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Bad Faith Filing - Review of the Kingmax Case

18

NOV

2020

1. Background

At the end of 2006, a local company named Chi Duc Trading Service Co., Ltd (“Chi Duc”) imported from Hongkong a shipment of computer’s RAM branded “KINGMAX” from Taiwanese Kingmax Semiconductor Inc.(“Kingmax”) for sale in the Vietnam market.

An another local company named Vien Son Application Engineering Development Company Limited (“Vien Son”) requested the Customs of Ho Chi Minh city to suspend the clearance of this shipment, alleging that the imported products are counterfeit and Chi Duc infringes the trademark right of Vien Son, a proprietor of Protection title/Registration certificate no.77256 “KINGMAX” registered for computer and computer memory products in Class 09, granted by the National Office of Intellectual Property (NOIP) on November 24, 2006.

Later, on June 26, 2007, Chi Duc was administratively sanctioned by the People's Committee of Ho Chi Minh city (HCMC) as having infringed the protected trademark KINGMAX of Vien Son.

On June 1, 2007, Chi Duc filed a petition to request the NOIP to invalidate the Protection title no.77256 on the ground that Vien Son filed an application for registration of this mark dishonestly.

2. The NOIP’s decision on invalidation of KINGMAX

2.1 Chi Duc's arguments for requesting invalidation of trademark KINGMAX are:

(i) Vien Son was not entitled to file an application for registration of KINGMAX because at the time the application was filed, namely on October 12, 2005, the company should have registered in its Business Registration License the business line of producing computers, computer’s memory products as specified at Point a, Clause 2, Article 14 [1] of Government Decree No. 63/CP of October 24, 1996 detailing the regulations on Industrial Property (“ Decree No. 63/CP”)[1];

(ii) Vien Son filed an application for registration of the mark dishonestly. In this case, pursuant to Point c, Clause 2, Article 14[2] of Decree No.63/CP, Vien Son should have obtained a confirmation from the Taiwanese manufacturer Kingmax that they do not use the trademark KINGMAX and do not oppose Vien Son to apply for registration of such trademark. The application of Vien Son did not contain such documents.

It’s also noteworthy that before that time there were many domestic companies imported computers and computer’s memory products branded KINGMAX for sale in the Vietnam market.

2.2. Vien Son protested against the Chi Duc’s invalidation request, counter-arguing as follows:

(i) The document dated July 27, 2007 that Kingmax submitted indicates that Vien Son is an exclusive distributor of Kingmax for importing KINGMAX labelled products for sale in Vietnam and the legal basis Vien Son bases on to request the handling of infringement is the Protection title/Registration certificate no.77256 of the mark KINGMAX granted to Vien Son, and the company was preparing documents necessary to assign this trademark to Kingmax. Because of this, Vien Son requested not to cancel the validity of this Protection title;

(ii) The document dated August 30, 2007 that Kingmax submitted shows that Kingmax is a worldwide manufacturer of the computer products branded KINGMAX. At the time of 2005, Kingmax did not use this trademark in Vietnam. On 10/8/2005, Kingmax had agreed to assign the filing right to Vien Son and allowed the latter to apply for registration of the mark KINGMAX and then the corresponding Protection title no.77256 was granted;

(iii) As such, Vien Son is eligible to file an application in conformity with Article 6septies of the Paris Convention on the protection of industrial property [3][3]; therefore, it is completely appropriate to maintain the validity of Protection Title No. 77256 for KINGMAX and record the assignment of the trademark from Vien Son to Kingmax.

2.3. Decision of the NOIP

The NOIP rejected Vien Son's arguments, held that:

(i) When Vien Son applying for registration of the mark KINGMAX in 2005 Taiwan was not a member of the Paris Convention and Vietnam was neither a member of the World Trade Organization (WTO)[4] so the Article 6septies of Paris Convention could not be applied to Taiwanese entities. As a result, it was also ineligible to use the relevant provisions of the Paris Convention implemented under the frame work of WTO to handle the application for registration of the mark KINGMAX in Vietnam;

(ii) The documents that Kingmax submitted as mentioned above were made behind time, during the time NOIP was considering the invalidation request against the Protection title no. 77256 for the mark "KINGMAX, so they were not eligible to establish the filing right of Vien Son. The examination of application no.4-2005-13488 filed on October 12, 2005 for registration of KINGMAX, upon which the Protection title no.77256 for "KINGMAX" was granted, was also ended 2 years ago.

On October 29, 2007, the NOIP issued Decision no.1352/QD-SHTT on invalidating the Protection title no.77256 for KINGMAX, after which, although Vien Son made complaints, the NOIP still maintained its decision.

3. Lawsuit of Vien Son and decisions of Courts

Vien Son sued the NOIP’s Decision No.1352/QD-SHTT. The lawsuit was adjudicated at both first instance and appellate levels. As the arguments of Vien Son was accepted by the first instance court, the NOIP appealed against the court’s decision. The appellate Court of the Supreme People's Court in HCMC had an appellate trial on January 16, 2009.

