Applicants for trademark registration in China frequently find their applications are refused because of alleged conflict with prior applications or registrations.  This is perhaps the inevitable result of a system where trademark applications can be filed very broadly without any genuine intention to use and bad faith applications are commonplace.

Legitimate brand owners frequently feel obliged to file as widely as possible to protect their interest, and as a result find themselves in conflict with other legitimate brand owners. In this situation, a Letter of Consent may provide a practical and cost-effective solution.  In China, however, Letters of Consent have been problematical.  Brand owners have often experienced difficulty in both obtaining Letters of Consent from local Chinese companies and having them accepted by the administrative authorities or the courts.

There are, however, signs that the situation is changing which is good news for brand owners looking to protect their trademarks in China.  This article examines both the current position and important recent Supreme Court decisions that indicate a changing attitude to Letters of Consent.  It also provides some practical tips for brand owners seeking to rely on Letters of Consent in China.

Letters of Consent

In the context of trademark registration, the term ‘Letter of Consent’ generally refers to a written statement or agreement whereby the owner of an earlier mark consents to a third party’s registration of a later identical or similar mark.

In many jurisdictions Letters of Consent are commonly used to overcome trademark registration refusals on relative grounds i.e. where the applied-for mark is identical or similar to an earlier conflicting mark. They can provide a practical and cost-effective solution, even in situations where grounds might exist for cancellation or invalidation of the earlier mark.  In a global context, for example, where maintenance of a unified brand is important, co-operation is more likely than aggression to achieve a commercially satisfactory result.

Current Situation in China

Although China’s Trademark Law does not make specific provision for Letters of Consent, brand owners have often sought to rely on them -- with varying degrees of success.  Local Chinese companies are often less likely than their foreign counterparts to agree to a Letter of Consent, certainly in the absence of payment.  It is not uncommon for large amounts of money to be asked in exchange for such an agreement.   And even where it is possible to obtain a Letter of Consent, it may be difficult to have it accepted by Trade Mark Review and Adjudication Board (TRAB) or the courts.  They have often taken the view that co-existence of two marks owned by different proprietors will inevitably cause confusion and be detrimental to the interest of consumers.

This is very different from the more liberal approach that has been taken in many other jurisdictions, particularly Europe and the US, where Registrars and the courts take the view that the brand owners concerned are in the best position to gauge the likelihood of confusion and that, in general, their opinion should be respected. [1]

Indications of Change

There are signs that the attitude to Letters of Consent in China is changing.  There have been a number of appeal decisions in which rejections of Letters of Consent, on the part of both the TRAB and the lower courts, have been overturned.

The first of these is a 2013 decision of the Beijing Higher People’s Court, Deckers Outdoor Corporation v TRAB [Case No. (2012) High Court Administrative Final No. 1043], in which the Court overturned decisions of both the TRAB and the Beijing No. 1 Intermediate People’s Court and held that the Letter of Consent should be respected.

The particulars of both the applied-for mark and the cited mark involved, and the services in relation to which they were used, are set out in the table below:

More recently, the Supreme Court adopted a similar approach in two landmark appeal decisions: Google Inc. v TRAB   [Case No: (2016) Supreme Court Administrative Retrial No. 102 & 103] and decided that, in the presence of the Letter of Consent that had been provided, the likelihood of confusion resulting from the co-existence of two identical marks on nearly identical goods was low or manageable.  The particulars of both the applied-for marks and the cited mark involved in these cases are set out in the table below:

 The Court’s reasoning was as follows:

• A Letter of Consent signed by the owner of a cited mark should be respected, provided there is no harm to the national interest or public interest, or to the interest of a third party.

