Avoiding Registered Trademarks from "Accidental Injury" Due to Cracking Down on Trademark Squatting and Hoarding — Insights from DSM's "Da Li Ma" Trademark Invalidation Case
- DSM and the “DYNEEMA” series marks
Koninklijke DSM N.V., founded in 1902, is active in nutrition, health and green life on a global scale. DSM provides innovative business solutions for areas including human nutrition, animal nutrition, personal care and fragrance ingredients, medical equipment, green products and applications, and new mobility and connectivity. The approximately 23,000 employees of DSM and its affiliates have generated annual net sales of approximately EUR 10 billion. The company started trading with China as early as 1963 and established its first sales representative office and first production site in China in the early 1990s. DSM China’s regional headquarters and R&D center are located in Shanghai. It currently has 47 branches in China, including 26 production sites, and has nearly 5,000 employees. In 2018, China’s sales were approximately RMB 10 billion. DSM has won numerous awards and consumer recognition in many fields such as new materials, cosmetics, and nutritional products in China.
DSM IP Assets B.V. is the intellectual property custodian of Koninklijke DSM N.V. It cooperates with DSM's business in China involving many fields and applies for registration of related trademarks in China. In recent years, due to the strengthening of trademark protection, DSM IP Assets B.V. (hereinafter referred as “DSM IP”) has also registered some defensive trademarks around the company's important trademarks based on the actual situations in China. Among them, "DYNEEMA" is a high-strength polyethylene fiber product brand developed by DSM and enjoys a worldwide reputation. Its corresponding Chinese trademarks are "Di Ni Ma" and "Da Li Ma". DSM IP selected these trademarks to build a strong position in China for their important Dyneema brand. Since these three trademarks are susceptible to trademark copycat, in addition to fiber products, these three trademarks are also registered in the "hot" classes that are particularly prone to squatting, such as clothing and bags, as the trademarks are licensed out for these classes.
- "Da Li Ma" trademark invalidation case
In October 2019, "Xiamen Sanfeng Yingbing Outdoor Products Co., Ltd." filed an invalidation action against DSM IP's trademark No. 5651016 "Da Li Ma" ("Disputed Trademark") registered in class 18 of bags and etc. The main reasoning of the action was that "Da Li Ma" was the generic name of high-strength polyethylene fiber thread, the disputed trademark was a waste of public resources, and the registration in class 18 was deceptive because it was likely to mislead the public regarding the quality and other characteristics of the products or the place of origin. The action was based on Article 7, Article 10(i)(7), Article 11(i)(1), and Article 44(i)of the Chinese Trademark Law. There was no evidence filed with the invalidation action. In particular, Article 44(i) was only mentioned as one of the legal provisions without any relevant discussion or elaboration.
DSM IP believed that the invalidation application was obviously lacking basis and had not submitted any evidence to support it. Considering that the invalidation application was totally groundless, DSM IP did not respond to the invalidation action.
In June 2020, the China National Intellectual Property Administration (CNIPA) took the initiative to investigate the trademark registration status of DSM IP in China, finding that, in addition to the disputed trademark, it also applied for a total of 1,142 other trademarks. Based on this finding, the CNIPA ruled, "The respondent did not provide evidence of the use of the disputed trademark, and obviously lacked the intention to actually use the disputed trademark. The respondent’s application for registration of a large number of trademarks clearly exceeded the normal production and operation requirements and disrupted the normal order of trademark registration management. And it was detrimental to the market order of fair competition.” Therefore, the disputed trademark was declared invalid in accordance with Article 41(i) of the 2001 Chinese Trademark Law.
DSM IP filed an administrative lawsuit on the CNIPA decision. In the lawsuit, it introduced the company's situation in detail and submitted a large amount of evidence to prove that most of its trademark registrations were entirely for actual use, and there were only a small portion of defensive trademark registrations against trademark squatting. The Beijing Intellectual Property Court found that the evidence in the case could not prove that DSM IP’s application for a large number of trademarks was a hoarding behavior that lacked true intent to use. In addition, DSM IP also gave a reasonable explanation of the creative source and design concept of "Da Li Ma". Therefore, in November 2020, the Beijing IP Court ruled to revoke the CNIPA's ruling. Recently, the CNIPA has also made a new ruling in accordance with the court’s decision, to maintain the registration of the disputed trademark.
- Suggestions on avoiding trademark registrations from "accidental injury" due to cracking down on trademark squatting and hoarding
In the past two years, in response to the phenomenon of rampant trademark copycat and repeated prohibitions on trademark hoarding, the CNIPA has actively examined the number of trademarks held by trademark registration subjects in various procedures such as trademark refusals, oppositions and invalidation actions. Cracking down on trademark hoarding intensively, the absolute terms are directly invoked in trademark refusal, non-approval of registration and invalidation actions. In the year 2020 alone, there were more than 20,000 trademarks invalidated by the CNIPA in accordance with Article 44(i)! It can be said that the thunderbolt tactics of the CNIPA have curbed trademark squatting and malicious hoarding effectively.
In this context, the aforesaid "Da Li Ma" case is a reminder to good faith trademark applicant, especially foreign companies with a large number of trademarks in China that they need to actively respond when facing opposition or invalidation action against their defensive trademarks to avoid "accidental injury"!
First of all, the CNIPA examiners generally have knowledge of large domestic companies. According to the scale and development space of the company, the examiners are not likely to determine that well-known domestic companies are hoarding trademarks. The number of trademarks of large enterprises such as Alibaba and Tencent Technology has exceeded 10,000, but the CNIPA has never applied absolute reasons for their trademarks. However, there are many large multinational companies in the world, and it is impossible for the CNIPA examiners to know about all of these subjects. When a foreign subject does not respond, it is difficult for an examiner to distinguish whether the subject is a powerful and honest multinational enterprise, or a shell company registered by some people for trademark hoarding purpose.
Secondly, many large multinational companies will set up independent companies to manage their own intellectual property affairs, and words such as "intellectual property assets", "intellectual property management", and "brand management" often appear in their company names. These words are exactly what some shell companies that specialize in trademark hoarding activities like most, which further increases the difficulty of the examiner's identification.
Thirdly, it is a small matter that a defensive trademark is invalidated, but it is a big deal to find that the company's trademark registration behavior exceeds business requirements and disrupts the order of trademark management! Under the current circumstances where the review rulings are all open to public, if similar rulings take effect, anyone in the future can target the subject’s any other trademark registration and file a similar invalidation action, and it might get official support! Therefore, once such "accidental injury" occurs, administrative litigation will be inevitable.
Finally, in similar cases, the defense at the review stage is less difficult and cost-effective. Generally, as long as the company’s situation and the purpose of the trademark application are briefly explained, the CNIPA examiner will not actively apply the absolute clauses. However, when an unfavorable decision is rendered, the difficulty and cost of litigation will suddenly increase, and there will be stricter requirements on the quality and format of evidence. Therefore, the gain is not worth the loss for the trademark applicant or registrant.
The continuous progress of Chinese trademark system and the continuous purification of the trademark application environment require not only the active actions of the national administrative departments, but also the support and cooperation of well-intentioned trademark applicants. Only in this way can a good business environment be developed, and a good business environment be created for Chinese and foreign enterprises in the Chinese market. The “accidental injury” of the “Da Li Ma” trademark in the invalidation case shows that it is an important means to effectively resolve disputes for the trademark registrant actively responding and providing supports in cases, in order to help the CNIPA to make correct decisions. (Acknowledgement: Thanks DSM Global Trademark Center for its contribution of supporting materials.)