CNIPA Work Plan on Bad Faith, Suspensions, Unregistrable Marks

The China National Intellectual Property Administration (CNIPA) recently released its work plan for the years 2023 to 2025, which sets out 30 action points, with most focused on four areas of primary concern:

Bad faith trademark applications and registrations;
Abusive repeat filings of non-use cancellations;
The use of marks deemed inherently unregistrable – including those deemed likely to cause deception, as well as those creating “unhealthy social effects”; and
The need to allow suspension of cases where there are co-pending disputes involving bad faith actors.

As noted below, virtually all of CNIPA’s action points draw upon existing rules and policies, but are still of interest in that they highlight CNIPA’s priorities over the next few years.

Key Concern: Prohibition on Use of Unregistrable Marks

Point 6 of the CNIPA action plan indicates that relevant authorities will at some point begin actively monitoring to determine whether trademarks rejected as unregistrable and thereby prohibited from use are indeed in active use. The risks in this regard will no doubt be increased where a trademark owner has filed an appeal with CNIPA’s Trademark Review and Adjudication Division (“TRAD”), supported by evidence of use intended to prove fame and explain the way the mark is used.

Articles 10.1.7 and 10.1.8 of the PRC Trademark Law prohibit the registration, as well as use of trademarks that are deemed deceptive or misleading to consumers, as well as those that are deemed to cause “unhealthy social effects,” with penalties theoretically including significant fines and an order requiring rectification — essentially an injunction on further use of the mark.

Although these prohibitions were introduced decades ago, to date, national and local enforcement authorities have only rarely enforced them. As a result, foreign companies that have had applications for registration rejected on these grounds will often continue using them in China. This is of course likely to change, assuming CNIPA follows through with its action plan in this regard.

Implementation

Point 6 of the CNIPA work plan does not set out a concrete timeline for implementation or otherwise clarify the method of detection. But if experience is any guide, CNIPA will at some point soon implement a broad campaign and pursue a substantial number of cases to encourage voluntary compliance.

SIPS has begun monitoring for signs of such a campaign and will report on developments as news becomes available.

Possible Enforcement Mechanisms

It remains unclear for now how CNIPA will begin enforcing Articles 10.1.7 and 10.1.8. Very likely, it will rely upon local IP enforcement authorities – the Market Supervision Bureaux or “MSBs” — to conduct most investigations and impose sanctions. But CNIPA may well begin referring cases for investigation to local MSBs following the issuance of new decisions once they are final. Worst-case, CNIPA will comb its records for earlier decisions and ask local MSBs to commence investigations against a much larger number of companies.

Regardless, trademark owners will also need to consider the risk that competitors or unhappy consumers will report their use of prohibited marks to local MSBs on an ad hoc basis.

Suggested Preventive Measures

Brand owners that have had their applications or registrations rejected or invalidated based on Articles 10.1.7 and 10.1.8 are strongly advised to review the history of their applications and the current scope and scale of use of their marks.

Where there appear to be grounds to argue, consideration could be given to filing new applications, and once rejected, supporting appeals with more robust arguments and evidence.

Otherwise, depending on the circumstances, it may be more prudent to either amend the mark in question or replace it for use in China. Filing through the Madrid system may also be worth considering in appropriate cases.

Bad Faith Registration

As noted below, the Action Plan provides few specifics as to how CNIPA will strengthen its efforts to address bad faith trademark filings. However, Points 14 and 15 offer very specific measures to help victims of piracy to address abusive attacks by pirates in the form of repeated non-use cancellations and “malicious litigation” – both common steps by bad faith actors intended to increase pressure on victim brand owners to pay higher ransoms to settle.

Point 14 states that where a trademark owner is the target of repeated malicious non-use cancellation actions, the Trademark Office can proactively consider evidence of use that the victim brand owner submitted in cancellation actions within the prior 12 months – thus saving victim brands resources and resulting in faster decisions.

Point 15 of the Work Plan states the after a Chinese court has already confirmed bad faith by a pirate and the same pirate has engaged in “malicious litigation”, CNIPA may accelerate invalidation and non-use cancellation actions that remain pending, and otherwise deal with them more strictly. Point 15 also reminds that CNIPA enjoys the right to invalidate registrations held by bad faith pirates on an ex officio basis where Article 44.1 of the PRC Trademark Law is deemed to have been violated.

Overview of CNIPA Work Plan

Noteworthy Action Points

SIPS Observations

Point 6 – Prohibited Marks

Authorities will begin monitoring the use of trademarks that have been refused based upon provisions in the PRC Trademark Law prohibiting the registration and use of marks deemed deceptive (Article 10.1.7) and those causing “adverse social effects” (Art. 10.1.8).

If a trademark owner is found to be using a mark that it clearly knows is prohibited from use, local authorities shall impose severe punishment.

Article 10.1.7 refers to the marks that are deceptive, and easily mislead consumers as to the quality or origin of the designated goods or services. For example:

(it can be translated as “ZERO DEFECTS”).

