Abstract
A significant quantity of unutilised trademarks exists within China’s extensive pool of registered trademarks. This situation results in the squandering of trademark resources, administrative capacity dedicated to trademark examination, and judicial resources. Furthermore, it disrupts the regular functioning of trademark systems and market dynamics. Presently, China’s approach to managing unused registered trademarks relies primarily on a system where third parties can apply for cancellation if a trademark remains unused for three years. Despite recent reforms aimed at clarifying the usage requirements for trademarks, this single provision falls short of effectively supervising unused trademarks. To address this issue comprehensively, a standardized management system for idle trademarks is necessary. This system should operate at both macro and micro levels, encompassing prevention, identification, and resolution. At the macro level, preventive measures, identification protocols, and remedial actions should be established. At the micro level, unused trademarks should be categorized based on their underlying causes and addressed through tailored approaches.
1. ISSUE
China is currently advancing its status as a prominent hub for intellectual property, positioning itself among the top five global intellectual property offices. Statistics from January to May 2023 reveal a significant surge in trademark applications, totalling 2,770,000, with 1,679,000 registrations during the same period. As of May 2023, China boasts a staggering 43.963 million valid registered trademarks. Despite this notable progress, the influx of trademark applications continues to outpace the market’s capacity to absorb them. This phenomenon highlights a concerning trend: a substantial portion of registered trademarks remain inactive, failing to fulfil their intended purpose of goods and services identification. Reports suggest that between 30% to 50% of China’s registered trademarks are dormant, representing a substantial underutilization of trademark resources. This situation poses several challenges, including hindering the registration of new trademark applications and exacerbating the strain on administrative and judicial resources. Left unchecked, the proliferation of unused trademarks risks disrupting the established order within the trademark landscape and market dynamics. Therefore, effective regulation and management of unused trademarks are imperative to mitigate these risks and optimize the utilization of trademark resources.
2. The Risks and Causes of Idle Trademarks
2.1 The Hazards Posed by Idle Trademarks
2.1.1 Depletion of Scarce Trademark Resources
Trademark registration in China encompasses various elements such as words, graphics, letters, numbers, three-dimensional symbols, colour combinations, sounds, and their combinations. Despite the potential recognition of additional elements under the revised Trademark Law of China, the commonly utilized elements primarily consist of words, graphics, letters, and numerals. Consequently, the resources available for trademarks with identification functions are constrained due to the limited composition of these elements. When a previously registered trademark remains unused and fails to fulfil its role in identifying goods or services in the market, it represents a squandering of scarce trademark resources.
2.1.2. Impediment to Legitimate Usage by Other Trademark Applicants
China’s trademark registration process primarily follows the principle of registration as the primary criterion and usage as a supplementary requirement. Trademark applicants are not obligated to provide evidence of trademark usage to meet registration conditions. Upon obtaining trademark rights, applicants are granted exclusive rights, barring others from registering trademarks for similar or identical goods. Consequently, competitors are unable to engage in normal commercial activities, leading to potential infringement issues. The presence of an idle trademark hinders other applicants from legitimately registering and utilizing trademarks for their intended purposes.
2.1.3. Depletion of Administrative Trademark Examination and Judicial Resources in Intellectual Property
When an applicant acquires a registered trademark and leaves it unused, it not only squanders the administrative resources previously allocated for examining the trademark but also complicates subsequent trademark registrations. If others attempt to register similar or identical trademarks that remain unused, trademark examiners must compare them with existing valid trademarks to assess registration eligibility. If the applied-for trademark is deemed identical or similar to an existing idle trademark under trademark law, the application will be rejected. Consequently, applicants may resort to legal proceedings to challenge rejection or non-registration. This inadvertently results in the wastage of significant trademark administrative review and intellectual property judicial resources due to idle registered trademarks.
2.1.4. Disruption of Normal Trade Mark and Market Order
The primary function of trademarks is to identify goods or services, which forms the cornerstone of China’s trademark legislation. However, when trademarks are registered but remain unused, they fail to fulfil their intended purpose and value. Moreover, idle trademarks impede others’ legitimate use, sparking demand for trademarks among enterprises and individuals and fostering malicious competition. This, in turn, fuels speculative behaviour such as the resale of registered trademarks, disrupting the normal trademark order. Such practices are detrimental to creating economic value for enterprises and disrupt the orderly functioning of China’s market.
2.2. Causes of Unused Trade Marks
In essence, trademarks that have been registered but remain unused can be categorized as idle trademarks. From the context of China’s commercial landscape, the reasons for idle trademarks can be broadly classified into subjective and objective factors.
