The large number of trademarks in China, combined with their monopolistic characteristics, makes trademarks—particularly “valuable trademarks”—a limited asset in business competition, which inevitably results in a “scramble” for them. Additionally, the law requires trademark registrants to use and consistently utilize their registered trademarks. There is a three-year grace period after registration during which the registrant is expected to start using the trademark. After this period, anyone can contest the validity of a trademark on the grounds of “non-use for three consecutive years,” allowing them to request CNIPA to cancel the registration. The decision to cancel or uphold the trademark ultimately hinges on the evidence provided by the registrant.
1. Trademark cancellations always have a reason.
If you ever receive a notice regarding trademark cancellation (a request for proof of use), don’t be alarmed. Just as there is no love without a reason, trademark cancellations also occur for specific reasons.
The trademark cancellation system aims to eliminate “zombie trademarks,” rejuvenate trademark resources, and enable those who genuinely need them to secure trademark registrations. When there are conflicting trademarks that are identical or similar, later applicants must resolve these conflicts to obtain their registrations. The system favors the cancellation applicant, who only needs to conduct a preliminary investigation to file their application, while the burden of proof falls on the trademark registrant. As a result, trademark cancellation has become a common strategy for competing for trademark resources.
2. Your understanding of trademark usage may differ significantly from how CNIPA views it.
In a landscape where trademark resources are limited, trademark cancellation is a prevalent method for competition and is relevant to all business entities. If you ever find yourself facing a trademark cancellation, you will be better prepared.
In China’s trademark landscape, it’s typical for individuals to register multiple trademarks. A single trademark registered in one major category is considered one trademark (there are 45 classes for different industries). For instance, if a trademark is registered in five Classes, it counts as five trademarks; if two trademarks are each registered in five Classes, that totals ten trademarks. Generally, small businesses may hold several trademarks, while larger ones might have dozens or even hundreds.
Major corporations could possess hundreds or thousands of trademarks. However, not all of these trademarks are actively used. The trademarks in use represent only a small fraction; most are kept for “storage or defense” purposes. This strategy allows businesses to prepare for future growth and maintain brand integrity by preventing others from registering or imitating their trademarks. Consequently, the majority of your registered trademarks that are not actively used but are held for “storage or defense” may struggle to withstand challenges like cancellation due to non-use and could be at risk of being revoked.
A frequent scenario we come across is the use of the “Bamboo” trademark on “hoodies,” which is registered in five Classes: Class 25 (covering “hoodies, shoes, socks”), Class 9 (for “sunglasses”), Class 14 (for “accessories”), Class 18 (for “bags”), and Class 35 (for “advertising”). However, it is only actively used in Class 25. This situation puts the other four Classes at risk of cancellation. Additionally, within Class 25, if “hoodies” fall under subclass 2501, “shoes” under subclass 2507, and “socks” under subclass 2509, any subclasses not included in 2501 could also be at risk of cancellation. If a cancellation request is made, “shoes” and “socks” could be affected as well.
While trademark registrations are filed under broad classes, the application must detail the specific goods or services, which are categorized into different subclasses. The most recent trademark cancellation guidelines assess “by subclass,” meaning only the subclasses that are actively in use can be maintained. Therefore, just because the “Bamboo” trademark is used on “hoodies” does not imply that it is utilized across all five registered categories.
3. “Used Products” and “Registered Goods” Are Inconsistent
Another easily overlooked issue is that the products actually being used may not match the goods registered under the trademark, which can result in the trademark being revoked.
For instance, if a “hoodie” is sold but the trademark is only registered for “T-shirt” without including “hoodie,” even though both items are categorized under Class 25, a cancellation request could succeed because the evidence of use for “hoodie” would not support the trademark registration for “T-shirt.” Therefore, it is crucial to regularly review the alignment between registered trademarks and the products being sold. If any inconsistencies are identified, the trademark registration should be updated promptly; otherwise, if challenged, it could lead to the trademark being invalidated, significantly affecting the business.
This perspective focuses on the trademark registrant. Conversely, if your trademark application faces challenges and is rejected due to conflicts with existing trademarks, the fact that “most trademarks in China’s trademark database are not actively used” suggests a higher likelihood of successful trademark cancellations. This also indicates a greater chance of obtaining trademark registration by “cancelling prior trademarks.”
The trademark cancellation process has its pros and cons, as anyone can either initiate a cancellation or respond to one. For those looking to cancel a trademark, it’s crucial to conduct thorough preliminary investigations and evaluate the likelihood of success to ensure it fits with their trademark application strategies. On the other hand, for trademark holders, the key factor that holds up under examination is the actual commercial use of the trademark. If a trademark is not being utilized, resources can be redistributed based on the circumstances to those who truly require them.
4. Is the “Trademark Layout” at odds with the “Three-Year Cancellation System”?
You may question why so many trademarks are applied for if “reserve or defensive” trademarks can easily be canceled. What is the purpose of these applications?
To understand this, we need to consider the trademark landscape in China. The trademark application layout serves as a proactive measure to prevent others from registering similar or identical trademarks, making it a cost-effective strategy. Without this proactive approach, you risk facing trademark squatting or attempts to capitalize on well-known brands, which is quite common. While applying for trademarks may lead to challenges from others seeking to cancel “reserve or defensive” trademarks, the chances of this occurring are significantly lower than the risk of being squatted on. For instance, if you have 100 registered trademarks, only about 5-10 (5-10%) might be subject to cancellation challenges. In contrast, if you only register 20 trademarks that you actively use and neglect the remaining 80, the likelihood of those unregistered trademarks being squatted on could be as high as 80%.
On one hand, you have a passive approach to dealing with trademark squatting, and on the other, a proactive strategy to manage resources or respond to trademark cancellations (which this article will not delve into). The choice is evident. Trademark protection and maintenance is an ongoing process; there is no flawless system or universal solution—just a continuous negotiation of interests.
The marketplace resembles a battlefield; we must not only focus on tactics but also develop a solid strategy. By understanding the legal environment, the intent behind legal provisions, and the applicable rules, we can better leverage those regulations.