How to better preserve use evidence for registered trademarks in China?

Trend

It is observed that the China National Intellectual Property Administration (“the CNIPA”) has been tightening the examination standard on use evidence submitted in defence of non-use cancellations. At the appeal stage, the Chinese courts tend to be more flexible in general (such as less bound by the subclassification system, or more open to accept OEM evidence), but they have also been getting more detailed in adjudicating non-use cases. 

This increasing strictness in examination and adjudication on trademark use is quite in line with the proposed amendments to the PRC Trademark Law. While the Draft Amendment thereto as released by the CNIPA on 13 January 2023 has not yet come into effect, one of the main changes under the Draft is the reinforcement of the obligation to use trademarks.  Specifically, the Draft adds the requirement of actual use or commitment to use for trademark filings (Article 5) and the potential cancellation of a trademark registration in failure of submission of Statement of Use upon registration for 5 years (Article 61). 

It seems the overall trend is that use would play an increasingly important role in the trademark regime in China. Therefore, for brand owners, it is important to have a good practice of preserving use evidence in view of the potential challenges.  

Changes to current practice with Case Studies

Through case studies, we have observed some changes in the CNIPA’s recent practices in examining non-use cancellations:-

1. The CNIPA is placing more weight on the authenticity of use evidence submitted.

(i) Electronic evidence may face challenges on its authenticity if not notarised. In practice, notarisation of evidence is generally required at the court level and the CNIPA used to find evidence without notarisation acceptable. However, there are recent decisions where the CNIPA did not accept evidence without notarisation.

• Case 1 – The CNIPA considered that the evidence obtained online by the registrant, including the promotional pages on Weibo, Red Book and Taobao, is editable. Since the evidence preservation process was not notarised, the CNIPA did not accept the evidence on the ground that its authenticity is questionable. (Review on non-use cancellation against mark No. 20485185 “濒湖山人” (BIN HU SHAN REN); CNIPA decision SHANG PING ZI [2023] No. 213047)
• Case 2 – For emails showing payment confirmation, the CNIPA did not accept such evidence as it considered that the emails were electronic evidence, and its authenticity could not be confirmed. (Review on non-use cancellation against mark “PREVENT” No. 5357649; CNIPA decision SHANG PING ZI [2023] No. 344083)

(ii) The CNIPA may go farther by initiating and conducting checks on the authenticity of evidence.

• Case 3 – When examining the authenticity of the VAT invoices submitted by the registrant, the CNIPA took the initiative to log into the National VAT Invoice Verification Platform for verification purpose, and decided to accept the evidence after such verification. (Review on non-use cancellation against mark No. 10746134 “道登DO.D” (DAO DENG DO.D); CNIPA decision SHANG PING ZI [2024] No. 51760).
• Case 4 – For the screenshots of a mobile APP submitted as evidence, the CNIPA found its authenticity questionable and therefore logged into the relevant mobile APP conducting searches on the disputed mark as the keyword. The CNIPA could not locate any relevant information and therefore considered the screenshot evidence not authentic and not acceptable. (Review on non-use cancellation against mark No. 19171258 “大麦公寓” (DA MAI GONG YU); CNIPA decision SHANG PING ZI [2021] No. 141696). 

2. The CNIPA is getting stricter in examining the completeness of the evidence submitted – chain of evidence is required. 

(i) The CNIPA may not accept evidence which shows only preparation for use, such as authorisation letters or contracts per se.  In the absence of other supporting evidence which shows actual commercial use, the evidence showing only preparation for use may be considered as insufficient.

