Lamborghini and Novartis prove effectiveness of invalidation and opposition proceedings to combat trademark squatting

China’s National IP Administration (CNIPA) is cracking down on malicious trademark registration.

One of the ways it is doing this is through its opposition and invalidation system, which allows legitimate trademark owners to oppose applications or invalidate registrations that are believed to be infringing their rights. Trademark owners will now have an opportunity to defend their rights and prevent malicious registration of their marks. The opposition and invalidation system serves as an effective tool to safeguard the interests of genuine trademark owners and deter potential trademark squatters.

A commonly cited provision for combatting malicious registrations is Article 44(1) of the Trademark Law. According to this provision:

trademarks obtained through deception or other improper means can be declared invalid by the CNIPA. Other entities or individuals can request the CNIPA to declare the registered trademark invalid.   

This mainly applies to invalidation procedures for already registered trademarks.  The following situations fall under the "obtaining registration through other improper means" category:

• if the disputed trademark applicant applies for the registration of multiple trademarks that are identical or similar to those with a certain reputation or that have distinctive features;
• if the disputed trademark applicant applies for the registration of multiple trademarks that are identical or similar to others' trade names, company names, names of social organisations and other institutions, influential product names, packaging or decoration; and
• other situations that can be deemed as obtaining registration through improper means.

If there is evidence in a case that can be applied to other provisions of the Trademark Law to refuse registration or declare the trademark invalid, the exception for obvious malicious intent will not apply to Article 44(1) of the Trademark Law.

Ex officio refusal

In one case, the owner of a Chinese app specialising in maternal and child products and parenting knowledge applied for more than 900 trademarks, including over 50 registration applications in 2022. During the examination of these new applications, the CNIPA issued an examination opinion notice, stating that the applicant submitted a large number of trademark registration applications, which significantly exceeds the needs of a normal business and constitutes malicious trademark registrations as they are not intended for use.

In such cases, the applicant must provide an explanation of their intentions and use of these marks, as well as necessary evidence. If these explanations and evidence are not provided, the CNIPA will formally reject the applications.

This measure can, to some extent, curb the occurrence of malicious registrations. However, it may also have an impact on entities that genuinely need to apply for multiple trademarks, especially when the applicant applies for marks that are identical or similar to their already registered marks for defensive purposes or in anticipation of potential future business needs. If an examination opinion is received, business plans can be submitted as evidence to prove an intention to use the marks and maintain their registrations.

Opposition actions

In the opposition against the NOVARTIS trademark (58696008), the goods covered by the opposed mark in Class 21 were not similar to the goods covered in the opponent’s cited mark in Class 5.  Therefore, the CNIPA held that the parties’ marks do not qualify as “similar trademarks over similar goods”. However, it is important to note that the opponent's cited NOVARTIS mark is highly distinctive and the opposed mark was exactly the same as the opponent’s prior mark. Further, it was discovered that the opposed party filed applications for trademarks that were identical or similar to those of other third parties, which were already registered or used and had a certain reputation and distinctiveness.

The opposed party failed to provide a reasonable explanation for these trademark creations. The CNIPA believed that the opposed party’s actions were deliberate imitations and plagiarisms. These actions disrupt the normal registration process and undermine fair competition in the market, which goes against the legislative spirit of the Trademark Law that prohibits trademark registration acquisition by deceptive or other unfair means and emphasises the principle of good faith.  Therefore, the opposed trademark was rejected.

Invalidation actions

In an invalidation action against the ESTOQUE trademark (under the registration number 35390278), Lamborghini claimed that the adverse party registered the mark by improper means and sought improper interests by asking for a high transferring fee.  The CNIPA supported the applicant's claim, stating that the registrant's action is in violation of Article 44(1) of the Trademark Law.

Lamborghini is a well-known luxury sports car manufacturer and the concept car ‘Estoque’ is associated with their brand. However, Lamborghini does not have a prior application or registration for this name. In addition to the disputed trademark, the adverse party constantly filed applications for the same mark and also filed many marks in different classes that imitate others’ famous brands or names. Additionally, the adverse party expressed their willingness to sell the related marks to Lamborghini for a high price of US$100,000. As a result, the applicant's argument was primarily based on Article 44(1) of the Trademark Law.

The road ahead

In many cases, the main challenge is that the disputed trademark is not a "similar trademark over similar goods" with the rights holder’s prior trademark, making it difficult to prove confusion among the relevant public. Further, if we want to expand protection through a well-known trademark claim, it is often difficult to gather enough evidence to meet the high threshold required. In such situations, it is crucial to investigate whether the adverse party has engaged in obvious malicious registrations, as this can increase the chances of success.

Considering the current official examination standards and attitude towards malicious behaviour, right holders should consider actively filing opposition and invalidation actions against maliciously squatted trademarks. As always, it is critical to register trademarks in a timely manner, which will help to establish strong foundations for brand development and protection in China.