Jiangxi HENGDA Hi-tech Co., Ltd. (HENGDA) is a manufacturer specializing in abrasion and corrosion-resistant materials for industrial equipment.

On September 2, 2008, HENGDA filed an application for the registration of the trademark “” (HENGDA in Chinese Characters) in Class 32, covering goods “legume drink, coke, milk tea (non-milk based), vegetable drink, pure water (drink), vegetable juices (beverages), non-alcoholic fruit juice beverages and lactic acid beverage (fruit products, non-milk)”. The trademark was registered on May 21, 2010.

On December 30, 2013, a person named Pan Di filed for the cancellation of the aforementioned trademark before the China Trademark Office (CTMO), on the ground of non-use for three consecutive years.

In order to sustain the registration, HENGDA needed to prove use for the period from December 30, 2010 to December 29, 2013.

On September 27, 2014, the CTMO found that the use evidence produced by HENGDA was sufficient to maintain the registration.

On October 23, 2014, Pan Di applied for review before the Trademark Review and Adjudication Board (TRAB). The TRAB scrutinized the evidence of use and found that it was either inconsistent, or in any way, merely symbolic. The TRAB granted the cancellation request on January 7, 2016.

HENGDA filed appeal to the Beijing Intellectual Property Court, which overruled the TRAB decision and maintained the validity of the trademark.

Pan Di and TRAB appealed before the Beijing High Court.

The TRAB and Pan Di argued, inter alia, that: 1) HENGDA has forged evidence; 2) the evidence submitted cannot prove that the disputed mark has been put into genuine commercial use; 3) HENGDA has no intention of preparing for the future use of the disputed mark; and 4) the use evidence does not suffice to prove that the disputed mark has been continuously used after the designated period and reached a certain scale.

On November 29, 2017, the Beijing High Court rendered a judgment reversing the first instance decision and confirming the TRAB decision to cancel the trademark.

The Court set the general principles to be applied by a trademark in order to avoid cancellation for non-use : 1) the evidence must be authentic and legitimate; 2) the act of trademark use must have occurred during the designated period; 3) the disputed mark must be visible on the evidence; and 4) the disputed mark, when being used on designated goods or services, must functions as a source identifier.

The court stated that the trademark cancellation mechanism aims to encourage and urge the trademark owner to use its mark so as to fulfill its source identifying function in the market.

Given that use evidence is mostly furnished by the trademark registrant, such evidence shall be subject to the cross-examination and rebuttal of the other party. The court should adopt higher scrutinizing criteria if the trademark registrant is suspected to have been forging evidence.

Therefore, the authenticity and relevance of every single piece of evidence should be assessed.

In this case, HENGDA produced license contracts and claimed that the products were produced by third parties. However, the evidence, which intended to prove that the trademark licensees had commissioned third parties to print HENGDA labels, manufacture and launch HENGDA mineral water into the market, were either flawed or questionable. The licensees could not prove that goods bearing the disputed mark had been launched in the market.

More specifically, the court ascertained the following facts:

• The bar code (used to identify the manufacturer of commodity) of the HENGDA mineral water indicates another entity other than the trademark licensee or the outsourced manufacturer of the trademark licensee.
• The time stamp (December 12, 2013) on the invoices accompanying the licensee’s sale of HENGDA mineral water predates the time (January 17, 2014) when the blank invoices were claimed by the licensee from the local taxation bureau.
• The licensees failed to provide corroborative evidence to prove that the products bearing the HENGDA labels had been launched into the market.
• The photos intended to prove that HENGDA mineral water was offered for sale at retailers were questionable because various details indicated that the photos had been taken at a different season other than that indicated by the time stamps.
• Some seemingly plausible use evidence was formed (on December 23, 2013) shortly before the last date of the designated period. Even if such evidence were genuine, the court found it difficult to rule out the possibility that it was just symbolic use to maintain the registration of the disputed mark.

Wanhuida Peksung represented Pan Di in the appeal proceeding.

Comment:

The scrutiny demonstrated by the Court in such a case is most welcome. Too many trademarks are filed in China for the purpose of trading them as a commodity, with potential profits. These trademarks are not filed for the purpose of functioning as a source indicator of goods or services. Meanwhile, what is regrettable is the fact that, at the CTMO level, the procedure is opaque and the applicant of the request for cancellation based on non-use has no possibility to cross-examine the evidence produced by the trademark registrant. This leads to frequent procedures of review before the TRAB, which could be avoided if the procedure was open to rebuttal from the beginning.

Furthermore, HENGDA filed for the registration of “HENGDA in Chinese Character” in 43 classes, and, obviously, most of these classes of products had little to do with its business. Moreover, cancellation requests were filed against HENGDA’s registered trademarks in a total of 34 classes. On December 16, 2013, a few days prior to the cancellation request of Pan Di, another cancellation action was brought against the disputed mark. Under such circumstance, it is reasonable to conclude that HENGDA was prepared for the cancellation action. That explains why most of the documented evidence was formed shortly before the expiry of the designated period. Addressing a similar situation, the “Regulation on the European Union Trade Mark”[1] and the “Trade Marks Ordinance of Hong Kong”[2] explicitly rule out evidence formed shortly before the filing of the cancellation action, if the trademark owner cannot justify that he prepared for such use before being aware that a cancellation action was about to be filed. Even if this does not quite correspond to the HENGDA case, the aim is the same : evidence dated just before the cancellation action, or even just before the expiration of the 3-year period should be regarded as potentially suspicious and examined with care.