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In the Li Longfeng case, the Supreme People’s Court delivered its judicial opinions on the interpretation of Arts. 41(1) and 31 of the Trademark Law 2010, which tackle bad faith trademark registrations in China. Based on the terms and structures of the provisions, this comment argues that the Supreme People’s Court is correct in its interpretation and application of these articles. The Court held that as an absolute ground for trademark invalidation, Art. 41(1) should be invoked only when the trademark piracy will jeopardize the public interest. The Supreme People’s Court also agreed with the second instance court that although Art. 31 can curb trademark piracy in a general way, it only protects the victim trademarks that have already been used in China and enjoy substantial inﬂuence in the Chinese market. Under this legal regime, however, most of the foreign trademarks with a certain reputation among Chinese consumers, but which have not yet ofﬁcially been launched into commerce in China, face the risk of trademark piracy without corresponding legal recourse. Since it is justiﬁable and increasingly common in international society to grant such extra-territorial legal protection to foreign trademark owners as an exception to the principle of territoriality, the law should be amended accordingly to explicitly provide for such protection against cross-border, bad faith trademark registrations.


Introduction
With the ever-increasing importance of brand building to enterprises and the subsequent brand awareness of consumers, trademarks have become progressively valuable. In general, two main legal systems of trademark protection can be identified: ''first-to-use'' and ''first-to-file''. Most countries have adopted the first-tofile system, in which trademark rights are awarded to the party who first files the trademark registration application with the registry authority, irrespective of the sequence of the use of the trademarks. In contrast, the first-to-use system entitles the first trademark user to an exclusive right to the trademark. Although the first-to-file system improves the legal certainty by determining the entitlement on a much simpler standard, it is a truth generally acknowledged that it creates potentially dangerous loopholes for trademark pirates to register a trademark of a prior user under their own name if the prior user failed to register the mark in time. Given the clear definition of the first-to-file rule, the prior user has to take the consequence. However, it does not mean the law would turn a cold shoulder to the trademark applications if they are filed in bad faith.
Trademark piracy is becoming increasingly overwhelming in China to date, 1 bringing about severe complaints from both domestic and overseas brand owners. The Supreme People's Court of the People's Republic of China (Supreme People's Court) most recently addressed this issue in the Li Longfeng case. 2 This comment holds that the decision of the Supreme People's Court in this case is admittedly without faults and errors both in the interpretation and application of the law herein specified, and it is the law per se that should be blamed to a large extent for causing the victim brand owners' discontent, especially the complaints of foreign trademark owners.

Facts
Haitang Bay, located in the Sanya City of Hainan Province, is the name of a town gradually developing into a world-class holiday resort with luxury villas and hotels. Realizing the prospective value of the mark ''Hai Tang

Issues
Two main questions arose in this case. The first was whether the trademark registration in dispute was obtained by ''any other improper means'' and thus subject to invalidation pursuant to Art. 41(1) of the Trademark Law 2001 (Trademark Law). 9 Second, whether Li had ''rushed to register in an unfair manner a mark that is already in use by another party and enjoys substantial influence'' which is prohibited under Art. 31 of the Trademark Law? 10

The Ruling
The Supreme People's Court held in the first issue that the trademark registration in dispute was filed by ''improper means'' prohibited by Art. 41(1) of the Trademark Law. 11 The Court deemed the term ''any other improper means'' as referring to the means other than fraud that would disturb the order of trademark registrations, impair public interest, and misappropriate public resources or any other means served to seek improper interests. 12 Given the fact that Li rushed to register the mark ''Hai Tang Wan'' (in Chinese) for multiple classes so as to take advantage of its popularity generated from the massive advertisement of the resort development project, and that he had forestalled a large number of other trademarks without any good reason, the Court believed that there was no evidence to prove Li had genuine 4 The Haitang Bay Management Committee is the governmental authority in charge of the development and construction of the Haitang Bay. 5 Supra note 3. intent to use these trademarks. 13 Absent of the genuine ''use'' intent to justify his trademark applications, Li's activities constituted means disturbing trademark registration order and misappropriating public resources. 14 Concerning the second issue, the court merely stated that because the evidence submitted by the Haitang Bay Management Committee was not compelling enough to prove that the use of the term ''Hai Tang Wan'' as a trademark had already enjoyed substantial influence before the date on which Li filed the trademark application, the claim under Art. 31 was not upheld. 15 2 Analysis

