China moves to further curb malicious ‘trademark squatting’

Trademark rights to ‘Ben Fu’, the most widely recognised wine brand in China have been secured by their rightful owner, Treasury Wine Estate (“Penfolds” wine) (TWE) in the Beijing High People’s Court.

The well-known trademark was previously registered in 2009 by notorious ‘trademark pirate’, Li Daozhi. China’s first-to-file system enabled Daozhi to obtain exclusive rights as first registrant of the Ben Fu trademark, despite the fact that TWE had operated in China under the Ben Fu name for 25 years and had been well known there for over 20 years.

The Beijing court ended the protracted five-year litigation by cancelling registration of the Ben Fu mark on the basis that Daozhi had failed to demonstrate it had engaged in any genuine commercial activity using the mark, allowing TWE to seize legal rights to continue using Ben Fu in its activities across China.

This decision indicates that China’s attempts to strengthen its trademark protection laws may finally be coming to fruition. Attempts in 2014 to address the prevailing ‘trademark squatting’ epidemic saw the introduction of Paragraph 2, Article 15 of the Trademark Law which directed additional focus to whether a disputed trademark had an existing reputation in China prior to registration.

Further refinements to this section came into effect on 4 January 2017 with the implementation of  ‘Standards for Application of Paragraph 2, Article 15 of the Trademark Law’. These standards specify:

  • how “prior use” should be determined
  • when a relevant contractual, business or ‘other’ relationship will be found to exist between an applicant and third party in a disputed trademark matter; and
  • what evidence can be used to prove the existence of those relationships.

They also indicate that a disputed mark does not need to be ‘well-known’ to gain protection on the basis of prior use.

As a whole, recent revisions demonstrate a willingness on the part of the Chinese Trademarks Office to recognise and protect prior rights and curb unfair competition. This opens up new hope for companies stung by trademark squatters, many of whom have been forced to pay transfer or licensing rights to use their own brand, undertake a complete rebranding of their product, pursue fruitless litigation or leave the market entirely. Moreover, it is anticipated that the Ben Fu case will provide a tangible outcome upon which further challenges may successfully be brought within China.

Trademark holders seeking to expand their enterprise into foreign jurisdictions must recognise the chasm that still exists between trademark protections afforded in Western jurisdictions and those in developing Asian markets and seek reliable advice. Developing an intellectual property strategy early on, is vital to ensuring protection of your rights and making your expansion a successful endeavour.