IP Cases & Articles

Bad faith grounds for invalidating Chinese characters

Bad faith is a ground that can only be used against an EUTM post registration and not beforehand during opposition proceedings. In this case, Inner Mongolia Yili Industrial Group Company Limited (the invalidity applicant) is a market leader in dairy production in China, where its trade mark 伊利 (yīlì) has attained the status of a well-known mark.

Inner Mongolia Yili Industrial Group Company Limited owns several EUTM’s covering goods in classes 29, 30 and 32 with the word element “Yili” as well as its Chinese transcription (see below left):

Chinese characters

In 2015, Mr Wen Li filed an EUTM application for similar goods in classes 29, 30 and 32 in the form containing both the word element “YILI” as well as the corresponding transcription into Chinese “伊利” (see above right).

After an unsuccessful opposition against this application based on its earlier EUTM, Inner Mongolia Yili filed for invalidity of the EUTM claiming bad faith under Article 59(1)(b) EUTMR.

In support of its invalidity action, Inner Mongolia Yili put forward the following arguments:

  1. It claimed to be the primary milk and dairy products company in China and Asia. It submitted evidence to show that its marks and YILI were among the best known brands in China and had been issued Certificates of “well-known trade mark status” in China.
  2. Mr Wen Li was of Chinese nationality at least in 2009, whereupon he became a resident and eventually a national of the UK, which created a presumption of his knowledge of leading Chinese brands.
  3. An investigation had been conducted into the trading activities of Mr Wen Li, whereby it did not identify and past or present activity in the dairy business.
  4. A conversation with a Chinese public notary revealed that Mr Wen Li was fluent in Chinese and had dealings with members of the public in China.

It was argued that all the above factors created a strong presumption of a bad faith registration.

Cancellation Division decision

The Cancellation Division noted that in order to find bad faith there must be a dishonest intention and an objective standard against which such a dishonest action can be measured. In order to assess whether this has taken place, the Cancellation Division referred to the non-exhaustive criteria laid down by the CJEU’s judgment in the Lindt case.

Taking all of the aforementioned into consideration, the Cancellation Division found:

  1. Inner Mongolia Yili had shown that its company, widely known under the short form of Yili, is the leading producer of dairy products in China and holds a position among the most valuable Chinese brands.
  2. For many years before the filing date of the Contested EUTM, Inner Mongolia Yili was identified not only with the Chinese characters 伊利 but also with the Latin word YILI as a unitary brand.
  3. There was no commercial logic other than a deliberate intention to create an association with the Chinese trade mark(s) of Inner Mongolia Yili in order to take advantage of these, and even to prevent them from pursuing their business activities in the EU.

The Cancellation Division held that it was not a necessary condition for the finding of bad faith that the invalidity applicant actually possesses enforceable rights in the EU prior to the filing of the contested EUTM. What is important is the invalidity applicant’s legitimate right to the sign. It therefore concluded that the EUTM should be declared invalid.

In short

Despite the huge number of EUTM filings from China, the EUIPO consistently considers EUTMs containing Chinese characters to be figurative marks (it conducts no aural and genuine visual and conceptual comparison in inter partes proceedings when assessing a likelihood of confusion). Therefore the scope of protection one has in a Chinese character EUTM is debatable. Whether the EUIPO’s position is sustainable, only time will tell.

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