Articles
Protecting Chinese Company Trademark Rights in the U.S.
China IP News
May 2010
Foley, Christopher P.
Article
The most important function of trademark is to build a brand image that is recognized by consumers as identifying one source, thus assuring consumers that the products or services identified by the brand have a consistent level of quality. In order to identify a single source, the trademark must be capable of being distinguished from other brands to prevent the likelihood of confusion with the goods and services of others. Consider, for example, such Chinese brands as the Maotai liquor and Quanjude roast ducks and foreign brands as Coca-Cola and Mercedes-Benz. A glimpse at each of these brands immediately reminds consumers of a specific commodity or service, and the expectation of a certain level of quality associated with each brand. That’s why these trademarks are deemed to have acquired substantial value, which is also referred to as the goodwill of the business that is associated with the trademark.
It can take years of painstaking effort for a trademark owner to develop a strong brand. A trademark owner, however, must be vigilant in protecting the brand or the goodwill associated with the brand can be lost. For example, if a trademark is preemptively registered in another jurisdiction by another, the original user of the trademark may be forced to give up the original trademark and create a different brand in the new market, or alternatively it may become necessary to buy back the trademark at a high price, or resort to legal action to cancel that preemptively registered trademark. All such efforts will add to the business cost of the company, prolong the time to market, and sacrifice the market shares as a result. More importantly, when a company seeks to trade on the goodwill of another by filing an application to register in another jurisdiction, any use by the junior party may create confusion as to the source or sponsorship of the goods. The resulting confusion may adversely affect the business reputations of the company which originally adopted the trademark.
As more and more Chinese companies sell their products into the US market or introduce their services into the US, there has been an increasing number of Chinese business trademarks preemptively registered in the US and elsewhere. How to effectively prevent and counteract such preemptive registrations in the United States? First of all, we need to understand the difference between the American legal system and the Chinese legal system.
Differences between the trademark law of the People’s Republic of China and the trademark law of the United State of America:
The trademark law of the People’s Republic of China adheres to the principle of trademark registration. The trademark right shall be procured by raising an application therefore according to the stipulations under the applicable trademark laws. Or for a simple interpretation, he/she who has filed the earliest application for a trademark according to the stipulations under the applicable trademark laws will be granted the trademark right thereto.
The trademark law of the United State of America adheres to the principle of trademark use, which is different from the practice in China. According to the trademark law of the United State of America, trademark is used to identify the sources of goods or services in business transactions so as to prevent customers from getting any confusion of the sources of such goods or services and therefore the interests of both seller and buyer will be protected. The procurement of trademark right is based on business practice. Without business transaction, it’ll be meaningless to keep any trademark in existence. Therefore, trademark is always linked with commodity and transaction. It is under such philosophy that the significance of a trademark in existence lies in its use, the prior user shall be eligible to the trademark right according to the trademark law of the United State of America. Therefore, the procurement of a trademark in the US is subject to such criteria of judgment on who is evidenced to be the first user.
In the US, the trademark in use is subject to the protection under the State Common Law even without registration. Nevertheless, the trademark law of the United State of America provides federal registration protection too. Only those trademarks in trans-state use are eligible for application for such federal registration protection as under the trademark law of the United State of America. The federal registration protection has quite a number of advantages when compared with the protection under the State Common Law. For example, a trademark subject to federal registration may be applied to resist any and all subsequent bona fide use within the territory of the US, while common law rights extends only to the area in which the mark is actually used. Anyone in the US territory is supposed to know of the federal registered trademark and therefore shall not use any such other same or similar trademarks that would cause confusions among the consumers. Secondly, the federal registered trademark holders are qualified by presenting such federal registration to apply for the jurisdiction of the Federal Court. Thirdly, the federal registered trademark will become incontestable trademark against any challenge raised by any third party upon expiry of a 5-year period after such registration. Fourthly, federal registration system allows application for intent-to-use trademark, in which case the applicant shall have a maximum 3-year period to transfer any such intent-to-use trademark into the trademark in actual use.
Along with deepening into the US market, more and more Chinese companies have been involved in the trademark lawsuits in the US. In the light of that, Chinese companies should learn and understand the differences between the US laws and Chinese laws and try to safeguard their own rights and interests with such knowledge. The legal actions instituted by China International Travel Service (Hereinafter referred to as “CITS”) for protection of its trademarks offer us a very good example.
How Did CITS Recapture its Trademark Right in the US
One of the earliest international travel agencies established in China, CITS boasts a history of over 5 decades and holds such trademarks including “China International Travel Service”, “CITS”（the English abbreviation）and its logo featuring the Globe, which in all are renowned trademarks in China. In 1991, CITS established US Huaya Travel Agency to deal with the tourism services in the United States. In 2006, CITS found at China International Travel Mart an exhibitor from the US whose full name is “China International Travel Agency (US) Inc.”(Hereinafter referred to as “US CITS”). The exhibitor was essentially using the same CITS trademark to promote travel services to customers in the United States that want to travel to China. Moreover, the brochures distributed by the exhibitor as well as its website pages were found to have been using exactly the same Globe-featuring logo and “CITS” trademark as those validly held by China International Travel Service.
Upon further investigation, CITS discovered that US CITS is a company registered in California by a person, who had once been engaged in the tourism industry in China, and then came to the US to develop a travel business of his own. Indeed, he actually had worked for CITS and was familiar with the CITS trademark as well as the Globe logo. In 2003, the individual registered the “Globe” and “CITS”, which had been used by China International Travel Service around the world, including the U.S. for many years. In fact, the marks were considered famous in China. Nevertheless, in 2005, this individual was granted a registration by United States Patent and Trademark Office (Hereinafter referred to as “USPTO”) because no other applications or registrations in the United States precluded registration by this individual.
