In the recent past, trade mark applications in China have been increasing at a very high pace. An explosive growth took place in 2017 when the number of applications hit the 5 million mark. A number of such applications are malicious which are filed for the purpose of hoarding and selling at a high price later on. Wuhan Zhongjun Ltd had registered its mark “闪银” in class 36. In 2015, Beijing Shanyin Qiyi Ltd initiated n invalidation proceeding claiming that Wuhan Zhongjun was a trade mark squatter and had hoarded over 1,000 trade marks in bad faith.

The Supreme People’s Court (SPC) has noted that the thousands of trade marks were registered without any intent to use as well as the free riding applications in bad faith.

Wuhan Zhongjun had registered a large number of trade marks similar to well known marks (e.g. Alibaba’s AliPay). The trademark was registered in financial services in class 36 although his scope of business does not include of the same. Thus, the Court has stated that Wuhan Zhongjun’s way of registering so many trademarks is not for the purposes of business but for the purpose of hoarding large number of trade marks in order to pursue unjust benefits in breach of Article 4 of the Chinese Trademark Law:

“Any natural person, legal person or other organization that needs to obtain the exclusive right to use a trade mark for its goods or services during production and business operations shall apply for trade mark registration with the trade mark office.”

Answering all of Wuhan Zhongjun’s contentions, the SPC accepted that the Chinese Trademark Law does not limit the number of trademark applications or lawful trademark assignment. However, both have to be based on the needs of the enterprise’s normal production and operating activities. Since, Wuhan Zhongjun has argued on the basis of Article 49 of the Chinese Trademark Law stating that it llowed the 3-year “preparation period” prior to the actual use of the trade mark, the SPC clarified that “no genuine use in 3 consecutive years without a justiciable reason leads to the revocation of the registered trade mark” was enacted with the legislative intention to promote the genuine use of trade marks and maximize the real value of trade marks. In addition, Wuhan Zhongjun failed to prove the proper reasons for non-use as well.

Thus, the SPC held that the hoarding of trademarks disturbs the orderliness of trademark registration, misappropriated public resources, undermined fair competition and was contrary to good faith. Therefore, the registration of the disputed trade mark fell within the scope of “other illegitimate means” prohibited in Article 44, Section 1 of the Chinese Trademark Law.

23 aug, 2018


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