On 18 May 2020, the Beijing High People’s Court, handed down its judgment on the administrative litigation concerning the invalidation filed by Tencent Technology (Shenzhen) Co., Ltd. against the trade mark registration No. 16715668 for 
in Class 9, which was filed in the name of Baoding Hua Yu Electromagnetic Wire Co., Ltd. With this ruling came the end of a two year dispute over the mark, which means ‘produced by Penguin Factory’.
In its judgment, the Court ruled that Tencent was successful in showing that, prior to the application date of the disputed mark, the Chinese public associated the term ‘鹅厂’ (‘penguin factory’, the first two Chinese characters in the disputed mark) with Tencent and hence, Baoding Hua Yu had no right to register a trade mark comprising the Chinese characters ‘鹅厂’. Accordingly, and since Baoding Hua Yu also filed a number of applications for marks which included Alibaba’s and Baidu’s nick names ‘猫厂’ (‘cat factory’) and ‘狼厂’ (‘wolf factory’), the Court decided that Baoding Hua Yu had obtained the registration of its ‘Penguin Factory’ mark “by other illegitimate means” as prescribed by Article 44.1 of the 2013 Trade Mark Law and invalidated the trade mark registration.
As the Court’s verdict was based on the Baoding Hua Yu’s bad faith, it marks a welcome addition to recent decisions from Chinese courts to curb bad faith filings, which have plagued the Chinese IP system for a long time.
The Beijing High People’s Court’s decision was, however, rather remarkable under another aspect. The Chinese words ‘鹅厂’ (‘penguin factory’) , ‘猫厂’ (‘cat factory’) and ‘狼厂’ (‘wolf factory’) are nick names of the well-known Chinese Internet giants, Tencent, Alibaba and Baidu, as their mascots and logos 
, 
and 
are related to these animals. Although the companies do not commonly use the nick names in their own communication or to mark their products, they had certainly become aware of them. Out of an abundance of caution, they secured some trade mark protection for their nick names with the Chinese trade mark office, although they did not cover all categories of products with their trade mark registrations.
It was predominantly the public and media who used the nicknames to refer to Tencent, Alibaba and Baidu. In a legal context, this type of use has been deemed to be ‘passive use’ and not proper trade mark use by the brand owner, and normally, the brand owner could not claim rights to a nick name if it was created by the public or the media.
The Beijing High People’s Court, however, had set a new trend in April 2019 when it first issued its own Guidelines for the Trial of Trademark Right Granting and Verification Cases (2019) to acknowledge that the use of a trade mark by others may be sufficient to defend a mark against a non-use cancellation, provided that the use is not an impediment to the owner of the trade mark and the owner has not specifically objected to such use.
In its recent judgment, the Court first had to acknowledge that Tencent did not own prior registrations for its nick name in relation to the relevant goods and therefore, technically, Baoding Hua Yu’s ‘Penguin Factory’ mark would not infringe Tencent’s rights. Setting this aside, the Court adopted the notion of ‘passive use’ of a trade mark and acknowledged that a nickname, which was created by the public in the first place and became popular, was a brand owner’s valuable asset and worthy of being protected including against unauthorised filings and use by other traders.
In this decision, the Court not only recognised the obvious bad faith of the defendant, who had the intention of free riding on Tencent’s reputation, it also came up with a practical solution for affording protection to Tencent’s unregistered mark as a result of ‘passive use’.
For brand owners, it may be comforting that, contrary to popular belief, unregistered marks can be protected in China. Nevertheless, the main takeaway from the decision should be that filing applications to register IP in China remains the key measure for brand owners to take before entering the Chinese market to avoid disputes over ownership of the IP. If one or more nicknames already exist, devised by the public or local distributors or agent, then effort should be made to choose one version for which an application for registration as a trade mark for the relevant goods and services should be filed with the China National Intellectual Property Administration as soon as possible.
Source: Beijing High People’s Court Administrative Judgment (2019) Jing Xing Zhong No.10063 (http://wenshu.court.gov.cn/website/wenshu/181107ANFZ0BXSK4/index.html?docId=275adb76671b480db4e9abc7000d6d97)