Article 10.1.8 covers the marks which will cause adverse social effects. For example:

(a Buddhist symbol, but also used as an emblem of Nazi Germany)

Before filing new trademark applications, careful consideration should be given to determining the risk of rejection based on Articles 10.1.7 and 10.1 8.
Where applications have already been rejected on these grounds, brand owners may wish to support appeals with more thorough arguments and evidence.

Point 8 – Bad Faith

CNIPA will strengthen the investigation and collection of evidence in cases involving bad faith filings, improve the mechanism for handling reports of cases, improve the channels for reporting complaints, and enhance the supervisory role of society (likely through greater media coverage of disputes).

CNIPA may be signaling a greater willingness to act upon ad hoc reports by victim brands explaining the bad behavior of bad faith pirates and their trademark agents. To date, CNIPA has only taken action in a small number of such cases.
SIPS typically suggests that trademark owners file informal interference letters when they detect pending applications by applicants that have a demonstrated record of bad faith filing and malicious litigation.

Point 11 – Prohibited Marks

Consistent with Point 6 above, Point 11 states that CNIPA will crack down on trademark applications that can create significant adverse effects and those that are “obviously deceptive” under Articles 10.1.7 and 10.1.8, through the following measures:

Increasing reliance on ex officio invalidations of registered trademarks that create significant adverse effects.
Expedited handling of oppositions and invalidations and appeals.
Increasing enforcement particularly for marks that contain words that appear on a list of prohibited words maintained by CNIPA for use in handling trademark examination.
Proactively tracking down use of offending marks.
Accelerating examination and rejection, as well as ex officio invalidations.
Increasing the use of public notices and administrative penalties.

CNIPA’s list of prohibited words is not available to the public. However, trademark attorneys can often identify relevant risks when reviewing new marks.

Point 12 – Bad Faith

When reviewing oppositions and invalidations involving bad faith filers, CNIPA may consolidate related cases and hold oral hearings in major cases.

These proposed action points are already well within CNIPA’s power, but to date they have rarely been adopted due to limited resources.

Point 13 – Bad Faith

To improve efficiency, where a bad faith filing submits multiple applications without intent to use, these applications will be subject to special consolidated examination.

Same as above.

Point 14 – Malicious Non-Use Cancellations and Applications Filed on Same Day

When dealing with abusive non-use cancellations by bad faith filers, to alleviate the administrative burdens on victim brands, after notifying the parties, the Trademark Office may proactively obtain and consider evidence of use that the trademark owner has submitted in response to non-use cancellation actions involving the same mark filed by the same petitioner within the past year.

Separately, the Action Plan also takes aim at parties that file two applications on the same day in the names of different entities, knowing that the applications will then be subject to a longer examination period (currently three years). The Action Plan indicates CNIPA will address this phenomenon by expending examination of trademarks filed on the same day to combat this bad faith behavior.

These measures may well help to deter pirates to some degree from filing repeated non-use cancellations. In practice, this phenomenon is not that common. But it is encouraging to see that the Trademark Office may be willing to accelerate examination of applications by bad faith pirates and reject them more quickly. At present, most applications are examined in China within three to five months.

Point 15 – Bad Faith

Where a court has determined in a final judgment that a trademark registrant has acted in bad faith, other related invalidations and non-use cancellations are pending against the pirate’s marks, CNIPA will handle these more strictly.

CNIPA may also invalidate registrations on an ex officio basis where the pirate is deemed to have violated Article 44(1) of the PRC Trademark Law.

In practice, CNIPA have been implementing these measures for some time. But their inclusion in the Action Plan may help to increase the number of cases where CNIPA applies them.
Victim brand owners are advised to repeatedly ask for these special measures at appropriate stages of their disputes against more aggressive pirates.

Point 21 – Trademark Application Fees

CNIPA will conduct research on the optimization of trademark fee standards, and promote the establishment of a tiered fee system.

It is possible trademark filing fees will be increased to deter bad faith filers, particularly those with no intent to use.

Points 23 and 25 – Suspension of Cases

CNIPA will commence research leading to the introduction of procedures that will allow the suspension of pending cases in a manner that will bring greater benefits to rights holders, and address the problems created by bad faith filers that submit multiple applications for the same mark.

The refusal of the TRAD to suspend co-pending cases effectively forces many victim brands to refile and spend resources on appeals which are not typically required in other countries where suspensions are easily accessed.
CNIPA is expected to issue formal rules to facilitate suspensions before the end of 2023.

Point 26 – Bad Faith

While cracking down on malicious behavior, CNIPA will respect the rights of parties that have a genuine intent to use their marks, as well as those that have used their marks for an extended period of time.

The inclusion of this point in the Action Plan suggests that CNIPA may handle cases against bad faith actors in a more balanced manner where they have used their marks for an extended period of time, as well as where evidence of bad faith is not entirely clear.