A deep dive into the distinction between defensive applications and cybersquatting

An increasing number of enterprises are choosing to register defensive trademarks in order to better protect their brands and to lower the risk of registrations by cybersquatters. Recent registrations have shone a light on this issue: Alibaba has registered a number of defensive marks, including ALI GRANDPA, ALI MAMA and ALI DAD, while Laoganma, meaning ‘old godmother’ in Chinese, registered the serial marks for OLD GOD-DAD and GODSON. The purpose of applying for such trademarks is not for actual use, but to prevent them from being rush-registered by others. Compared to endless opposition or invalidation actions, registering defensive trademarks is usually a cost-effective strategy. 

However, in accordance with Article 4 of China’s Trademark Law (see "CNIPA cracks down on malicious registration using Article 4 of the Trademark Law"), questions have arisen about how best to clarify and adhere to the legal boundary between defensive applications and cybersquatting.  

Defensive trademarks under Article 4

On the one hand, Article 4 aims to specify "malicious trademark registration applications not for use purposes" and does not include "bona fide trademark registration applications not for use purposes". The intent of an enterprise applying to register a defensive trademark is to protect itself against infringement before it happens – this being in good faith, it does not violate Article 4.

On the other hand, the legislative intention of Article 4, in addition to prohibiting malicious registrations where there is no intention of actual use, also includes enhancing the use obligation of trademark registrants. Therefore, there is a need not only to distinguish between good faith and bad faith when filing, but also to take the use obligation into account. If the trademark is filed without intention of use, it cannot fulfil the use obligation.

Given that the Trademark Law follows a first-to-file principle, rather than requiring the applicants to use the mark before registration, the applicant could apply for the registration of unused trademarks, including defensive and reserve or storage trademarks. 

In such a scenario, the key difference between defensive applications and cybersquatting is the subjective intention. In other words, while defensive registrations are permitted, they must not be excessive.

Typical models of defensive trademarks

In practice, the typical models of defensive trademarks, registered for protection of the core mark, are usually classified under three different types:

• applications for defensive trademarks concerning the core mark in the full 45 classes – for example, Red Technology Co Ltd applied for 362 trademarks covering 45 classes, including RED, RED book, XiaoHongshu REDSIGN, XiaoHongshu Global Selection, and the XiaoHongshu brand;
• applications for defensive trademarks which are similar to the core mark in the main business field – for example, Sichuan Haidilao International Holding Ltd applied for HAIDILAO, 海底涝 (similar to ‘Haidilao’ in pronunciation, but in different Chinese characters) and SANYIDIILAO in Class 43; or
• applications for defensive trademarks that are dissimilar to the core mark in the main business field – for example, Sichuan Haidilao International Holding Ltd applied for YUDIILAO and other administrative division abbreviations combined with ‘diilao’.

How to distinguish defensive trademarks from cybersquatting

One of the standout points of the new Trademark Law implemented in 2019 is that malicious trademark registration applications without intention of use will be rejected under Article 4. However, this does not apply to all such applications. In November 2021, the official website of the China National Intellectual Property Administration issued the Trademark Examination and Trial Guide. This listed two exceptions, namely:

• if the applicant applies for a trademark with the same or similar logo of its registered trademark based on defence purposes; or
• if the applicant applies for the trademark in advance with an appropriate number for their future business plan, and with realistic expectations.

The first exception refers to defensive trademarks and the second to reserve or storage trademarks. These guidelines make things a little clearer – when applicants file a defensive mark, there is no restriction on the number of specified marks or classes, nor is it necessary for the applicant to explain the circumstances of their application for defensive marks that are not similar to the core mark. If the applicants file a reserve or storage mark, the administration will take the number of applications into account and ensure that this is consistent with the applicant’s business scope. 

Article 24 of the Trademark Law stipulates that a new application for registration should be filed when the trademark is changed. The applicant can apply for registration of all trademarks in use, so it can be presumed that the first registration type – for core and defensive marks that are similar to the core mark for the full 45 classes – conforms to the guide. In this scenario, Article 4 of the Trademark Law is not applicable.

An applicant can apply for a number of trademarks to form a ‘trademark moat’, which protects the rights of the core mark. However, the radius or scope of protection cannot be too large, otherwise it will hinder the legitimate rights of others and could be identified as excessive defence.

The second type of registration application – for defensive marks that are similar to the core mark – is acceptable in accordance with the guide, but the number of applications will be strictly considered and examined.

The third type – for defensive marks that are dissimilar to the core mark – must be combined with the applicant's other circumstances to determine whether it constitutes cybersquatting.

The greater the similarity between the defensive mark and the core mark, the greater the risk of overlap between the protection scope and the core mark, thus, the greater the number of defensive trademarks that can be allowed. On the reverse, filing multiple applications could occupy more trademark resources, thereby reducing the number of permissible defensive trademarks. In other words, the protection scope of defensive marks that are similar to the core mark is much greater than when the defensive marks are dissimilar to the core mark.

Putting it into practice

The case of Laoganma highlights this distinction. The trademark holder, Guiyang Nanming Laoganma Flavor Food Co Ltd, registered 301 trademarks in total, including its core mark for Laoganma, as well as some defensive marks (eg, GODMOTHER, GOD-DAD, GODSON). This is a typical model of the application for over a dozen defensive trademarks in the key business field for full protection of the core mark. Here, the reputation and social influence of Laoganma will be taken into consideration when verifying the scope of the applications.

Conversely, there have been cases in which the application of Article 4 led to a rejection of applications due to excessive defense. For example, a company in Shenzhen registered the trademark PRESIDENT DING, and then applied for over 60 trademarks of the same ‘president’ and ‘surname’ format, such as ‘President Peng’, ‘President Xue’ and ‘President Ouyang’. During the substantive examination, the examiner issued a review opinion requiring the applicant to explain the use intention, the number of applications, and to provide evidence in support of the application. The applicant stated that the registration was defensive of the mark PRESIDENT DING. The group of 'surname' and 'president’ trademarks applied for in addition to the PRESIDENT DING mark were identified as instances of cybersquatting, which violated Article 4 of Trademark Law.

Key takeaways

The examiner will comprehensively consider various factors when making a decision about whether a mark or group of marks are cybersquatting, or merely defensive. When the notice of examination opinions is issued, it is likely to be considered excessive defence or cybersquatting if the scope covered by the marks is too broad, if they are too dissimilar to the core mark or if there is malicious intention of no actual use. Evidence of circumstance must be submitted with the application or it will be difficult to seek support when arguing that the marks are defensive.