Symbolic Use is Insufficient to Maintain Trademark Registration in Non-Use Cancellation in China

Trademarks that are registered for more than three years face the risk of non-use cancellation actions filed by other party in China. According to Article 49 of Chinese Trademark Law, any party can lodge a non-use cancellation action against a mark registered for over three years. After receiving the non-use cancellation application, the China National Intellectual Property Administration (CNIPA) shall inform and require the registrant to submit use evidence or good reason for non use. If the evidence submitted is deemed invalid or there is no justified excuse for non use, the CNIPA shall cancel the registered mark. If the registrant or the non-use cancellation applicant is not satisfied with the CNIPA’s decision, they may file a review before the CNIPA and then appeal the review decision before Beijing IP Court and Beijing High People’s Court (the first-and-second instance courts).

The author received a favorable ruling from Beijing High People’s Court[1], confirming that symbolic use of a trademark should not be supported to maintain its registration. In this case, the trademark registrant submitted several sales contracts and corresponding VAT invoices which could be verified as authentic, but the mark in dispute was still cancelled and the author secured a successful second-instance judgment that overthrew the first-instance court ruling and the CNIPA’s review decision of a non-use cancellation case. This article will present a detailed, in-depth analysis for you.

Introduction of the Case

1. The author helped the client to lodge a non-use cancellation against the mark in dispute in class 9. Upon examination, the CNIPA held that the use evidence submitted by the registrant included a trademark authorization letter, sales contracts and invoices which proved the mark in dispute was used on “diving suits, etc.” in the specified three years, and decided to maintain registration of the mark in dispute.

2. Since the CNIPA did not exchange the use evidence to the non-use cancellation applicant for check, the author filed a review on behalf of the client. In the review procedure, the CNIPA transferred a copy of the use evidence for response. The author pointed out the flaws and doubted the validity of the evidence. However, the CNIPA still decided to maintain the mark in dispute on most of designated goods.

3. The client did not accept the CNIPA’s review decision. So the author appealed before Beijing IP Court, claiming the decision is untenable and the evidence on record is unreliable or at best shows symbolic use of the mark in dispute. Unfortunately, Beijing IP Court dismissed the appeal because the Court considered the registrant submitted an authorization letter, several sales contracts between the licensee and different buyers, and corresponding VAT invoices. The contracts indicated the mark in dispute and the goods diving goggles, etc. in class 9. Besides, the contracts were established in the specified three-year period. The sales amounts, the seller and buyers, and the goods on the contracts were consistent to those shown by the VAT invoices. In particular, the contract signed between Guangzhou Haifeng Company (the buyer) and the licensee (the seller) and the corresponding invoice both showed the mark in dispute. So the evidence had formed a chain of proof and was sufficient to demonstrate that the mark in dispute was commercially used in the specified three-year period.

4. The author appealed before Beijing High People’s Court on behalf of the client, pointing out the flaws and defects of the use evidence as follows:

1. 1. The two contacts accepted by Beijing IP Court are possibly fabricated and not true.

The two contracts were dated Dec. 2, 2020 and Jan. 5, 2021. They were in standard form and were only affixed with the seal of the licensee (the seller). The buyer (Guangzhou Haifeng Company) did not affix its official seal. Instead, a natural person signed and affixed his signature to the contract on behalf of the buyer, which is inconsistent with commercial practices. The person was not the legal representative of the buyer then. And the relationship between the person and the buyer is not clear. Further, the buyer was dissolved on May 16, 2022. It is difficult to verify the signor’s identity and his power to sign for the buyer, and the authenticity of his signature.

The contracts also included the goods in class 25 such as swimming trunks, swimming suits, swimming caps under the same mark as the mark in dispute. However, neither the registrant nor the licensee (the seller) has registered or applied for the same mark in class 25. The authenticity of these contracts containing false trademark information is therefore questionable. The author asked for the original copies of the contracts for check.

1. 2. The only VAT invoice bearing the mark in dispute should be inadmissible as evidence.

All VAT invoices were verified as authentic. But only one invoice indicated the mark in dispute and the related goods in class 9 simultaneously. The said VAT invoice corresponded to the contract dated Jan. 5, 2021. It labeled the mark in dispute as a model designation, not as a trademark. The goods listed on the said invoice included not only the goods (swimming goggles, diving masks, etc.) in class 9 but also the goods (silicone swimming caps, men’s swimming trunks and swimsuits, etc.) in class 25. Since the mark in class 25 is purely fictitious and fabricated, the invoice containing false information should not be acceptable as evidence.

   4.3 Symbolic use is insufficient to maintain trademark registration

Even if the mark in dispute on the above-said VAT invoice is construed as use of the trademark, the total number of relevant goods in Class 9 is only 34 items, with a total value of RMB 284.96. Specifically, the goods are “10 pairs of swimming goggles, RMB 88.5”, “12 diving masks, RMB 106.19”, “6 snorkels, RMB 42.48” and “6 diving face masks, RMB 47.79”. Given that there was only one VAT invoice in the three-year period, this evidence could at best demonstrate that the registrant had engaged in symbolic use of the mark in dispute solely to avoid its cancellation. According to the rules, symbolic use is insufficient to maintain registration of trademark.