• Case 5 – The registrant submitted evidence showing preparation for use, including trademark authorisation contract, operational rules of the authorised store, agency certificates and the regional trademark authorisation contracts. However, the CNIPA decided that such evidence was insufficient to prove use of the disputed mark since they did not show that the mark has been put in market circulation or any actual commercial use. (Review on non-use cancellation against mark No. 12510529 “50岚及图” (50 LAN and device); CNIPA decision SHANG PING ZI [2024] No. 39480)
• Case 6 - The registrant submitted evidence showing preparation for use, including the production contracts, the trademark authorisation letter and the purchase order. The CNIPA decided that such evidence was insufficient since they are preparatory work before the products enter into the market circulation. (Review on non-use cancellation against mark No. 34341747 “肆睡裤 MICKEY” (SI SHUI KU & MICKEY); CNIPA decision SHANG PING ZI [2024] No. 59248)

(ii) In examining evidence related to export, the CNIPA is now inclined to require a chain of evidence, or the evidence would be considered as incomplete. For example, mere customs declarations without any other corroborative evidence would be considered as insufficient to prove actual performance of export activities.

• Case 7 - The CNIPA did not accept the customs declarations of exported goods submitted by the registrant since such evidence did not bear the customs stamp and were not supported by other evidence to prove the actual completion of its customs declaration. (Review on non-use cancellation against mark No. 22796869 “PRECUT”; CNIPA decision SHANG PING ZI [2023] No. 79465).
• Case 8 - The CNIPA did not accept the customs declarations of exported goods submitted by the registrant since there was no corroborative evidence such as Notification of Customs Release. The CNIPA considered that mere customs declaration was not sufficient to prove the actual performance of the customs declaration. (Review on non-use cancellation against mark No. 6862815 “MACO TOOLS”; CNIPA decision SHANG PING ZI [2022] No. 318045)

3. The CNIPA is getting stricter in examining the correlation between the disputed mark and the use evidence submitted.

(i) The evidence submitted should show the disputed mark but not any other marks owned by the same registrant. It is common for brand owners to have more than one registration for a trademark, such as multiple registrations for different stylisation of the trademark. In the context of non-use cancellation, if the use evidence submitted shows use of other marks owned by the same registrant but not the disputed mark, it may be considered as insufficient to maintain the registration of the disputed mark.

• Case 9 – The registrant owned several registered trademarks and submitted use evidence of one of them. The CNIPA, following the first instance court's judgement, held that although the actual used trademark and the registered trademark have minor differences, the evidence could only show use of other trademarks registered by the registrant but not the disputed mark; therefore the evidence was not acceptable. (Review on non-use cancellation against mark No. G652566 “MAVIC”; CNIPA decision SHANG PING ZI [2022] No. 238507) 
• Case 10 - The CNIPA, following the second instance court's judgement, held that there is a certain difference between the logo of the mark shown in the use evidence and the logo of the disputed mark. Meanwhile, the registrant has also registered a few marks which are identical to the mark shown in the use evidence. Therefore, its claim to maintain the registration of the mark in question could not be supported. (Review on non-use cancellation against mark No. 1230236 “POLOBYRALPHLAUREN”; CNIPA decision SHANG PING ZI [2019] No. 169405 CHONG SHEN No.1661)

(ii) The use of a mark as a name of the product model or in product description cannot be deemed as trademark use. Some of the brand owners may register trademarks for model names and relevant descriptions for their products. However, once these registrations encounter non-use cancellation attack, due to the relatively weak distinctiveness of such trademarks, use evidence may not be acceptable as the use is unable to serve the purpose of distinguishing source of goods or services.

• Case 11 – The registrant submitted use evidence including contracts and invoices showing use of the disputed mark “脉动” (MAI DONG, meaning “pulsation”) on the goods “pulsating automatic dosage machine, pulsating automatic dosage system”.  The CNIPA did not accept such evidence, ruling that such use does not constitute trademark use since it is merely description. (Review on non-use cancellation against the mark No. 12829384 “脉动” (MAI DONG); CNIPA decision SHANG PING ZI [2022] No. 238507)
• Case 12 – The registrant submitted sales and purchase contracts as well as invoices to prove use of the disputed mark “HPDC”. The Beijing High Court (BHC) did not accept such evidence since the disputed mark “HPDC” was shown in the “Model” column in the evidence; thus, the registrant used the disputed mark as a name of the product model rather than as a trademark and the relevant public would unlikely see it as an identifier of the source of goods. (Court appeal on non-use cancellation against mark No. 20180736 “HPDC”; BHC decision (2023) JING XING ZHONG No. 1751)  

