How Should Trademark Holders Keep Their Use Evidence Properly

Most trademark holders are ordinary market operators or producers rather than professional legal service providers. It is not easy to survive and make profits in the increasingly fierce market competition, so in order to save budgets, many companies do not have their in-house legal team. Although some companies may have their own legal advisers, even if they do, they may still not be very familiar with the specific provisions of China Trademark Law. Therefore, in some non-use cancellation actions, many trademark holders will be puzzled: it is clear that our company has used the trademarks and submitted true evidence of use, but why did Chinese National Intellectual Property Administration ("CNIPA") rule that my trademark was unused?

Maybe the "use" perceived by trademark holders and the "use" as defined by China Trademark Law are different. Sometimes, even if you have used your trademarks, if you fail to properly preserve evidence in accordance with the provisions of the law, your trademarks may be deemed unused. The author has compiled some cases and summarized several issues that trademark owners are prone to encounter in a non-use cancellation case.

1. Only Submitting Contracts/Brochures: In order to expand their businesses, almost every commercial entity will have product catalogs printed. Once a business deal is made, contracts should be the most common commercial document in commercial transactions. However, in cancellation proceedings, only providing business catalogs and/or contracts may not be enough to successfully maintain a trademark registration. The holder needs to further submit invoices corresponding to the contract. The invoices produced by China's State Administration of Taxation (i.e. Chinese Fapiao) have the highest credibility. For international transactions, normal commercial invoices are more commonly used. If normal commercial invoices could reflect real transactions, they will still be accepted by the CNIPA.

2. Online sales of small commodities: This scenario is common among manufacturers producing relevant products overseas, who export them to Chinese distributors through international shipping. The distributors then sell the goods to Chinese consumers either through physical stores or online platforms. One problem that arises from this business model is that the export documents, such as shipping orders, customs declarations and product inspection certificates are often not in a chain, that is, it is difficult for holders to provide complete documentation of the entire sales process for a batch of goods sold. Furthermore, due to requirements by customs officials, etc, holders often cannot clearly specify the trademarks and product names in their declarations. Another issue is that Chinese distributors selling small products such as acne cream, plasters, gum or soda pop, etc. worth less than RMB 100 ($15) or so, may find it hard to collect corresponding Chinese Fapiao proving transactions with consumers in China. The good news is that trademark review practice in China keeps abreast with changes in times; with an increasing proportion of online sales year after year, the Trademark Examination Guide issued by the CNIPA in 2021 has incorporated electronic business transaction bills or records into evidence which can be recognized as valid proof of use.

3. Goods/Services used are not those registered: With the rapid development of technology, new industries and companies will inevitably emerge. There are many high-tech companies at the forefront of the times that provide goods or services that are not covered by the Nice Classification and Chinese Classification of Goods and Services used in mainland China. For this situation, the applicant could choose a broader upper concept when applying for a trademark because it is stipulated in Trademark Examination and Adjudication Guide that "if the actual used goods of the disputed trademarks are not the standard descriptions according to the Chinese Classification of Goods and Services, but they essentially refer to the same goods, or the actually used goods belong to the subordinate concepts of the approved designated goods can be deemed as constituting use on approved goods and services." In addition, in the possible subsequent litigation proceedings, courts will also flexibly judge based on the natures, functions, purposes of goods and contents, methods of services.

4. Use on Unapproved Goods: Many trademark holder often applied to register a trademark in China before entering the Chinese market, but their application is either totally rejected or some goods are refused for registration. Therefore, the applicant cannot obtain exclusive trademark rights to use the trademark for the time being. However, market activities cannot wait until the trademark is approved for registration. Then, the applicant may use their trademark (over the unapproved goods or services), that is, unregistered but used on their core products. For trademarks that have been partially approved and partially rejected for registration, using trademarks on unapproved goods cannot be regarded as use on approved goods because they do not belong to the same sub-class (so they are not similar goods or service). In this situation, it is recommended that applicants continue to pay attention to changes in trademark registration situations and try to get a registered mark, so as to 1) avoid any possible infringement risks and 2) minimize the risk of being cancelled in potential non-use cancellation actions.

5. Registration in Class 35: Many applicants may register their trademarks in Class 35 just as a defensive or general registration without actual use purpose. Since not providing advertising, accounting, business management or related services for others, if the owners' Class 35 registered trademarks are challenged, submitting use evidence in their main business will not be sufficient to maintain the Class 35 registration. Therefore, it is available for the owner to abandon the registered mark but re-file the application as a back-up.

Finally, if the registrants produce goods not circulated within China, which are directly exported, such activity can be considered as effective use.