4.4 The registrant failed to provide any photos or pictures, packaging and advertisements of the goods, which is inconsistent with common sense.

Sales volumes of some contracts were large. For example, the sales volume of swimming goggles and snorkels that bear the mark in dispute in the contract signed between the licensee (the seller) and the buyer (Guangzhou Haifeng Company) on December 2, 2020 are 25,932 pairs and 4,000 pieces respectively. However, the registrant failed to submit other supporting evidence, including product photos, packaging, advertising materials, packing lists, and delivery records, to prove that the mark in dispute was used on the relevant goods in class 9 during the three-year period. It is against common sense.

5. Beijing High People’s Court held an interview of the case. During the interview, the author raised doubts about the contracts and invoices and asked to check the original contracts again. The judge asked the registrant questions to clarify the situation and required the presence of original documents. The registrant replied it was unable to submit original copy of the contracts.

The judgment of the Second-instance Court

Beijing High People’s Court rendered a final judgment, overturning the first-instance court judgment and the CNIPA’s review decision, and ordering the CNIPA to re-issue a decision. The court held that：

1. In this case, the use evidence of the mark in dispute submitted by the registrant consists of an authorization letter, five contracts and five corresponding VAT invoices. The authorization letter was issued by the registrant as the licensor to its affiliated company as the licensee. Standing alone, it is insufficient to prove that the mark in dispute was actually used.

2. The registrant is unable to provide the original copies the five contracts. Additionally, the contracts contain the following aspects that do not align with normal business practices, e.g. although the contracts specified the goods name, quantity and prices, details such as size, model and color are not stipulated; the contracts indicated men’s swimming trunks and swimming suits in class 25 bearing the mark in dispute, but neither the registrant nor the licensee had the mark for the said goods in class 25; the licensee signed a large quantity sales contracts with the buyer (Guangzhou Haifeng Company) on Dec. 2, 2020 and signed another contract for an extremely small quantity (6-12 pieces for each goods item) with the same buyer on Jan. 5, 2021 soon. Considering the sales amount and quantity of the contract of Jan. 5, 2021 and the corresponding VAT invoice is very small, it not insufficient to demonstrate the registrant had a genuine intent to use the mark in dispute. This constitutes a symbolic use of the mark in dispute aimed solely at maintaining the validity of trademark registration.

3. For the remaining contracts, since the corresponding VAT invoices do not display the mark in dispute, they cannot prove that the goods bearing the mark in dispute in the contracts were actually sold.

In summary, the evidence on record is insufficient to demonstrate that the mark in dispute was used in a genuine, lawful and effective commercial manner on the reviewed goods during the specified period. The appeal is well-founded and should be supported by the court.

Therefore, the Court decided to annul the first-instance judgment and the CNIPA’s review decision, and ordered the CNIPA to re-issue a decision. According to the effective court ruling, the CNIPA has recently made a revised decision to cancel the mark in dispute.

Case insights

1. According to the rules in China, symbolic use of trademark is not sufficient to maintain the registration in non-use cancellation cases. In this case, the registrant submitted five VAT invoices but only one VAT invoice showed the mark in dispute and related goods in class 9. Besides, according to the only invoice, the total amount of the related goods in class 9 is only 34, with a total value of RMB 284.96. Therefore, in the specified three years, a single contract and a single VAT invoice involving a small sum of money and a small quantity of goods are considering symbolic use even if they are true, and therefore insufficient to maintain the registration of the mark in dispute in line with the rule.

2. VAT invoices are important use evidence because they show the seller, buyer, sales amount, date, goods name, trademark (if available) and they can be verified from National VAT Invoice Verification Platform of the State Taxation Administration. In this case, the registrant submitted five VAT invoices and even screenshots of verification results to prove they were true. However, four VAT invoices did not indicate the mark in dispute, they are irrelevant to the case and shall not be admitted. The only one invoice bearing the mark in dispute is not reliable, because the mark is indicated as a model designation and the invoice contains false information of the same mark in class 25 while neither the registrant nor licensee registered or applied for the same mark in class 25.

3. The contracts fail to specify the size, model or color of the goods in class 9 and 25, which is not in conformity with commercial practices. The seller and buyer first signed a contract of a large amount of goods and later signed a second contract of a very small amount of goods in about one month. Although the second contract corresponds to the VAT invoice bearing the mark in dispute, it is insufficient to demonstrate that the registrant had a genuine intention to use the mark in dispute, the relevant goods bearing the mark in dispute had entered the market and was capable of distinguishing the source of the goods. Other evidence does not indicate the mark in dispute, or is defective and not in conformity with trading practices.

4. It is common for trademark registrants to provide sales contracts, invoices and advertising evidence to prove the use of trademark in non-use cancellation cases. In recent years, the majority of advertising evidence is from online usage. Cyberspace maintains an immutable record. In this case, the author conducted an investigation online but failed to locate any evidence of online use of the mark in dispute and the relevant goods in class 9. Yet the registrant provided five sets of contracts and corresponding VAT invoices. So the author conducted thorough verification of the registrant’s evidence and raised objections, thereby convincing the second-instance Court to render a favorable ruling and achieving the goal of cancelling the mark in dispute.