While the above may demonstrate that the CNIPA and the Chinese courts are getting more stringent in examining use evidence in a non-use context, it may also suggest that they are putting more focus on the actual use of trademark in a commercial sense. In other words, the examination is conducted in a more conscious way, which in some cases may result in higher flexibility. For example:-

1) Token use is generally considered as insufficient in defence to non-use cancellation. However, the CNIPA and the Chinese courts have been considering this more comprehensively, and the determination of token use should not depend only on the amount/quantity of evidence submitted.  

• Case 13 – In this case, the Supreme People’s Court (SPC) gave specific consideration on the industry in which the registrant was engaged (i.e. fishing industry) and accepted the use evidence on that basis notwithstanding that there were defects in the evidence submitted. The SPC specifically commented that in deciding whether the trademark was in use, factors like the actual situation of the relevant business activities, the habits of trademark use, the differences in the way of use of the trademark and other practical conditions should be fully considered; and the evidence does not have to be flawless so long as the evidence meets the standard of a high degree of probability. (Court appeal on non-use cancellation against mark No. 3639814 “锦江渔业; JIN JIANG FISHING” (JIN JIANG YU YE & JIN JIANG FISHING); BIPC decision (2020) ZUI GAO FA XING SHEN No. 9798).
• Case 14 – The use evidence submitted by the registrant showed that the mark in use was not identical with the registered disputed mark. While this would generally be unacceptable, the CNIPA held that the evidence was sufficient to show use since it proved that the registrant had the true intention to use and the trademark could be used to identify the origin of the goods. The CNIPA had taken into consideration the limitation of the conditions and habits of use of the trademark in commercial circulation, and the fact that the registrant had only one valid trademark under its name during the prescribed period. In particular, the CNIPA commented that in the examination of evidence of trademark use, it should give full consideration to the general commercial habits of market business activities, the industry characteristics of business activities, focusing on the examination of the trademark registrant’s true intention to use and the situation where the trademark plays the function of identifying the source of the trademark in its business activities. (Review on non-use cancellation against mark No. 617517 “华康及图” (HUA KANG and device); CNIPA decision SHANG PING ZI [2021] No. 215198)

2) When the disputed mark covers non-standard goods/services items, and the evidence submitted does not reflect the exact registered goods/services under the non-use cancellation, the CNIPA would consider if the goods/services as registered and as in use are the same in terms of nature. 

• Case 15 – The registrant submitted evidence of use on “medical antipyretic patches” which is not covered by the disputed mark. However, the CNIPA decided that such evidence would be sufficient to maintain registration of the disputed mark on the relevant goods “medical ice packs; first-aid hot packs” as the CNIPA considered that these goods are similar in terms of nature. (Review on non-use cancellation against mark No. 30798922 “两只老虎” (LIANG ZHI LAO HU); CNIPA decision SHANG PING ZI [2024] No. 78463).
• Case 16 – The registrant submitted evidence of use on “Baijiu” (i.e. Chinese liquor) to try to maintain its registration on “alcoholic beverages, except beer”. The CNIPA supported the registrant because of the characteristics of the manufacturing process, function and use of Baijiu which share the subordinate concept of “alcoholic beverages, except beer”. (Review on non-use cancellation against mark No. 1435948 “楚留香” (CHU LIU XIANG) No. 1435948; CNIPA decision SHANG PING ZI [2022] No. 181062)

Takeaways and suggestions

Evidence of trademark use is of significant value, in fact not only in the context of non-use cancellation, but also in proving intent to use in examination opinions triggered by large-scale applications, as well as in opposition, invalidation and infringement cases to prove the earliest use of the trademark, its continued use and reputation. Therefore, it is always a good practice to have regular preservation of use evidence to strengthen the value of brand owners’ trademarks.  