2.2.1. Subjectively Unused Trade Marks
2.2.1.1. Unused Trade Marks Registered for Prior Rights Protection
Some trademarks are registered but not utilized as a strategic move by enterprises to safeguard their existing rights. This scenario often occurs when businesses register similar or identical trademarks within the same or similar classes to protect their prior rights. Such registrations are part of the enterprise’s strategic planning, with the intention of potential future use or to prevent others from exploiting similar marks. By registering these unused trademarks, enterprises aim to prevent confusion with their well-established trademarks and deter others from using similar marks maliciously. This serves to maintain market order and protect the integrity of existing well-known trademarks.
2.2.1.2. Idle Trade Marks Hoarded for Profit
As China’s market economy evolves and the trademark registration system undergoes reforms, trademark registration has become more accessible, even for individuals. Reforms in trademark laws have streamlined the examination process, fostering an environment conducive to the development of small and medium-sized enterprises and brand expansion. However, this accessibility has also led to the emergence of speculative behaviour among certain individuals who register trademarks solely for profit. These individuals pre-emptively register trademarks, including those already in legitimate use by others, to profit from subsequent legal disputes or infringement claims.
2.2.2. Objectively Unusable Trade Marks
2.2.2.1. Unclaimed and Unused Trade Marks Due to the Death or Termination of the Registrant
In cases where the registered trademark holder passes away or terminates the trademark during its validity period without any successor, the trademark becomes effectively ownerless. According to the Civil Code of China, such unclaimed trademarks are considered public resources, and ownership is transferred to the state upon the demise of the previous owner. The Trademark Review and Adjudication Board of the State Intellectual Property Office (SIPO) is responsible for managing and overseeing these trademarks.
2.2.2.2. Idle Trade Marks Unusable Due to Changes in Business Scope, Restructuring, or Bankruptcy
Enterprises, as dynamic entities in the market economy, often undergo operational changes and restructuring, leading to alterations in their business scope. Sometimes, these changes occur abruptly or without prior anticipation, resulting in trademarks that are technically unusable due to misalignment with the enterprise’s revised operations. Despite the inability to utilize these trademarks effectively, the trademark rights remain with the entity. Given the fluidity of market entities, the prevalence of such unused trademarks should not be underestimated.
3. Analysis of the Importance of Establishing a Regulatory Management System for Idle Trademarks
3.1. Development of a Standardized Management System for Unused Trademarks Aligns with China’s Current National Situation
The implementation of a standardized management system for idle trademarks in China is a practical necessity given the significant prevalence of idle trademarks nationwide. According to Cheng Jing, a member of the Chinese People’s Political Consultative Conference (CPPCC) in 2018, the national rate of idle trademarks has reached approximately 30%, with certain categories even hitting 50%. This abundance of idle trademarks hinders new trademark registrations due to similarity with existing idle trademarks and undermines the realisation of intellectual property rights value. Hence, there is an urgent need to regulate and manage idle trademarks to ensure they fulfil their intended value as trademarks.
3.2. Alignment of Unused Trademark Management System with Current Legislation in China
China’s focus on trademark rights protection has progressed over time, with legislative efforts aimed at aligning with international standards. The current trademark laws in China adhere to strict criteria for protecting trademark rights, including objective and subjective assessments of similarity. While this rigorous protection safeguards existing trademark rights, it also leads to a significant number of new trademark applications being rejected. Moreover, many existing trademarks remain unused, failing to contribute to the market, thus resulting in the loss of trademark resource value. Therefore, current trademark rights protection in China should extend beyond combating infringement to include standardized management of existing trademarks, especially idle ones.
3.3. Reduction of Resource Waste through Standardized Management System for Unused Trademarks
Trademark administrative review and judicial litigation costs are relatively low for commercial entities. However, a considerable number of trademark disputes escalate to the judicial level, consuming substantial trademark review and judicial resources. Addressing the issue of unused trademarks can mitigate this resource waste. By implementing preventive measures, supervising trademarks during their validity, and taking timely actions on identified unused trademarks, administrative and judicial resource waste can be minimized. Additionally, categorizing and managing unused trademarks can potentially revitalize them, thereby realizing their value and reducing disputes and litigation.
4. Constructing a Path for Exploring the Analysis through Idle Trademark Normative Management System
4.1. Macro-planning of a System for Regulating and Managing Unused Trademarks
Not all idle trademarks pose the same level of risk to trademark resources or rights. Therefore, the establishment of a standardized management system for idle trademarks should be approached from a macro perspective, to unlock trademark value and streamline idle trademark resources. This entails implementing preventive measures before trademark approval, establishing a supervision system during trademark validity, and promptly addressing different causes of unused trademarks. Moreover, horizontally differentiating control measures based on the causes of idle trademarks and regulating management accordingly can optimize the utilization of trademark resources across various categories.
