Key Practice Takeaways for Recent Developments in China, the United Kingdom, and Mexico

Kilpatrick Townsend & Stockton LLP
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A global pandemic isn’t the only major event that has impacted the practice of trademark law over the last year. For brand owners already reeling from workplace and business changes brought about by the crisis, there are also substantial law changes that impact their global trademark portfolios. This article offers takeaways for best practices in China now that the dust has started to settle on its monumental law changes over the last few years, as well as the key elements and practical implications of developments following Brexit and changes in Mexico’s trademark practice.

China

China is one of the most attractive markets for various brands due to the sheer size of China’s population. By the end of 2019, China had already reached a total population of 1.4 billion. This dynamic market represents an enormous opportunity for businesses. No matter if you are interested in entering this particular economy or have already laid down a certain foundation in China, protecting your brand and trademarks in China should be one of the top priorities for brand owners. Here are some novel and straightforward techniques that could help a brand to protect their trademark rights in China.

Takeaway #1 - File Trademarks in China as early as possible and as broadly as possible as China is a first-to-file jusridiction. Using a mark in China does not give you trademark rights. Having trademark registrations is the only way to obtain trademark rights in China.

Thirteen years ago, China had approximately 640,000 trademark filings for the entire year. In recent years, the trademark application numbers had increased dramatically. There were approximately 7.3 million applications filed in 2018, 7.8 million applications filed in 2019, and 9.1 million applications filed in 2020.

China is a first-to-file jurisdiction as opposed to a first-to-use jurisdiction. Having a trademark registration is the only way to obtain exclusive trademark rights on products or servcies in China. In addition, a trademark applicant is not required to present use of a mark or declare an intention of use upon filing. The only documents that are required by the China National IP Adminstraiton are: (1) an application form; and (2) a copy of the applicant’s business license or a Certificate showing that the aplicant is an active business. Compared to other jurisdicitons, filing costs in China are comparatively less expensive. We have seen numerous occasions where a brand’s mark had already been registered by a Chinese entity or individual in China before a brand had entered the markert. As a result, filing trademarks in China as early as possible is a fundmental step in protecting trademark rights in China.

China also adopts a unique subclass system, which breaks up a class into different subclasses and subgroups. Goods and services that fall in different subclasses or subgroups are regarded as dissimilar to each other even if they are classified in the same class. For example, tablet computers and smartphones both fall in class 9, but tablet computers are categorized in subclass 0901 and smartphones are assigned to subclass 0907. Because they fall in different subclasses, they are considered to be different from each other in China despite the fact that these products contain similar components, features and functionalty. In other words, if a trademark registration only covers tablet computers in subclass 0901, a third-party may obtain a registration for an identical mark in the same class covering smartphones in subclass 0907. Unless there are clear obstacles in a particular subclass or subgroup, a tademark appliction should cover all subclasses and subgroups in a class of interest.

Takeaway #2 - Lack of prior trademark rights in a particular class is no longer fatal. Brand owners can still enforce IP rights based on the copyright claim, the bad faith claim, and the well-known claim.

In addition to obtaining trademark registrations in China, another essential approach in protecting trademark rights is to monitor and object to third-party published applications or registrations that are identical or confusingly similar to an existing trademark. An opposition is to filed against a published application in China. An invalidation action is to be filed against an existing registration.

The most common grounds asserted in an opposition and/or invalidation action are based on Article 30 and Article 31 of the China Trademark Law where a petitioner argues that the disputed mark is similar to a pre-existing registered trademark of the petitioner and covers similar goods or services. But, what if a business or a brand owner does not have prior trademark rights in a particular class or particular subclass, does that mean opposition or invalidation actions are unattainable?

A straightforward answer is NO. There are other grounds that can be relied on even if prior trademark rights are in absence. For example, a claim of prior copyright rights could be a prevailing basis if the disputed mark is identical or confusingly similar to the prior copyright rights. China is a member of the Berne Convention for the Protection of Literary and Artistic Works (1886). Therefore, a petitioner is allowed to claim copyright rights outside of China as long as the alleged copyright rights were registered in a member country of the Berne Convention.

Another basis that can be relied on, in the absence of prior trademark rights, is to demonstrate that the disputed mark was filed in bad faith. China Trademark Law was amended in 2019, and a new provision was included in Article 4 of the law. This new provision indicates that “a bad faith application for a purpose other than use shall be rejected.” It also allows Chinese examiners to reject and cancel malicious trademark applications and/or registrations despite the fact that a petitioner of an opposition or invalidation action does not have prior trademark rights in China.

Last but not least, if a mark has been recognized as a well-known or high-fame mark in China, the well-known/high-fame status can also be asserted in support of an opposition/invalidation action when prior trademark rights do not exist in a particular class or subclass.