The parties presented their arguments in the appellate Court as follows:

3.1 The NOIP

The NOIP cited Point c, Clause 2, Article 14 of Decree No. 63/CP to defend its decision, declaring that the application that Vien Son filed on 12/10/2005 neither contained any documents of trademark assignment of Taiwanese Kingmax nor gave notice of this matter, so it can be concluded that the application was neither related to nor derived from the assignment of the filing right from Kingmax.

Besides, the NOIP’s having accepted Vien Son's trademark registration application as valid does not mean the agency automatically recognizes the validity of the documents on the assignment of the filing right from Kingmax to Vien Son that Kingmax has prepared and submitted after the Certificate No. 77256 has been issued.

3.2 Chi Duc

At court the representative of Chi Duc stated that as a result of NOIP invalidating the Protection title of KINGMAX, the People's Committee of HCMC also withdrew its decision to administratively sanction Chi Duc. The purpose of Chi Duc to participate in the proceedings is not to dispute over the trademark ownership with Vien Son but to defend the decision of NOIP.

3.3 Judgement of the appellate court

At the hearing on January 16, 2009, based on Clause 2 Article 87[5] and Clause 3 Article 220[6] of the IP Law, the Appellate Court of Supreme People's Court in HCMC held that the first-instance court acted improperly; contents of the Kingmax’s documents of August 30, 2007 has revealed that as of August 30, 2007 the company still uses the trademark KINGMAX and Kingmax has not officially assigned such filing right to Vien Son; due to failure in meeting the conditions specified at Clause 2, Article 87 of the IP Law Vien Son does not have the right to register the KINGMAX trademark in Vietnam; the NOIP's decision no.1352/QD-SHTT to invalidate the Protection title no. 77256 granted to Vien Son was made in accordance with the law.

4. Comments

4.1 The nature of the case

In this case Vien Son as an agent has registered the manufacturer's trademark which is widely used by the latter as trademark and brand name. Unlike most manufacturers who will request the trademark office to invalidate the registration of the agent, Taiwanese manufacturer Kingmax has done the opposite, by agreeing and assisting its agent in registering that trademark.

It is not difficult to realize that Kingmax submitted the concerned documents is to help Vien Son to be qualified for Article 6septies of the Paris Convention and to deny Chi Duc's allegation that Vien Son has no right to file an application as specified at Article 14.2.c Decree 63/CP.

The alliance between Kingmax and Vien Son to enable Vien Son to monopolize the trading of KINGMAX-labeled products in Vietnam aimed to nullify the regulations on parallel importation[7] allowed under the Vietnam's IP Law. Once KINGMAX has been registered under the name of Vien Son, any other company that imports the products from Kingmax to be deemed an infringement of trademark right.

4.2 Article 14.2.c of Decree 63/CP vs. Article 87.2 of the IP Law

Vien Son filed an application for trademark registration on October 12, 2005, based on this was granted Protection title/Registration no.77256 on November 24, 2006.

In determination of the filing right of Vien Son the NOIP applied Article 14.2.c of Decree 63/CP which was valid before the time the IP Law coming into effect on July 1, 2006 (also known as IP Law 2005 because it was passed on December 29, 2005, distinguished from amended IP Law 2009), while the Appellate Court applied Article 87.2 of the IP Law 2005. This stemmed from a different interpretation of Article 220[8] Transitional provisions of the IP Law 2005 which writes “...the regulations shall apply are those in effect at the time of issuance of protection title...”. The NOIP was of the opinion that the provisions which have been used for “the issuance of protection title” also covers the provisions related to filing, receiving and handling an application, hence the provisions of Decree 63/CP must be applied as specified at Article 220.2[9] of the IP Law. The court did not reject this interpretation of the NOIP but held that as the Protection title in question was granted on October 12, 2006 after the IP Law 2005 took effect, so Article 87.2 of this law could also be applied.

The inconsistency in this interpretation has been eliminated in the amended IP Law 2009, in which Article 220.3[10] was amended as “...the regulations shall apply are those in effect at the time for consideration of the granting of such protection title...”

The connotations of both the Article 14.2.c of Decree 63/CP and Article 87.2 of the IP Law 2005 are the same; they set out the conditions ones must meet in order to have the right to register a trademark for products but are manufactured by someone else. Due to lack of detailed explanation, some unanswered questions still exist in this context, namely:

  1. Is the right to file an application here only applicable for products? May it be applicable for service selling/distributing such products? Is it possible to apply Article 6. Application of analogy of law[11] of the Civil Code? In case of using the trademark for service, why should obtain the manufacturer's consent if they do not use the mark? If using the trademark for product, would it cause confusion for consumers about the origin of the product when the trademark owner did not manufacture that product?
  2. In the event that the manufacturer does not use the mark, whether it’s necessary to specify the geographical area(s) and the time (all the time or only for a certain period of time) of such non-use. In our case, Vien Son arguing that when filing the application in 2005 the company did not violate Article 14.2.c of Decree 63/CP because Kingmax did not use this trademark in Vietnam. On the contrary, the court said that the Kingmax’s documents of July 27 and August 30, 2007 have revealed that Kingmax was still using this trademark, whether or not in Vietnam it’s not necessary to know. As a result, the court rejected Vien Son's argument and accepted the NOIP’s opinion.

