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Risks of Settlement in Procedures of Trademark Opposition and Review of Disapproval of Trademark Registration

06

AUG

2021

In the procedures of trademark opposition and review of disapproval of trademark registration, the involved parties (e.g. the opponent and the opposed party) may reach a settlement, such as a trademark coexistence agreement, or an agreement to transfer the opposed mark from the opposed party to the opponent. Then the opponent shall apply to withdraw the opposition and the China Trademark Office (CTMO) accepts the withdrawal and issues a decision to close file and approve registration of the opposed mark. Even if the opponent and the opposed party fail to reach a settlement in the opposition procedure and the CTMO disapproves registration of the opposed mark, the opposed party can still apply for review of disapproval of trademark registration to keep the opposed mark alive, and continue the negotiation with the original opponent for a settlement. Once a settlement agreement is reached, the applicant for review of disapproval of trademark registration (the original opposed party) can still submit the agreement to the China National Intellectual Property Administration (CNIPA), saying that he has reached an agreement with the original opponent and the original opponent has agreed to voluntarily withdraw the original opposition application and agreed on registration of the opposed mark. The original opponent (the respondent of the review procedure) shall also report to the CNIPA that he is willing to withdraw the original opposition application and request the CNIPA to approve registration of the opposed mark. In view of the settlement agreement between the two parties, where the original opponent voluntarily withdraws the opposition application and agrees on registration of the opposed mark, it can be regarded that there is no conflict of rights between the opposed mark and the cited trademark(s), and the CTMO or CNIPA may decide to approve registration of the opposed mark.

However, in the above procedures, the agreement reached by the parties may not always lead to a satisfactory result. We would like to point out the risks of settlement in the procedures of trademark opposition and review of disapproval of trademark registration with the following three cases as examples.

Case I

[Introduction]

In this case, the opposed mark was opposed by two opponents separately. During opposition examination, one of the opponents settled with the opposed party to withdraw his opposition and the opposed mark was transferred to this opponent. The CTMO approved the withdrawal of the opposition, and held that the opposition grounds of the other opponent were untenable. However, the Trademark Office found that, apart from the opposed mark in this case, the opposed party applied for registration of more than 100 trademarks in various classes of goods and services, and many of them had been opposed by different parties. The opposed party did not give a reason for application of the opposed mark. Therefore, the CTMO held that the application of the opposed mark had obvious intention to copy or imitate other’s trademark, and the transfer of the opposed mark did not change the fact. The application of the opposed mark disrupted the normal order of trademark registration management, harmed the fair environment of market competition and violated the principle of good faith. The CTMO decided to disapprove registration of the opposed mark.

[Comment]

When seeking for a settlement, the parties of an opposition case should consider the nature of the opposed mark. Even if the opposed mark is transferred to the opponent, the fact that application for the opposed mark has an obvious intention to copy or imitate other’s trademark will not be changed.

A major revision of China Trademark Law in 2019 is the addition of a provision that "the malicious application for trademark registration that is not filed for the purpose of use shall be refused" in Article 4. The provision stresses the obligation to use trademarks and strengthens crackdown on malicious trademark applications without intention of use. Further, the Regulations for Standardizing Trademark Application Behaviors implemented from December 1, 2019 facilitate combating malicious trademark registration applications. First, the new provision can be applied during the examination stage. If a trademark application violates Article 4 of the Trademark Law, the CTMO shall reject it. Second, the new provision can also be applied in opposition and invalidation procedures. If the opposed mark or the mark in dispute falls into the circumstances provided in Article 4 of the Trademark Law and Regulations for Standardizing Trademark Application Behaviors, the CTMO or CNIPA shall disapprove registration of the opposed mark or invalidate the mark in dispute.

Case II

[Introduction]

In this case, the CTMO decided to disapprove registration of the opposed mark. The opposed party was unsatisfied and applied for review of disapproval of trademark registration. It is argued the applicant (the opposed party) and the original opponent (the respondent) reached a settlement. The original opponent withdrew its opposition and meanwhile applied to withdraw one of the cited marks in its name. Therefore, the obstacle to registration of the opposed mark has been removed. Upon examination, the CNIPA found that the opposition withdrawal application was refused by the CTMO and the original opponent did not respond during the review procedure to support registration of the opposed mark. The applicant's argument that he has reached a settlement with the original opponent lacks factual basis and therefore shall not be justified. Although one of the cited marks was rejected by the CTMO and became invalid, the opposed mark and other cited marks constituted similar marks on similar goods according to Articles 30 and 31 of the Trademark Law. In summary, the review grounds of the applicant are untenable and therefore the opposition decision is maintained.

[Comment]

In this case, the original opponent (the respondent) did not join the review procedure to express its support of registration of the opposed mark to the CNIPA. After examination, the CNIPA held that the opposed mark constituted a similar mark to the remaining cited marks of the original opponent on similar goods, and therefore disapprove registration of the opposed mark. After reaching a settlement, the parties should cooperate with each other and jointly write to the CNIPA to request registration of the opposed mark.

