Penalties for Bad-Faith TM Applications

Trademark Applications Identified as Bad-Faith Receiving Administrative Penalties

Author: Jazz Wu
Translation: Olivia Ma

It comes to our attention in legal practice that an increasing number of companies are getting refused for mass trademark applications. From the published refusal review decisions, the applications are refused for constituting a “bad faith application for trademark registration for a purpose other than use”, in accordance with Article 4.1 of the Trademark Law. The companies whose mass trademark applications are identified as bad-faith registration not only face the situation that their trademark applications are getting refused, opposed, or invalidated but also may face the legal consequences of getting publicly announced administrative penalties such as a warning or a fine given by the Market Supervision and Administration Bureau (hereinafter the “MSA”).

Let’s explore some case examples. Company A has filed for more than 800 pieces of trademark registrations, among which more than 500 pieces of them have acquired registration specified in various goods and classes. However, the company’s registered business scope only involves “software development”, and most of the using scope of the registrations is not directly linked to its business scope. The company neither actually engages in relevant business activities nor is competent to engage in relevant business activities. Therefore, the local MSA determines after investigation that such conduct constitutes a “bad faith application for trademark registration for a purpose other than use”, issues an Administrative Penalty Decision to the company, and imposes a fine. According to the Administrative Penalty Decision, the local MSA finds out the illegal act during inspection without the previous intervention of the China National Intellectual Property Administration (hereinafter the “CNIPA”), and the legal basis for identifying the illegal act is Article 4.1 of the Trademark Law and Article 3.1 of the Several Provisions on Regulating the Application for Trademark Registration (hereinafter the “Several Provisions”).

The second case might be in a different scenario. Company B files applications for 158 pieces of trademark registrations within 3 days, but with a careful look into these trademarks, it is not hard to find that the names of these trademarks are modified based on others’ registered trademarks by adding modifiers or using the common names of the product. The applications for such trademarks violate the principle of good faith. The local MSA has done its investigation and confirmed that such behavior violates relevant laws and regulations. Without the intervention of CNIPA, the MSA determines that the company’s trademark applications have exceeded its actual needs in use and have constituted an illegal act, and issued an Administrative Penalty Decision in accordance with Article 3.1 of the Several Provisions.

The third case is about a company, Company C, that has filed for 62 pieces of trademark registrations with CNIPA from 2014 to 2021, among which 58 pieces were applied from 2019 to 2020. Some of these trademarks are obvious imitations of others’ registered well-known trademarks in China. The local MSA determined after an investigation that such behavior constituted a “bad faith application for trademark registration for a purpose other than use” in violation of Article 3.1 of the Several Provisions and deemed that the company’s imitations of others’ well-known trademarks registered in China have constituted an act of misleading the relevant public in violation of Article 3.2 of the Several Provisions. Thus this company has been given an administrative penalty of a warning and a fine of RMB 5,000.

From these cases, it is learned that apart from the usual opposition actions and invalidation actions, relevant authorities that have the jurisdiction may conduct their own investigation to understand whether the mass trademark registration applications are suspicious for bad-faith filing and once it is confirmed by the authorities, there would be legal consequences to be born by the applicants, even being imposed by penalty. Therefore, we suggest that during the process of brand planning and trademark applications, the business should make the decision to apply for trademark registrations on their real business development, including current and future periods, filing in good faith and avoiding any possible negative impacts.

Relevant laws and regulations quoted：

• According to Article 4.1 of the Trademark Law, “Any natural person, legal person, or other organization needing to acquire the right to exclusively use a trademark on the goods or services thereof during business operations shall apply to the Trademark Office for trademark registration. A bad faith application for trademark registration for a purpose other than use shall be rejected.”
• According to Article 3.1 of the Several Provisions, “The application for trademark registration shall follow the principle of good faith. The following acts shall be prohibited: bad faith application for trademark registration for a purpose other than use, as referred to in Article 4 of the Trademark Law.”
• According to Article 12 of the Several Provisions, “In accordance with Article 68.4 of the Trademark Law, the applicant who violates Article 3 of the Several Provisions by applying for trademark registration in bad faith, shall be given administrative penalties such as a warning or a fine by the MSA at or above the county level in the place where the applicant is located or where the illegal activity occurs, depending on the circumstances. If there are illegal gains, a fine of three times the illegal gains but not more than 30,000 yuan may be imposed; if there are no illegal gains, a fine of not more than 10,000 yuan may be imposed.”

Case Source: China Market Supervision Administrative Penalty Decision Document Website (https://cfws.samr.gov.cn/index.html)