More than three years after the registration was issued, China International Travel Service contacted our firm in order to recapture their trademark right in the US. Based on the analyses of the case, we suggested that CITS file a petition with the USPTO seeking to cancel the registration for the “Globe” logo and “CITS” trademark obtained by US CITS.
As what we have pointed out earlier, the most significant difference between the trademark law of the People’s Republic of China and the trademark law of the United State of America lies in the fact that China adopts “first-to-file” principle while the US adopts “first-to-use” principle. According to the trademark law of the United State of America, trademark right shall be granted to such person who is identified to be the first user rather than the first applicant. We had a lot of evidences to prove that China International Travel Service began using its trademark on a continual basis throughout the United States as early as in 1991. The US CITS, however, was incorporated in 2003 in the US and acknowledged in its trademark application that its earliest use of such trademark could be traced back to no earlier than 2003. Because CITS was the earliest user of the trademark in the United States and because CITS used the trademark throughout the country, CITS had priority according to the trademark law of the United State of America. Furthermore, when filing an application for a trademark, the applicant took an oath that to the knowledge of the applicant the trademark being applied for has never been used by anyone else. Since the founder of US CITS worked for years in the tourism industry in China, he could not have made that representation. Indeed, it was no coincidence that his registration was identical to trademark and logo design used by China International Travel Service for over 5 decades. Therefore, the applicant took a false oath during the course of his application, which would be sufficient to cause the trademark in question to be invalid according to the trademark law of the United State of America.
We filed a petition, requesting the USPTO to cancel the trademark registration owned by US CITS. On learning that we sought cancellation of its registered trademark, US CITS took such countermeasure as to institute a legal action at the U.S. District Court for the Northern District of California alleging that our client had infringed their trademark right, declaring that the US CITS was the lawful user and registrant of such trademark and demanding that CITS’ use of such trademark in the territory of the US be prohibited. During the litigation, the US CITS demanded that it share the business with CITS, namely it demanded that CITS allow the US CITS to use such trademark in China and vice versa. The US CITS even tried to persuade our client to pay them some money for the trademark. Apparently the US CITS hardly understood the trademark law of the United State of America in nature, assuming that a trademark, once registered, would be worth more or less some money. Nevertheless, according to the trademark law of the United State of America, considering the fact that the trademark was registered on the basis of deception, we were concerned that the USPTO or a court would consider the registration to have been fraudulently procured, in which case it’d remain null and void even if our client has paid for it, and our client would not be able to curb any infringement by a third party with such invalid trademark. Under such circumstances, the only correct solution was to cancel such invalid trademark registration so that CITS could register another lawful and valid trademark.
Eventually, under the powerful factual evidences and legal grounds as presented by our side, US CITS took the initiative to cancel their trademark at the USPTO.
How to Prevent the Chinese Trademark from Preemptive Registration in the US
What is noticeable is the fact that trademark protection is territory-specific, which means the registered trademark in a country will be protected only in that jurisdiction. It’s pretty easy for a domestic trademark, even if a renowned one in China, to be preemptively registered in a foreign country in the absence of a prompt registration of such trademark in that jurisdiction. In order to prevent your own trademark from being preemptively registered, it is advisable, therefore, to pay attention to such key points as follows:
Firstly, have your own trademark registered promptly. It seems pretty easy to register a trademark, yet it involves a lot of knowledge. Although a lot of consultant firms and law firms declare that they are qualified enough to assist the Chinese companies in registering trademark in the United States, some applications may be encountered with a premature end if you are not so knowledgeable with regard to the trademark law of the United State of America.
Secondly, if the trademark is a name (even if it is commonly used as part of a design or logo), consider registering the name broadly by seeking protection for the name, apart from the design or logo. Also, consider seeking protection for the design or logo, apart from the name. When assisting the Chinese companies in registering their trademarks in the United States, we are aware of the fact that quite a number of the Chinese companies have their character-or-letter-featuring trademarks registered with a certain type-font, which, however, will result in a very narrow scope of protection. No one else can be accused of infringement upon the trademark right if he/she uses the same bearing exactly the identical characters and words but in a different font. Therefore, in general, we will suggest that our clients have their trademarks registered without a design or a particular font, because the trademarks so registered will be eligible to the broadest protection scope. And any one else can be accused of infringement upon such trademark right if he/she uses the same bearing exactly the identical characters or words presented in whatever font regardless how different they are designed.
If your trademark is left uncared for, you cannot expect to prevent the others from using similar trademarks for related goods or services. And some other people would even preemptively register the trademark leaving you in a threatened position, which would be very difficult to deal with on the one hand, and your commercial interests and corporate image would be considerably impacted on the other hand. Therefore, it’s advisable for the domestic companies to bear such strategic awareness of intellectual property right and to apply for and register in no delay valid trademarks when exploring the overseas markets. In addition, we strongly recommend that companies adopt a watch service program to monitor efforts by others to obtain trademark protection for the same or similar marks in other countries. Otherwise, you would find yourself plunged in such an awkward position when attempting to safeguard your own rights and interests after finding that someone else had taken the initiatives to preemptively register your trademark. It costs dearly to go to law for such intellectual property disputes in the US and you’d have to go through very complicated procedures. Once Chinese companies suffer preemptive registration of their trademarks overseas, they should take the initiative to deal with the case rather than feel scared or worried. CITS, for instance, took so positive and effective steps to recapture in time their own trademarks which had been preemptively registered by others. It’s advisable for other domestic enterprises to learn and seek reference from such a case.