Understanding the legislation that governs non-use cancellation attacks

It is essential for rights holders to understand the rules and regulations involved in non-use cancellation attacks, particularly given the fast-moving legislative background. A firm grasp on the details and criteria will facilitate good practice and an effective defence strategy.

In China, actual use is not a prerequisite for a trademark application or registration. In other words, it is not strictly required that a trademark is in use at the time of application for registration. However, non-use still has a negative impact on registration because a trademark’s substantive value lies in its actual use. In accordance with Article 49.2 of China’s Trademark Law, if a registered trademark is not used for three consecutive years without a justified reason, any entity or individual can initiate a non-use cancellation action and challenge the mark’s validity. 

Procedures

In a non-use cancellation procedure in China, the burden of proof will fall on the rights holder of the challenged mark. Considering the long-term examination timeline in trademark assignment and coexistence negotiations, non-use cancellations have become a popular way to clarify uncertainties, especially if prior citations have been registered for over five years, or if they have been filed in good faith, even if they are confusingly similar.

The legal spirit of the non-use cancellation system is to clean up so-called ‘zombie trademarks’ and release idle trademark resources. Nonetheless, due to the vast trademark landscape, coupled with the sharp rise in applications in China, there are still a considerable number of marks that have long been out of use. According to the bi-monthly reports published by the China National Intellectual Property Administration (CNIPA), about 80% of trademark applications are cancelled after review of the non-use cancellation procedure. This indicates that the strategy of non-use cancellation has served as an effective measure to remove obstacles to application.

Regulations

In contrast to review and litigation procedures, laws and regulations do not strictly stipulate legal document exchange and cross-examination in non-use cancellation cases. In practice, after the Trademark Office formally accepts the non-use cancellation application, it will not share the materials with the respondent, but it will issue a notification asking the respondent to submit actual use evidence within two months, or provide legitimate reasons for a lack thereof. After receiving and examining this, the office will make the decision directly.

In the review of non-use cancellation procedures, the Trademark Review and Adjudication Department will forward the petition and materials to the respondent, invite them to respond. Then, they will give the same materials to the applicant for review and challenge, in accordance with the Regulations on the Implementation of China’s Trademark Law and the Trademark Review and Adjudication Rules.

In administrative litigation, the court strictly exchanges both parties’ petitions and use evidence in compliance with the requirements of the procedural law. The parties can fully review and cross-examine evidence in multiple rounds, and debate or file rebuttals during the court hearing procedure.

Examining the evidence for use

In non-use cancellation procedure, the examiners may not strictly distinguish between the use evidence of goods and services. In other words, if the evidence chain can be formed partially for goods or services, it is highly likely to be identified as legitimate use evidence for all claimed goods and services together.

Recently, however, examiners have been opting to review goods and services separately. In such instances, as well as notifying for the provision of use evidence, "if the use of evidence materials could be able to prove the use of partially approved goods, the bureau will maintain the registration of the trademark over such goods and cancel the registration over rest of the unused goods".

In review, examiners will usually distinguish the use evidence between the particular goods or services that have applied for revocation, especially in the case of individual items. Further, the Trademark Review and Adjudication Department will review the rebuttal as filed by the respondent. As a result, the respondent will usually have a strong incentive to highlight problems with the use evidence.

At the stage of administrative litigation, the court will scrutinise the authenticity, legality and interrelation of the trademark’s use evidence in accordance with the Evidence Rules of Civil Litigation, with ‘high probability’ functioning as the determination standard.

The significance of this was highlighted on 10 September 2021, when the Beijing Intellectual Property Court held a briefing on penalty for perjury in administrative litigation cases. In compliance with the briefing, the court has since concluded 3,843 administrative litigation cases over review of non-use cancellation actions. Among them, 970 decisions made by CNIPA were revoked, with a cancellation rate of 27.7% - much higher than the average. In such cases, it is more common for trademark registrants to submit additional new evidence in the process of administrative litigation.

Keeping evidence accessible

To determine the real use of the challenged mark, evidence should be unlocked for the duration of the procedures. Further, the registrant should have the chance to supplement additional use evidence that had not been submitted before the deadline.

If the trademark registrant does not submit use evidence, the office will automatically review the evidence submitted in the earlier non-use cancellation procedure, rather than make a direct decision of revocation. For cases in which the registrant has filed use evidence in earlier non-use cancellation procedures, the office will automatically take them into consideration with the new evidence submitted in review of the non-use cancellation stage.

Key takeaways

It is becoming increasingly common to submit new evidence in the administrative proceedings of rehearing the cancellation. Some trademark registrants even fabricate and submit false use evidence at this stage, and rights holders should bear this in mind when involved in non-cancellation attacks.

Next week we will discuss strategies that can be used to defend against non-use cancellations.