• The Trademark Law aims to protect the interest of both consumers and producers and dealers. They are equally important: neither should be neglected. In real life, the likelihood of confusion cannot be completely eliminated: similar business symbols may, for example, be simultaneously registered and used in good faith by different parties for specific historical reasons. In these two cases, Google’s registration and use of the NEXUS mark has a more direct and immediate impact on the interests of SHIMANO than on the interests of ordinary consumers. Shimano’s issuance of a Letter of Consent indicates that it has taken a tolerant attitude towards the likelihood of Google’s registration causing consumer confusion. Further, both Google and Shimano are famous companies in their respective industries, and there was no evidence that Google had acted in bad faith or intended to take unfair advantage of Shimano’s reputation when it applied for the NEXUS mark. There was also no evidence that Google’s registration of the NEXUS would harm the national or public interest. Given that, the Letter of Consent should be respected.

• Although the very function that a trademark performs is to identify and distinguish the source of goods or services, in this case Google’s other business symbols, such as corporate and trade names and package designs etc, were also functioning as source identifiers.

The reasoning adopted in these very important decisions is similar to that reflected in the USPTO Trademark Manual quoted above.  We expect that, in future, both TRAB and the lower courts will take a more liberal attitude towards Letters of Consent than they have in the past, and that Letters of Consent will generally be more widely used and accepted.

Practical Tips for Brand Owners seeking to rely on Letters of Consent in China

These guidelines should be followed when seeking to rely on a Letter of Consent in China:

• Letters of Consent originating in mainland China should be notarized in China. Letters of Consent originating outside mainland China should be notarized by a Notary Public in the country of the earlier mark owner and then legalized by a Chinese embassy or consulate in that same country.

• A Chinese translation of Letters of Consent written in another language should be provided.

• There is no provision in China’s Trademark Law prescribing the content or form of a Letter of Consent, but it is advisable to include a statement of the earlier mark owner’s belief as to the likelihood of confusion and a statement of the measures being taken to avoid consumer confusion. A Letter of Consent is likely to have higher probative value if the earlier mark owner explicitly states that (i) the applied-for mark and the earlier mark differ in appearance, sound, meaning, and commercial impression; (ii) the marks are used in relation to different goods in different market segments; and (iii) the trade channels for goods of both marks are sufficiently unrelated.

• Given the Supreme People’s Court’s finding that because both parties were famous in their respective industries, the applicant was not intending to take unfair advantage of the reputation of the earlier mark, evidence establishing the general reputation of the applicant will be useful e.g. company history, and reputation of its products/ services, and brands.

As indicated above, local Chinese companies have often been reluctant to sign Letters of Consent, or to sign them in the absence of a substantial fee.  While that may well change in the future as Letters of Consent become more widely accepted, it is advisable to be prepared in the event of a refusal or reluctance to sign.

• In some instances it may be helpful to commence, or threaten to commence, opposition, cancellation or invalidation proceedings.

• Where it looks as though the other party may not co-operate, early consideration should be given to filing a separate application for a re-designed mark that incorporates the current mark, but endeavours to ensure that, in its entirety, the new mark is distinguishable from the cited mark.

Conclusion

Although Supreme Court decisions are not technically binding in China, other than those the Court has specifically approved as ‘guiding cases’, they can, in practice, have a direct influence on practice generally and the decisions handed down by administrative authorities and courts.  The recent decisions in relation to Letters of Consent, which are in line with international practice, are, in our view, likely to influence future decisions of both TRAB and the lower courts.

[1] The Trademark Manual of Examining Procedure (TMEP) issued by the USPTO provides as follows in relation to Letters of Consent:

• The Court of Appeals for the Federal Circuit has indicated that consent agreements should be given great weight and that the USPTO should not substitute its judgment concerning likelihood of confusion for the judgment of the real parties in interest without good reason, that is, unless the other relevant factors clearly dictate a finding of likelihood of confusion.
• Examining attorneys should give substantial weight to a proper consent agreement. When an applicant and registrant have entered into a credible consent agreement and, on balance, the other factors do not dictate a finding of likelihood of confusion, an examining attorney should not interpose his or her own judgment that confusion is likely.

A version of this article was first published in World Trademark Review in February 2018.