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Prior Use as Affirmative Defense in Trademark Infringement Disputes

February 2012 - Intellectual Property. Legal Developments by Wanhuida Peksung.

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In patent and copyright infringement disputes, the affirmative defense of prior use has been established practice in China. Can a defendant raise the same argument in a trademark infringement dispute? The latest judicial opinion is a breakthrough on this aspect.

China adopted the “first-to-file” principle in the Trademark Law of 1982. Since then the policy on how to balance the rights and interests of the prior user of a registered trademark has gone a long way in evolution. On December 16, 2011, the Supreme Court promulgated judicial opinion No. 2011/18 1. Article 22 addresses this problem as follows:

Article 22 (The courts should) hear the defenses in a proper way in trademark infringement disputes, so as to protect the legitimate rights and interests of the business transactors  (provision on indicative fair use omitted) … If the registered trademark (cited by the plaintiff) is: a) the reproduction, imitation or translation of another’s well-known trademark unregistered in China, b) preemptive registration by the agent or the client’s representative, or c) bad faith registration of another’s trademark that has been used in China and enjoys certain influence, (the court should) support the defense of the prior trademark user by citing the above grounds.

This article virtually offers the prior trademark user the means of affirmative defense in a civil lawsuit raised by the preemptive registrant. Compared with prior practice, this is a significant breakthrough. Before this judicial opinion, the only officially recognized prior use exemption is the continuous use of a service mark after July 1, 1993 despite that the third party has registered the same service mark. Previously if a preemptive trademark registrant takes legal actions against the prior trademark user, the latter cannot argue before the court that it is the prior user of the disputed trademark, and that the plaintiff has registered the latter’s trademark preemptively. The latter will have to firstly apply to the TRAB for revocation of the plaintiff’s trademark registration, and during this time the court may, as requested by the defendant, suspend the hearing pending the outcome of the revocation proceedings. With the promulgation of this new judicial opinion, the defendant may raise such argument directly before the court.

This judicial opinion also offers the prior trademark user a chance to seek declaratory judgment when facing threats of legal actions from the preemptive registrant. In practice some preemptive registrant either takes legal actions directly, or blackmails the prior trademark user by cease & desist letters, etc. In the future the prior trademark user may directly file a civil lawsuit to seek a declaratory judgment on non-infringement. 2

The new judicial opinion empowers local courts to find preemptive registration on the part of the plaintiff (or the defendant in a declaratory lawsuit), which has traditionally been the exclusive right of the TRAB and of the courts that hear appeals from TRAB decisions (namely Beijing No. 1 Intermediate Court, Beijing Higher Court and the Supreme Court). This judicial opinion raises a potential tension between the TRAB and local courts. What will happen if a local court supports the affirmative defense of prior use, and the defendant subsequently applies to the TRAB for revocation of the plaintiff’s registered trademark? Will the TRAB automatically accept the local court’s findings of preemptive registration on the side of the trademark registrant? One has to wait and see.

Endnote

1.       The full name of the judicial opinions is “Opinions on Several Issues Concerning Full Exploitation of The Function of IP Trials to Enrich Socialist Culture Prosperity and to Promote Self-reliant and Balanced Economy”. In China such judicial opinions have legal effects similar to judicial interpretations, and can guide the work of local courts.

2.       Article 13 of Judicial Opinion No. 2009/23 clarifies the conditions under which one may file a lawsuit to seek non-infringement declaration.


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