The Interpretation and Application of Art. 41(1) of the Trademark Law 2001
The Supreme People's Court is correct in its interpretation and application of Art. 41(1) of the Trademark Law. Trademark invalidity declaration means the mark is non-existence ab initio. Article 41 specifies the legal grounds by which to invalidate a registered trademark, 16 which can be divided into two categories: (1) the ''absolute grounds'' provided in Art. 41(1) including violating Arts. 10, 11, 12 of the Trademark Law, committing fraud or adopting any other improper means; and (2) the ''relative grounds'' provided in Art. 41(2) which is the violation of Arts. 13, 15, 16 or 31. Article 41(1) allows any organization or individual as well as the Trademark Office (TMO) itself to initiate the invalidation procedure at any time. 17 Under Art. 41(2), however, only if the interested party files a request shall the TRAB begin to pull the trademark at issue into invalidation procedure, and the request shall be filed within five years from the registration date unless the victim brand is a well-known mark registered in bad faith by the pirate. 18 The reason for the division is that the public interest protection should be distinguished from private interest protection. When the public interest is at stake (for example, when the registered mark lacks distinctiveness or contains deceptive elements), it should be declared invalid no matter by whom or when the request is filed. If the trademark is distinctive enough able to be registered but would infringe the prior right of another party, it is fairly reasonable to grant the right of requesting an invalidity declaration only to the specific infringed party because no one else is injured. It also makes sense to set up a time limit for the infringed parties to exercise their rights 13 Id.
14 Id. because that would help to balance the protection of the victims and the avoidance of the uncertainty of the legal status due to the victims' indolence in claiming their rights. Since the conditions for invoking Art. 41(1), including a mark's inherent disqualification to be registered and the commission of fraud, are all ''absolute grounds'', the term ''any other improper means'' in the same sentence should refer to the means that would impair public interest instead of one particular party's interest as well. The ''improper means'', as the Court held in the Li Longfeng case, consist of means that would disturb the order of the trademark registrations, misappropriate public resources or any other means served to seek improper interests. Given that all these listed circumstances involve the social order and public resources, they are undoubtedly detrimental to the public interest. The Court's interpretation of Art. 41(1) is justified accordingly.
After clarifying these concepts, the Court proceeded to apply the law to the facts. The following facts are mentioned in the Court's judgment to support its findings. First and foremost, Li himself admitted in a press interview that it was only after he had heard of the development project of Haitang Bay and realized the potentially great value of the mark ''Hai Tang Wan'' (in Chinese) that he decided to register the trademark. Secondly, Li did not engage in any manufacture or business operation pursuant to real estate, yet he still had the disputed mark registered on services pertinent to real estate. Further, he registered more than 30 other trademarks, most of which are popular names of the tourist attractions of Hanan Island, e.g. the mark ''Xiang Shui Wan'' (''Perfume Bay'' in Chinese) and ''Ye Lin Wan'' (''Coconut Forest Bay'' in Chinese). The Court believed that in light of these facts, Li was proved to have no genuine intent to use the trademarks he registered, which constituted a waste of the public resources and a disturbance to the trademark management order.
The reasoning of the Court, although not stated in quite a detailed way, is fairly logical and persuasive. Article 4 of the Trademark Law requires that a trademark application should be filed when the applicant does have the need to obtain an exclusive right to a mark in the process of business. 19 That is to say, the justification and reasonableness of a trademark application lie in the applicant's genuine intent to use the trademark in commerce. The ''genuine intent to use'', as a mental status, is a subjective element that has to be inferred from a person's objective behavior. Either registering trademarks that are identical or similar to any other reputable place names or unregistered trademarks on various classes, or registering a substantial amount of trademarks without proper reasons are the objective activities from which a lack of genuine intent to use can be reasonably inferred. Consequently, Li's trademark application in dispute should be deemed improper. If Li had improperly registered only one trademark, Art. 41(2) should be applied to recover private interest. However, such is not the case here. It was found that Li had the trademark registrations covering numerous different service classes, and he had registered many other famous place names. To register trademarks in abundance without 19 Article 4 of the Trademark Law (2001): ''Natural persons, legal persons, or other organizations that need to obtain the exclusive right to use service marks for the services they provide shall apply to the Trademark Office for service mark registration''. The corresponding provision in the Trademark Law (2014) is also Art. 4 with no material revision. ''Haitang Bay'' 495 genuine intent to use would not only impair the rights of the victim brand owners, but also waste the public resources of the TMO and TRAB by registering trademarks without actual use in commerce, precluding the people who have real needs from registering those marks, and subsequently disturbing the order of trademark registrations. As part of Li's overall trademark registrations that would impair the public interest, the absolute ground to declare the registration in dispute invalid based on Art. 41(1) is firmly established.