4.3 Bad faith filing and regulations of Article 87.2 of the IP Law

It is worth noting that dishonesty is also regulated in Article 3. Basic principles of law[12] of Civil Code 2015.

Vien Son's dishonesty is that it did not provide information about its relationship with the Taiwanese manufacturer Kingmax, so succeeded in obtaining the registration for KINGMAX trademark, making other businesses unable to carry out a parallel importation allowable under the IP Law of Vietnam. This was a trademark abuse that damaged legitimate commercial activity.

Therefore, a guideline should be issued to identify behaviours which may form the basis of a bad faith challenge in filing a trademark application in general as well as in determining the filing right of organization or individual legally engaged in the trade in a product produced by a third party in particular as specified at Article 87.2 of the IP Law. Without such guideline, it’s most likely possible to make a request to invalidate a protection title only within 5 years from the date of issue in accordance with Article 96.3[13] of the IP Law.


[1] Article 14.2.a) The right to file an application for the title of protection of trademarks: Individuals, legal persons, other entities legally conducting production activities shall be entitled to file applications for the title of protection of trademarks to be used for the products they are producing or will produce;

[2] Article 14.2.c) Individuals, legal persons or other entities legally conducting trading services shall be entitled to file application for the Title of Protection of trademarks to be used for the products which are marketed by them but manufactured by others, provided that the manufacturer does not use such trademarks for the relevant products and does not oppose such filing;

[3] Article 6septies - Marks: Registration in the Name of the Agent or Representative of the Proprietor Without the Latter’s Authorization

(1) If the agent or representative of the person who is the proprietor of a mark in one of the countries of the Union applies, without such proprietor’s authorization, for the registration of the mark in his own name, in one or more countries of the Union, the proprietor shall be entitled to oppose the registration applied for or demand its cancellation or, if the law of the country so allows, the assignment in his favor of the said registration, unless such agent or representative justifies his action.

(2) The proprietor of the mark shall, subject to the provisions of paragraph (1), above, be entitled to oppose the use of his mark by his agent or representative if he has not authorized such use.

(3) Domestic legislation may provide an equitable time limit within which the proprietor of a mark must exercise the rights provided for in this Article.

[4] Vietnam is an official member of WTO since 11/01/2007.

[5] Article 87.2. An organization or individual legally engaged in the trade in a product produced by a third party shall have the right to registration of a mark to be used for the product, provided for the producer neither uses such a mark for the product nor objects to such registration.

[6] Article 220.3. All rights and obligations conferred by Protection Titles granted under the provisions applicable before the effective date of this Law and procedures for maintenance, renewal, correction, license, assignment, resolution of disputes concerning these protection titles shall be subject to this Law, except for those grounds for invalidation of a Protection Title which shall only be subject to the provisions of legal documents applicable at the time of its grant

[7] Article 125.2.b) “...The owner of an industrial property object...shall not have the right to prevent others from circulating, importing, exploiting uses of the products having been legally put into the marketplace, including foreign markets, except for cases where such products put into foreign markets by persons other than the mark owner or his licensee;

[8] Article 220.3. “All rights and obligations under protection title granted under law in effect before the effective date of this Law and procedures for maintenance, renewal, modification, termination or invalidation , licensing , ownership assignment, and settlement of disputes related to such protection title shall comply with the provisions of this Law, except for grounds of invalidation of protection titles, the regulations shall apply are those in effect at the time of issuance of protection title...”

[9] Article 220.2. An application for registration of copyrights, related rights, inventions, utility solutions, industrial designs, trademarks, appellations of origin, layout design, plant variety has been submitted to Competent agencies before the effective date of this Law may continue handling according to the provisions of legal documents in effect at the time of filing the application.

[10] Article220.3 of amended IP Law 2009. “All rights and obligations under protection titles granted under law in effect before the effective date of this Law and procedures for maintenance, renewal, modification, termination or invalidation , licensing , ownership assignment, and settlement of disputes related to such protection titles shall comply with the provisions of this Law, except for grounds of invalidation of protection titles, the regulations shall apply are those in effect at the time for consideration of the granting of such protection title...”

[11] Civil Code, Article 6. Application of analogy of law, 1. In cases where a issue rises under scope of civil law which is neither provided for by law nor agreed upon by the parties , nor applied by practices, analogy of law shall apply”.

[12] Civil Code, Article 3. Each person must establish, exercise/ fulfill, or terminate his/her civil rights and/or obligations in the principle of goodwill and honesty.

[13] Article 96.3 “...The time period for making request for invalidation of a Protection Title shall be its whole

term of protection. With regard to marks, such time limit shall be 5 years as from the grant date, except for the case where the Protection Title has been granted due to the applicant’s dishonesty.

About the Firm

Pham & Associates
Address No.8 Tran Hung Dao St, Hoan Kiem Dist, Hanoi, Vietnam
Tel 84-24-3824 4852
Fax 84-24-3824 4853
Email hanoi@pham.com.vn
Link www.pham.com.vn

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