03 August, 2017
Spruson

Coexistence Agreements Assume a More Important Role in China Trademark Matters

Coexistence Agreements Assume a More Important Role in China Trademark Matters

Trademark coexistence agreements are expected to receive wider consideration in trademark administrative cases in China following two recent court rulings by the Supreme People’s Court in China, which have shed light on the role coexistence agreements play in trademark registration matters.

A trademark coexistence agreement arises when two different enterprises have developed rights to a similar or identical trademark. According to the World Intellectual Property Organization (WIPO), “Trademark coexistence describes a situation in which two different enterprises use a similar or identical trademark to market a product or service without necessarily interfering with each other’s businesses.”

In China, where the “first-to-file” principle is paramount, a coexistence agreement is not readily and automatically considered as the legal ground for a trademark to co-exist with a prior similar mark in respect of similar goods on the trade mark register.  Chinese authorities have tended to accept coexistence agreements only under certain conditions and allow the marks to co-exist on a case-by-case basis.

Traditional Position

Current laws and regulations in China do not yet contain provisions stipulating the effectiveness of coexistence agreements in practice. Based on the legislative intent of China Trademarks Law, which aims to protect the exclusive right to use a mark and consumer interest, there are different points of view in this regard – some hold that a trademark right, being a private right, is at the disposal of the proprietor and thus coexistence agreements shall be recognized. While those on the side of consumer interest believe that the mutual agreement should be disregarded if the coexistence is likely to cause public confusion.

Previously, in precedents where Chinese courts took consideration of the coexistence agreement and approved registration of a latter application, the prior mark and the applied-for mark were non-identical to one another. A case in point is the lawsuit filed by Knorr-Nahrmittel Aktiengesellschaft, concerning the disputed mark “KNORR SUSTAINABILITY PARTNERSHIP & logo” (china APAC update logo KNOL) and the prior mark “KNOL” owned by Google Inc. [2] The court held that the disputed mark is to some extent distinguishable from the cited mark, and the letter of consent issued by Google Inc. was recognized as a strong piece of evidence of avoiding likelihood of confusion. Hence, the court approved the registration of the disputed mark.

Breakthrough

Two court rulings by the Supreme People’s Court in China in December 2016 have shed light on the important role of coexistence agreements in determining the validity of a trade mark and assessing likelihood of confusion.

The retrial cases concerned trade mark applications Nos. 11709162 for “NEXUS” and 11709161 for “NEXUS” (Nexus) filed by Google Inc., both covering “handheld computers; portable computers” in sub-class 0901 of Class 9. The two applications were refused by the China Trademarks Review & Adjudication Board (TRAB) due to a cited prior mark No. 1465863 for “NEXUS” owned by Shimano Inc., which designates “computers for bicycle” also in sub-class 0901 of Class 9.

The TRAB’s decisions of refusal against Google’s applications were upheld on two occasions by the Intellectual Property Court of Beijing and Beijing High Court respectively on the ground that the coexistence of two parties’ marks is likely to cause public confusion and damage to the public interest, notwithstanding the bilateral agreement.

However, the Supreme People’s Court overturned the TRAB’s decisions, as well as the first-instance and second-instance rulings, and held that Google’s applications did not violate Article 28 of the China Trade Marks Law (2001 Amendment). [3] Notably, the Supreme Court stressed that the signing of a coexistence agreement is a way of the prior mark owner’s ‘disposal’ of its legal rights. As such, without objective evidence to prove the likelihood of damage to the public interest, it is inappropriate to deny the coexistence agreement merely due to the uncertain likelihood of “damage to the consumer interest”.

Undoubtedly, Google’s latter applications for “NEXUS” were virtually identical with Shimano’s prior registration for “NEXUS”, and there is limited room to argue the dissimilarities of goods because “handheld computers; portable computers” and “computers for bicycle” are both the subordinate concept of “computers”. Under such circumstances, it was the coexistence agreement that played the crucial role in granting registration to Google’s NEXUS trade mark.

Takeaways

The groundbreaking decisions on the “NEXUS” marks have sparked a wider consideration of the role of coexistence agreements in trade mark administrative cases. The rulings  imply that coexistence agreements are no longer absolutely ineffective when the marks concerned are confusingly similar, or even identical to each other, and designate similar goods in China.

Notably, the following significant factors were equally taken into account by the court in deciding whether or not the marks should be allowed to co-exist on the Register:

  • Dissimilarities of marks / goods - The goods “hand-held computers; portable computers” are arguably dissimilar to “computers for bicycle” in respect of function, usage, sales channel, method of use, target consumers and field of industry;
  • Market stablization / market position - Both Google and Shimano are famous enterprises in their respective fields of industry;
  • Bona fide intent - No evidence of Google’s bad faith to trade on Shimano’s reputation by Google’s application and use of the disputed marks;
  • Consumer interest - No evidence of likelihood of damage to the state interest, public interest and third party interest;
  • Other commercial logo – Google’s company name, trade name, unique packaging of products, etc., all serves to distinguish the origin of goods.

In other words, whilst coexistence agreements may serve as a strong evidence of eliminating the likelihood of public confusion – in the sense that the prior mark owner had disposed of its legal rights -, without the presence of the  factors outlined above the “NEXUS” retrial cases could well have ended up the other way.

A Window to the Future

With the surging number of international corporations finding their footing in China, conflicts of trade mark rights are inevitably on the rise. After breakthrough rulings of the Supreme Court, we may expect that the Chinese authorities, in their attempts to balance the interests between trade mark holders and consumers, will view trade mark coexistence agreements in a more favourable light in the days to come.

This article is an extract from Spruson & Ferguson’s Asia-Pacific Regional Trade Mark Update. You can view the entire summary here.

References

[1] INTA Glossary, http://www.inta.org/TrademarkBasics/Pages/glossary.aspx

[2] See Decision No. (2015) JING ZHI XING CHU ZI No.4711

[3] See Decision No.(2016) ZUI GAO FA XING ZAI No.102, and Decision No.(2016) ZUI GAO FA XING ZAI No. 103


coraltoh_370x270

CORAL TOH

Principal / Trade Mark Attorney / Solicitor
Trade Marks Team
Hong Kong, Beijing - China

MAY CHAN

Trade Mark Attorney / Solicitor
Trade Marks Team
Beijing, China

ALICIA HE

Trade Mark Attorney
Trade Marks Team
Beijing, China
 

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