The Interpretation of Art. 31 of the Trademark Law 2001
Addressing the second issue, the Supreme People's Court spared only one sentence in the judgment stating that the evidence was not strong enough to grant relief under Art. 31 of the Trademark Law. The Court might think that since the trademark registration in dispute was in violation of Art. 41(1) and thus invalid no matter whether or not it violated Art. 31, it was unnecessary to discuss the second issue at length. However, the lack of the underlying reasoning practically makes it difficult to make a judgment on the correctness of the Court's ruling, especially when the ruling depends in large part on the evidence inadequately disclosed in the judgment. As a result, we are left to solely concentrate on the interpretation of the law. As the Court's ruling merely corrected the finding of the second instance on evidence, it indicated indirectly that the Court agreed with the second instance court on the finding of law interpretation. The Beijing High People's Court, as the second instance court, interpreted the term ''already in use by another party and enjoys substantial influence'' set forth in Art. 31 as referring to ''actually in use within the territory of China and known to the relevant public within certain scope''. 20 It is interesting that compared with the literal language of the provision, the Court added a territorial constraint to the ''already in use'' element. Such interpretation is strongly supported by the principle of territoriality. It is a principle generally recognized by all states that the trademark rights are confined to certain territorial boundaries. For example in the 1883 Paris Convention, Art. 6(1) explicitly states that the conditions for trademark registration may be determined by each state independently. As for China, the Supreme People's Court had already affirmed this principle in an earlier case decided in 1998. 21 The Court held in this case that the exclusive trademark right obtained overseas was not governed by the law of China. The principle of territoriality excuses the need to specifically refer to the territorially ''domestic'' scope for any provision in the area of intellectual property. No exceptions to the principle would occur unless the article expressly provides the territorial constraint. Since Art. 31 does not provide otherwise, a territorial constrain in this article should be implied. The Court's interpretation is therefore consistent with the principle of territoriality and its own position all along.

Legislation Tackling Bad Faith Registrations in China
After finding the judicial interpretation and application of the Supreme People's Court correct, it is worth reviewing the law per se to further explore some implications. This will definitely shed some light on why foreign trademark owners are rather discontent with China's protection against bad faith registrations.
To file an opposition to a bad faith trademark registration at the TMO examination stage, one of the three conditions respectively specified in Arts. 13(1), 15 and 31 of the Trademark Law should be met. Pursuant to Art. 41(2), if the trademark in violation of one of the articles has been wrongfully registered, the interested party can still file a request for an invalidity declaration with the TRAB within five years from the registration date. Based on foregoing analysis of the case, if the nature of the pirating activity is serious enough to be detrimental to the public interest, anyone is entitled to request for invalidation of the registration at any moment according to Art. 41(1).
Even though there are as many as five articles in the Trademark Law to curb bad faith registrations, they are aimed at addressing special circumstances with the exception of Art. 31. Article 13 protects unregistered, well-known mark from trademark piracy. 22 The determination of well-known status, which is extremely difficult to acquire, involves consideration of many factors including the duration of use, the duration of marketing of the goods or services, the geographical scope covered, the sales volume of the goods or services in the latest three years, etc. 23 In comparison to the trademark with ''substantial influence'' protected under Art. 31, a well-known mark should not only be well known among the relevant public in China rather than in a certain geographical scope, but also be constantly used in commerce for no less than five years. 24 A majority of the victim's brands can hardly satisfy such a strict standard so as to enjoy protection under Art. 13. Article 15 deals with the situation where the bad faith registration is committed by a pirate who has certain relationships, a sales agency for example, with the victim's brand owner, thereby applying to specific circumstances as well. 25 As mentioned above, Art. 41(1) will only be effectively invoked when the public interest is impaired, which is obviously another special scenario. 22 Article 13 of the Trademark Law (2001): ''In the event of an application for registration of a trademark that is a reproduction or translation of another's well-known trademark not registered in China on same or similar goods, and consequentially is likely to create confusion, the application shall be rejected and the trademark shall be prohibited from use''. The corresponding provision in the Trademark Law (2014) is Art. 13(2) without any revision. 23 See Art. 9 of the Regulations on Well-known Mark Determination and Protection (effective 3 July 2014). 24 Id. 25 Article 15 of the Trademark Law (2001): ''Where an agent or representative registers, in its own name, a trademark of one of its principals without authorization, and the principal opposes the registration, the trademark shall not be registered and shall be prohibited from use''. The corresponding provision in the Trademark Law (2014) is Art. 15(1) without any revision. ''Haitang Bay'' 497 That leaves Art. 31 alone to tackle the bad faith registrations in the most general way. However, in light of the foregoing case analysis, we understand that a foreign trademark not used in commerce in China is not entitled to protection against bad faith registrations under Art. 31. In other words, when encountering trademark piracy in China, foreign trademark owners are normally empty-handed due to the inability to submit evidence of use in China, even if the marks enjoy substantial reputations among Chinese consumers. That is part of the reason why China continually receives complaints from overseas criticizing its performance on trademark protection.

