the accused infringer shall not be liable for compensation. ”

Based on the above provision, Mitsubishi Pencil Company also requested Fanghua Qianwei to explain the use situation of the "PURE MALT" trademark and submit relevant evidence. Although the lawyer representing Fanghua Qianwei claimed that Fanghua Qianwei had used the trademark, he did not submit any valid evidence of use until the first instance judgment. The adversary lawyer only showed a ballpoint pen bearing "pure malt" during the court hearing. Considering that the evidence was very likely to be specially customized for this lawsuit, our lawyer reminded him in court that he would bear the corresponding legal responsibility for forging evidence, and the adversary lawyer did not submit the ballpoint pen as evidence to the court of first instance under pressure. The adversary lawyer's response and attitude also made the judge’s discretion favorable to us.

In the judgment of first instance, the court of first instance also pointed out that "the plaintiff's application for trademark registration was close to the time of its establishment, and it did not submit evidence to prove that its actual use of the trademark involved in the case, which was inconsistent with general business practice. There is no evidence to prove that the plaintiff has goodwill or other interests that must be protected judicially, and its purpose in bringing the lawsuit in this case is hardly justified."

Finally, according to Article 32 of the Trademark Law, invalidation can be filed against "a pre-emptively registered trademark by illegitimate means that has been used by another person and has a certain influence". In addition to actively responding to the trademark infringement lawsuit filed by Fanghua Qianwei, Mitsubishi Pencil Company also filed an invalidation application against the trademark on which the case was based, and the trademark was eventually declared invalid by the China National Intellectual Property Administration. Although the favorable invalidation decision was made later than the first instance judgment, it can be presumed that the reason why Fanghua Qianwei finally abandoned the appeal was most likely because the China National Intellectual Property Administration recognized Mitsubishi Pencil's claim in the invalidation, and even if it appealed, its claim of infringement is not likely to be supported by the court of second instance.

This case is an important reference for others on how to claim defense of prior use of trademark and how to deal with malicious rights protection act.