The CTMO conducts formality examination only of the withdrawal application of opposition case. Even if the withdrawal application is refused by the CTMO for failing to meet the formal requirements, the opponent shall re-file the withdrawal application. If the parties agree to transfer the opposed mark to the original opponent, a trademark assignment application should be filed in a timely manner. In the review procedure of disapproval of trademark registration, if the opposed mark is already transferred to the original opponent, then there is no conflict between the opposed mark and the original opponent's cited trademark(s). The CNIPA should approve registration of the opposed mark.

In some cases, although the parties have submitted an assignment application to transfer the opposed mark from the opposed party to the opponent and the opponent has applied to withdraw of its opposition during the opposition stage, the CTMO may still decide to disapprove registration of the opposed mark before it is transferred to the original opponent. Under the circumstance, to implement the settlement agreement, the opposed party (the trademark assignor) shall file an application for review of disapproval of trademark registration within the prescribed time limit to keep the opposed mark alive. The original opponent (the respondent, the trademark assignee) shall also participate in the review procedure and request approval of registration of the opposed mark.

Case III

[Introduction]

In this case, the CTMO held that the opposed mark and the trademark cited by the opponent constituted similar trademarks on similar goods, and therefore made a decision to disapprove registration of the opposed mark. The opposed party was unsatisfied and applied for review of disapproval of trademark registration, claiming that the original opponent's cited mark was a malicious plagiarism of the brand of the applicant (the opposed party). The two parties have reached a settlement and the original opponent (the respondent) has issued a consent letter to show its desire of registration of the opposed mark. So the applicant requested the CNIPA to approve the registration of the opposed mark. The original opponent also responded and expressed its agreement of registration of the opposed mark in the review procedure.

However, the cited mark of the original opponent is transferred to another party. After the assignment application was approved by the CTMO, the assignee of the cited mark applied to join the review procedure and submitted its opinion to deny withdrawal of the opposition by the original opponent. The assignee argued that the opposed mark constituted a similar mark with the cited mark and should not be approved for registration.

Upon examination, the CNIPA found that the cited mark had been transferred to the assignee, and the original opponent no longer enjoyed the exclusive right of the cited mark; the original opponent had signed the transfer agreement with the assignee before he executed the settlement agreement with the applicant (the opposed party), issued the consent letter, filed the withdrawal application of the opposition; the original opponent had agreed that the assignee should be entitled to the right and obligations of his position in the review procedure. The evidence submitted by the applicant (the opposed party) is insufficient to prove that the assignee knew or should have known the settlement agreement between the applicant and the original opponent, the consent letter and withdrawal application of the original opponent. Since the assignee clearly opposed to the original opponent's withdrawal of the opposition and requested the CNIPA to disapprove registration of the opposed mark, the assignee is not bound by the aforementioned settlement agreement, consent letter and withdrawal application.

[Comment]

In this case, the original opponent first signed a transfer agreement of its cited mark with another party, then reached a settlement with the opposed party and agreed on registration of the opposed mark. However, after the assignment of the cited mark is approved, the assignee overturned the original opponent's commitment with the opposed party in the review procedure and opposed registration of the opposed mark. The above case demonstrates that the parties of an opposition case should pay close attention to the status of key marks involved when seeking for a settlement.

In some cases, the applicant (the opposed party) reaches a settlement agreement with the original opponent (the respondent) in review procedure, and the original opponent indeed cooperates to issue a consent letter and inform the CNIPA that he withdraws the opposition application and agrees on registration of the opposed mark. However, if the original opponent has signed a trademark transfer agreement and granted the assignee’s accession to the review procedure in advance, the assignee shall succeed to the review procedure after the assignment of the cited mark is approved and published. The settlement reached between the applicant (the opposed party) and the original opponent later is not binding on the assignee. In the above case, when the applicant (the opposed party) and the original opponent reached a settlement agreement, the assignment application of the cited mark had not yet been submitted. It is hard for the applicant (the opposed party) to find possible change of ownership of the cited mark. Therefore, even if the parties reach a settlement, the applicant (the opposed party) shall not take it for granted before registration of the opposed mark is approved. As a precaution, it is advised to clearly state in the agreement that change and transfer of the ownership of the cited mark(s) is forbidden before registration of the opposed mark is approved unless the cited mark(s) is/are assigned to the opposed party or its related party.

The trademark exclusive right has attribute of private right. The parties of a trademark case are entitled to perform their rights in accordance with the law. If the parties of trademark opposition and review of disapproval of trademark registration reach a settlement agreement without prejudice to the public interest and the rights of third parties, it will certainly solve the dispute quickly and save resources. However, the settlement agreements achieved are not always successful because of the risks involved in the implementation process. We suggest the parties consult professionals to optimize the trademark settlement agreement and reduce risks.

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Unitalen Attorneys at Law
Address 7th Floor, Scitech Place, No. 22 Jian Guo Men Wai Ave., Beijing, 100004 P. R. China
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