Takeaway #3 - Always contest an unfavorable non-use cancellation decision. The examination standards adopted by examiners at the first level and the Review Board level are different. Very often, the examiners at the first level accept questionable or bogus evidence. We usually recommend filing appeals against unfavorable non-use cancellation decisions so that our clients have the opportunity to review the submitted use evidence then decide whether to submit arguments challenging the submitted evidence.

Another way to remove a registered trademark in China is through a non-use cancellation action. This type of action can only be filed against a registration that has been registered for more than three years in China. If the owner of a disputed registration does not submit use evidence within the allowed time frame, the disputed registration will be cancelled.

If, however, the owner of a disputed registration does submit use evidence within the time frame, the first level examiner would review the submitted evidence and issue a decision. There is no exchange of evidence at this level, and the petitioner will not be allowed to review the submitted evidence. The only way to review the submitted evidence is to contest an unfavorable decision by filing an appeal to the Review Board. Once an appeal has been filed, the submitted evidence will be forwarded to the petitioner for review, and the petitioner is entitled to file arguments challenging the submitted use evidence.

In practice, we encountered a number of cases where accepted use evidence contains major defects. The examination standards adopted by the Review Board are stricter than the standards adopted by the first level examiners. Unless there is a clear indication of use of a mark on the registered goods or services, it is worthwhile to appeal an unfavorable decision so that the petitioner of a non-use cancellation action has the opportunity to review what was submitted before deciding the next steps.

The United Kingdom

The possible impact of Brexit has been a hot topic in the trademark world for the last few years. Now that Brexit is a reality, it is impacting filing programs, enforcement strategies, and budgets.

As of January 1, 2021 the United Kingdom was no longer a member of the European Union. As a result, the UK was no longer protected under an EU trademark registration. What is the impact of Brexit on an existing trademark portfolio? The answer depends on the status of your EU filings at the time of Brexit.

Following Brexit, if the EU trademark or international registration designating the EU was registered on or before December 31, 2020, the trademark holder automatically received a cloned UK registration that mirrored the underlying EU trademark registration, including the owner, the mark, the goods/services, and the priority filing date.

If the EU application was still pending after December 31, 2020, the brand owner must take action by September 30, 2021 to receive protection in the UK. No UK clone will be automatically created for EU application that did not register before January 1, 2021. Instead, brand owners need to engage UK counsel to file a new UK national application that relies upon the original EU application for its priority date.

Takeaway: Aside from the procedural technicalities, Brexit will have a practical impact on almost any large global portfolio. For example, the automatic cloning of UK filings from EU registrations can bloat portfolios that may already be large and difficult to manage. Brand owners should evaluate whether the automatically cloned UK filings are actually necessary for their businesses. This can be done either with an audit now, or on a case-by-case basis as the filings come up for renewal. Without such an audit, the brand owners may face increased costs and portfolios containing a large number of unnecessary filings.

Trademark owners should budget for additional UK filings and searches going forward, as EU searches will not cover UK uses and filings. It is also important to review any existing (and future) agreements or licenses to see how the European Union is defined, and whether separate coverage for the UK should be addressed. Finally, clients should remain mindful that UK courts will no longer be able to grant EU wide relief, as this may impact the preferred jurisdiction for enforcement actions.

Mexico

There is now only one official action in Mexico - the opposition, response, and final allegations are all forwarded together to the examiner for consideration during substantive examination.

As for the practical effects of this change, if a party opposes another mark:

  • it does not suspend the application process
  • it does not automatically determine the outcome of the examination by the trademark office

Instead, the examiner will either grant the registration or issue a provisional refusal based on the opponent’s trademark or any other prior registration that he/she considers as an obstacle for the application involved, or may reject the application based on other grounds. If the provisional refusal arises, the applicant gets a chance to respond.

Takeaway: Traditionally, trademark applications are rejected in Mexico when they reproduce totally or partially a prior registered element and cover the same, similar or related goods or services. This leads to an interesting dilemma for trademark owners. Should trademark owners forego the opposition process and rely on the possibility that the trademark office will reject the filing based on its company’s prior mark? In almost all instances, it is best to move forward with an opposition following publication instead of relying on the trademark office to identify the conflict with your company’s filing. Even if the marks are identical and for very similar goods or services, the best practice is to err on the side of opposing the application and raising the conflict with the examiner. The likelihood of success is higher at the beginning of the process than it likely would be in a follow-up cancellation action. In addition, because court cancellations actions are more expensive and time consuming, the opposition process may ultimately end up being the most cost-effective option in the long run.

As always, it is important to consult with local practitioners in that jurisdiction to confirm whether there are any updates on the relative law and best practices in that area before moving forward.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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