Extra-Territorial Protection Against Bad Faith Registrations in Japan and Germany
Both Japan and Germany adopt the first-to-file system, so the piracy of unregistered but used trademarks is likely to exist as well. Article 4(1)(xix) of the Japan Trademark Act provides that No trademark shall be registered if the trademark is identical or similar to a trademark which is well known among consumers in Japan or abroad […], and if such trademark is used for unfair purposes (referring to the purpose of gaining unfair profits, the purpose of causing damage to the other person, or any other unfair purposes). 26 The Trademark Review Standard of Japan explicitly states that where the trademark at issue is identical or similar to a trademark well known abroad but not yet registered in Japan, and the pirate takes advantage of it in order to sell the trademark to the foreign owner at a high price, the registration should not be approved. 27 Moreover, the Standard emphasizes that the mark ''well known among consumers abroad'' but not in Japan enjoys the equal protection against bad faith registrations in Japan. 28 Likewise, German case law allows bad faith to be found in the case of registering a trademark merely with prior use abroad by another party, provided that the applicant had an abusive intention to pre-empt the foreign brand owner from expanding its business to Germany. 29

Comparison
Notwithstanding the recognition of the principle of territoriality, both Japan and Germany have found their own way to protect foreign trademarks against crossborder trademark piracy, either by explicit statues or by case law. In contrast, from 26 Article 4(1)(xix) of Japan Trademark Act (Act No. 127 of 13 April 1959;revised by Act No. 63 of 2011, effective 1 April 2012. 27 Moritikouko et al. (author), Beijing Linda Liu Intellectual Property Agency Office (translator) (2012), p. 53. 28 Id.
the foregoing analysis we can conclude that the legal system in China fails to curb piracy of trademarks not used in the commerce of China.
It is nevertheless essential for China to keep up with Japan or Germany as far as extra-territorial trademark protection is concerned. First of all, globalization makes it rather convenient for us to learn of foreign trademarks when we watch foreign drama series and films, surf the Internet, read international publications or travel abroad. Moreover, we are even able to purchase goods not yet distributed in China officially by means of online overseas shopping. It is very likely that a trademark not used in commerce in China does enjoy substantial reputation or influence within certain scope of relevant consumers or distributors. Allowing cross-border trademark piracy would cause a likelihood of confusion among consumers as to the source of the goods or services. Secondly, the pirates will accrue unfair benefits. When the foreign trademark owner decides to enter the Chinese market, he will find that his products bearing the pirated trademark are technically infringing the pirate's trademark right in China and thus he will be left empty-handed with no choice but being forced to negotiate with the pirate on a trademark purchase assignment which is normally at an unreasonably high price. What is worse is that the foreign trademark owner may not even be able to strike the deal if the pirate is a market competitor who has an abusive intention to block the foreign trademark owner's access to the Chinese market. Thirdly, it is arguably true that the People's Congress of China will never have the intent to allow China to be used as a base for trademark piracy, even when it is mainly aimed at foreign trademarks. China will surely look askance if a country stands by silently and permits cross-border trademark piracy towards Chinese trademark owners. By the same token it is hard to believe the People's Congress is willing to prohibit legislation from policing similar activities within China. Last but not the least, the new Trademark Law 2014 declares loud and clear that the principle of good faith shall be complied with in the applications for trademark registration and in the use of trademarks. 30 There is no doubt cross-border trademark piracy should be identified as an activity in violation of the principle of good faith. The mental status of bad faith itself is surely accountable regardless of the nature of the victim brands. The principle of territoriality should not be taken advantage of as an excuse for the legislature to lose sight of foreign trademark owners when bad faith arises. In terms of prioritizing legal values we expect to preserve, where there is a more vital value at hand, the principle of good faith in our case, we have to make some sacrifice of the contradicted value relatively less important. Therefore, it is reasonable to set an exception regarding the principle of territoriality for purpose of curbing cross-border, bad faith trademark registrations.

Conclusion
The decision of the Supreme People's Court in Li Longfeng is correct in all aspects. The ambiguous term ''any other improper means'' set forth in Art. 41(1) of the Trademark Law should be interpreted as referring to the means detrimental to the public interest except fraud as Art. 41(1) is distinguished from Art. 41(2) in that it articulates ''absolute grounds'' for invalidity declaration of trademark registrations. The fact that the pirate has registered a considerable amount of trademarks without genuine intent to use has forcefully proved the existence of ''improper means''. The Court's interpretation of Art. 31 territorially constrained the occurrence of ''already in use and enjoys substantial influence'' in China, which is justified by the commonly accepted principle of territoriality. However, the legal regime would result in leaving the owners of the foreign trademarks not used in China unarmed when they desire to attack blameworthy, cross-border, bad faith registrations in China. It is arguable submitted that the extra-territorial protection against bad faith trademark registrations should be provided as an exception to the principle of territoriality, notwithstanding the imposition of some stricter conditions. Since the judicial interpretation on current statues is completely in accordance with either the literal or the implied meaning of the language of the provisions, the statues should be revised so as to explicitly specify the extra-territorial protection.