Having learned from the precedent cases and recent trend, we would provide some practical tips on collecting and preserve use evidence of trademark in common daily operations:-

1. Identifying the type of valid use evidence

The evidence of use for different brand owners could be roughly divided into the following three aspects according to the daily business operations:  

Firstly, in the process of production, the documents signed with the suppliers, manufacturers, product inspection and testing organisation, such as manufacturing agreements, purchase orders, payment receipts, invoices that can be verified on tax authority’s online platforms, exporting documents (customs declarations for exported goods with stamps, release confirmation, etc.), photos of products and package, test report (issued by the third party), etc. could be preserved as use evidence.

Secondly, in terms of the sales process, the signed distribution agreements, letters of trademark authorisations, transaction documents (including sales contracts, purchase contracts, receipts, invoices that can be verified on tax authority’s online platforms, transaction records on online stores), pictures of displaying the products, videos of sales of the products, consumers’ comments, etc., between the brand owners and the sales agents, distributors, online platforms and other business partners are also beneficial and should be preserved.

Thirdly, when it comes to promotion, the brand owners could keep the advertising agreements signed with advertisement agents, platforms, influencers, etc., the advertising materials (e.g. brochures, videos, social posts on TikTok, red book, dianping.com) and press release/ media reports. In addition, the exhibition contracts, invoices and pictures of the exhibition should be kept in good record. For advertising in magazines and other publications, the covers, catalogs and pages bearing trademarks would be useful. In case of outdoor advertisements and TV commercials, it is also necessary to take promotional pictures showing the time and place. When commissioning someone to design or print merchandise packaging, the design or printing contracts and corresponding invoices should be retained, and the trademark, goods and time should be reflected on these documents.

2. Completing the chain of evidence

Among all types of use evidence, evidence of actual transactions in production and sales is in general of the strongest probative value. However, one should bear in mind that the relevant documents, including the agreements/contracts/payment receipts/invoices/purchase orders, shall correspond to each other in order to prove the actual performance of the sales activities.
The evidence of sales can directly prove that the goods have entered into the market circulation, therefore it has a strong probative value comparing with other evidence. Sales contracts and corresponding invoices are usually the most common evidence, and invoices are indispensable as supporting evidence to prove the fulfillment of contracts. In this regard, sales contracts and invoices should always specify information such as trademarks and goods, and the relevant time and amount should be able to correspond to each other, so that the combination of the two can prove the sales time, sales volume and so on.

3. Standardising the way of evidence preservation

To ensure the validity of the evidence, attention should be paid to the standardised use of the trademarks in the commercial documents. For example, the trademarks and the relevant goods should always be reflected in the commercial documents such as invoices and contracts.

The manner of using the trademark will also greatly influence the determination of trademark use. Trademark used on product packaging should be in a reasonable size, font design, position, and color so that consumers can easily identify it as a trademark. Besides, adding the TM or ® symbol to the product packaging would also help demonstrate the registrant’s intent to indicate the source of the goods or services and to use the trademark in a trademark sense, particularly when the companies whose trademarks are the same as their trade names.
In case of a brand with multiple sub-brands and products, each trademark should be used differently and evidence of the use of each trademark should be preserved. 

Self-made evidence such as product brochures, mere photos and receipts, etc. should be avoided. Some self-made evidence does not show the formation of the time and is not used on the registered goods/services, which authenticity would generally be questioned.  

Last but not least, regarding the periodical timeframe of evidence preservation, keeping the use evidence on a yearly basis would be recommended. For instance, keeping 3-5 major deals proving production and sales contracts as well as keeping the corresponding invoices, sales records, etc. in the record. In terms of the process of evidence preservation, it is recommended to preserve them by notarisation or time stamp to improve the authenticity of the evidence, especially for the electronic evidence.