4.2. Micro-structuring of the Regulatory Management System for Unused Trademarks
4.2.1. Vertical Procedural Framework for the Regulatory Management System of Unused Trademarks
4.2.1.1 Implementation of a Preventive Mechanism for Unused Trademarks Before Trademark Registration
Preventing the emergence of unused trademarks should be prioritized, starting from the trademark registration process itself. Given the presence of “professional trademark registrants” seeking profit through trademark hoarding, measures should be implemented to scrutinize trademark registration applications. Specifically, the examination process should assess simultaneous trademark submissions and require evidence of intended use for approval, thereby discouraging trademark hoarding. Additionally, statistical analysis of trademark movements can identify entities hoarding trademarks without utilization, leading to their prohibition.
4.2.1.2 Establishment of a System for Submitting Evidence of Trademark Use Post-Registration
The vitality and value of a trademark lie in its usage. Implementing a system where trademark owners submit evidence of use serves as an effective means to monitor trademarks and distinguish between idle and active trademarks. Trademark owners should submit evidence of use periodically, with the frequency tied to trademark renewal cycles. Flexible methods for submitting evidence, such as electronic or mail service, should be accommodated.
4.2.1.3 Development of a Mechanism for Identifying and Categorizing Idle Trademarks during the Trademark’s Lifecycle
Identification of idle trademarks primarily relies on evidence of use submitted during the trademark’s lifespan. The Trademark Review and Adjudication Board should prompt trademark owners to submit evidence of use timely and categorize idle trademarks based on various factors such as the owner’s status and intent regarding trademark use. Additionally, incidental examination during new trademark registration can identify and mitigate obstacles posed by idle trademarks, promoting the legitimate use of new trademarks while activating idle ones.
4.2.1.4 Creation of a Platform for Reviving Unused Trademarks
Facilitating the transfer of unused trademarks can benefit multiple stakeholders. Establishing a platform for revitalizing idle trademarks, jointly managed by public and private entities, can streamline the transaction process and expedite the utilization of idle trademarks with potential commercial value. This platform would centralize information on idle trademarks, promoting their entry into the market and maximizing their trademark value.
4.2.2. Horizontal Categorization of Unused Trademarks in the Regulatory Management System
4.2.2.1 Oversight of Unused Registered Trademarks in the Category of Unclaimed or Terminated Ownership
Once an unused trademark is identified as unowned, it undergoes procedural steps overseen by the Trademark Review and Adjudication Board. After a public announcement period without objection, the unowned trademark enters a trading platform, with proceeds contributing to trademark development. If the trademark remains unsold after a set period, the Board announces its cancellation, extinguishing the trademark right.
4.2.2.2 Oversight of Unused Registered Trademarks in the Category of Objective Circumstances Inhibiting Trademark Use
This category encompasses situations where trademark ownership changes, bankruptcy occurs, or trademarks remain unregistered despite ownership changes. The Trademark Review and Adjudication Board notifies the trademark owner of the unused status, requesting evidence of use within a specified timeframe. Unused trademarks may then enter the trading platform to realize residual value.
4.2.2.3 Oversight of Unused Registered Trademarks in the Category of Bad Faith Registration
These trademarks are registered with the intent of illegal gains or infringing on existing brands. Failure to provide evidence of use within the designated period prompts the Board to cancel the trademarks and prohibit future registrations by the owner.
4.2.2.4 Oversight of Unused Registered Trademarks in the Category of Defensive Registration
Trademarks registered to protect existing rights are protected under Chinese law. Owners need only submit evidence of continued rights.
4.2.2.5 Oversight of Unused Registered Trademarks in the Category of Trademark Use Under Preparation
Entities preparing to use trademarks may require additional time to provide evidence of use. The Board may extend deadlines based on the circumstances.
5. Conclusion
In conclusion, the prevalence of dormant registered trademarks in China poses significant challenges to the effective utilization of trademark resources and the maintenance of market order. The current regulatory approach, relying on third-party cancellation after three years of dormancy, falls short of addressing the complexities and risks associated with inactive trademarks. To tackle this issue comprehensively, a standardized management system for idle trademarks is imperative.
This research paper has elucidated the various hazards posed by dormant trademarks, including resource depletion, hindrance to legitimate usage, waste of administrative and judicial resources, and disruption of market dynamics. Understanding the causes behind idle trademarks, whether subjective or objective, is crucial for formulating tailored regulatory strategies.
The proposed management system should operate at both macro and micro levels. Macro-level planning involves implementing preventive measures during trademark registration and establishing a framework for monitoring trademarks throughout their lifecycle. Micro-level structuring involves categorizing and analyzing dormant trademarks, with specific oversight mechanisms tailored to address different causes of dormancy.
By implementing such a comprehensive regulatory approach, China can mitigate the risks associated with inactive trademarks, optimize the utilization of trademark resources, and foster a fair and competitive market environment. This will not only uphold the integrity of the trademark system but also contribute to the overall development of intellectual property rights in China.
References
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[4] Yang Xiao. Optimizing Mechanism of Allocation of trademark resources in our country — from Cost analysis as entry point [J].China Trademark,2022,(08):33-38.
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