Following last week’s deep dive into the China National
Intellectual Property Administration (CNIPA)’s Guidelines on
Trademark Assignment Procedures, there are some additional risks
– particularly for trademarks that are likely to cause confusion
– that rights holders should be aware of to ensure a smooth
and cost-effective assignment process (see “CNIPA highlights
critical aspects of trademark assignment in published
guidelines”).
Geographical locations
Assignment of a trademark that designates a location that
differs to its actual origin may lead to public confusion about the
origin of the goods.
For example, the trademark below contains the city name Paris,
so it cannot be assigned to any party that is not physically
located in Paris.
Further, the trademark below contains the country name Italy,
therefore it cannot be assigned to any party that does not
originate from Italy. Otherwise, the use of the mark could mislead
consumers about the origin of the goods.
Company names
An assignee’s use of a company name in a trademark –
including the full or partial company name or an abbreviation
– may cause confusion among the relevant public or general
consumers.
For example, the trademark below contains the company name
Yangcheng Slewing Bearing, so this mark cannot be assigned to any
other party besides the business itself.
If the above situations relate to the requirement in the
CNIPA’s guidelines that “similar trademarks over similar
goods need to be transferred together”, then the parties
should negotiate to voluntarily cancel the registration to ensure
approval of the assignment recordal.
Trademark squatters
If the assignor is a trademark squatter that has registered a
large number of trademarks and assigned them to different entities,
the assignment will not be approved. The CNIPA indicates that if
this happens and the assignor fails to provide any legitimate
reason for assignment, evidence of use or intent to use – or
if it cannot prove that the evidence is valid – the
assignment will not be approved.
For example, if a business applies for 700 marks and assigns
some of them to different, unrelated entities, the CNIPA would
reject the assignment on suspicion of “malicious trademark
stockpiling and illicit gain through assignment”. Therefore,
in order to avoid unnecessary losses caused by assignment
rejection, rights holders should proceed with caution before
entering negotiations to purchase a trademark from a squatter.
Other risks and considerations
The details and status of a mark will impact the assignee’s
interests, so it is crucial for the assignee to conduct a
background check on the mark before purchase and fully evaluate the
risks before filing the application for assignment recordal. There
are five key considerations for rights holders to take into account
for such a background check.
Invalidation risk
First, it should be determined whether a registered trademark
was maliciously obtained through deception or other unfair means,
or if it infringes on the prior rights of others. Such marks are at
risk of being declared invalid in an invalidation action, as
judgments in these cases are generally based on the real-time
status of the trademark application and registration. Therefore, an
assignee that purchases a trademark from a malicious hoarder risks
losing it if a challenger claims that the former registrant (the
assignor) acted in bad faith.
There is a real-life example of this risk that rights holders
should note. A trademark squatter registered the DIOR trademark
under registration 9138175 and then assigned it to another
party.
In the invalidation action against this mark, the CNIPA
considered the previous right holder’s bad faith in copying and
imitating third parties’ marks and benefitting from their brand
image. It declared the mark invalid, even though it was owned by
another party through assignment when the invalidation action was
examined.
Generic name and non-use cancellation challenges
Rights holders should also consider whether the registered
trademark has become a generic name for the goods/services for
which it is designated for use. Further, if the mark has not been
used for three consecutive years without a justifiable reason for
this from the assignor, the registered trademark could be
cancelled. Assignment does not exempt an assignee from cancellation
challenges on such grounds.
It is vital to verify the assignor’s use of the mark. If a
registered trademark faces a non-use cancellation action during the
assignment recordal process or soon after the recordal has been
finalised, valid evidence of use would be required from the
assignor to maintain registration.
However, should such an attack occur during the recordal
process, if the assignment agreement stipulates that the assignor
cannot use the mark from the date of signing – and if the
assignment is not recorded until more than one or two years after
signing – then the assignee’s genuine and effective
commercial use alone can maintain the trademark registration.
Trademark stability
Further, a potential assignee should ensure that the trademark
is stable. For example, if the mark is pending examination for a
new application, review of refusal or an opposition, it could face
rejection for registration.
Risk of purchasing licensed marks
Finally, purchasing a registered trademark that has been
licensed to others carries the risk of affecting the ability to
exercise the rights after the assignment. The assignment of a
registered trademark does not automatically impact the mark’s
licence contract that is already in effect and recorded before the
CNIPA unless otherwise specified in the contract. Therefore,
assignees should carefully consider the type of trademark licence
and its recordal status. It is best practice to negotiate with the
assignor and request that it terminates the prior licence
contract.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
#Curb #Risk #Nonuse #Invalidation #Challenges #Trademark #Assignment #China #Trademark
