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HFG Newsletter – GossIP November 2022 – Trademark

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This November issue starts with an article about IP compliance
in China with reference to the Letter of Authorization: we explain
what a LoA is, its most common use and the basic legal grounds on
which it is based.

The following article touches the topic of refusal of
registration issued by the Chinese Trademark Office (CNIPA) on the
basis of lack of distinctiveness: TOILETPAPER has been rejected
because of its similarity to the hygienic paper.

While copyright usually protects the ‘original works of
authorship’, trademark protects items that distinguish or
identify a specific product coming from a certain industrial source
from other similar ones.

But what happens when copyright is used to fight against
trademark squatting? Read the third article to discover the
case!

The fourth contribution highlights the controversial decision
issued by the Japanese Trademark Office which approved the
trademark application for registration for “CUGGL” on
clothing and footwear. As you can see from the photo, looks like
the brand intentionally chose the wording.

Read then how Penfolds won against its competitor Rush Rich in
China, showing that Rush Rich had registered not only their
trademark, but also other known foreign brand trademarks, including
that of Bentley.

Another case of IP in Asia reveals the victory of Cadbury for
its Gems trademark in India, while the next case brings us back to
China: Puma recognized as well-known trademark won against PuMah,
with a decision that shows China’s zero tolerance for
‘knock-off’ trademark applications.

The last article focuses on a NFT copyright dispute of Xu
Beihong’s artwork: at the heart of the controversy is whether
the platform constitutes copyright infringement by selling the NFT
collection of an artist who passed away more than 50 years ago.

Enjoy reading, stay warm and get ready for the festivities to
come!

IP COMPLIANCE

Authorization Letters: so common, yet so unknown

An Authorization Letter or Letter of Authorization or
Trademark / Brand Authorization Letter (for short “LoA”)
is a commonly used document in China business
practice.

Although a LoA seems to be a very simple legal document,
yet its role, functions and effects are not always well understood
by managers, companies, entrepreneurs doing business in
China.

In this article we will try to explain what a LoA is,
its most common use and the basic legal grounds on which it is
based.

A LoA is a confirmation issued by the owner of a trademark. It
is, therefore, a “unilateral” declaration, different from
a contract that (which is a document expressing an agreement
executed by two or more parties).

A LoA usually states that a certain trademark is authorized to
be used by a certain company (or, sometimes, individual). To this
extent a LoA usually includes the name of the trademark owner, the
name of the authorized party, the trademark details, the duration,
the authorized use and other particulars or limitations.

In our experience, LoAs are commonly required and issued in
three main circumstances:

[Export]: a LoA is issued in favor of a
supplier that is going to export goods bearing a certain
trademark;

[Retail]: a LoA is issued to a distributor that
is going to open a retail store in a shopping mall or department
store;

[E-commerce]: a LoA is issued in favor a
distributor that is going to open an online store.

Duration

Although possible from a legal point of view, it is unusual to
issue a LoA without a term. The validity of LoAs is normally
limited for a fixed time (which may be long or short) or up to a
certain date. However, the validity of a LoA cannot be longer than
the duration of the right granted on the trademark to which it
relates.

Revocation

Being a unilateral declaration a LoA can normally be revoked by
the issuer, unless it was issued in an irrevocable form. The
revocation of a LoA must be communicated to the recipient of the
letter. It can, and actually should, also be communicated to the
third parties mentioned in the letter (example: the management of
the store or shopping mall for which the letter was issued).

Identification of the parties

It is important that both issuer and recipient are properly
identified by using the correct name and address. We would suggest
using the correct Chinese name and also attaching a business
license of the relevant parties. A LoA should also bear the contact
information of the issuer (which can be added in the header or
footer of the LoA) for further identification of the parties
involved.

Limitations

Whilst the recipient of a LoA would tend to obtain a simple and
potentially wide-open authorization stated in the letter, the
issuer and owner of the relevant trademark is understandably more
prone to specify the limitations to the use of the trademark in the
letter.

Normally, the document in which limitations to the use of a
trademark are expressed in the licensing contract, whilst the main
purpose of a LoA is to give external visibility to an underlying
relationship.

However, if the licensing contract does not permit any
“sub-licensing” of the trademark, it may be advisable to
state such limitation in the LoA to avoid risks.

Licensing contracts and LoAs are, therefore, closely connected
documents, the latter being somewhat the reflection of the former
(in that they confirm the authorization to use the trademark).

Relevant substantial contract (trademark
license)

Releasing a LoA not based on a preexisting contract is dangerous
and not advisable, especially if no limitations are expressed in
the letter. It is warmly recommended that a LoA be preceded by the
negotiation and execution of a contract, which is usually a supply,
distribution or, more often, a trademark licensing contract.

Trademarks registered abroad

Usually, LoAs are based on and issued in relation to trademarks
that are registered in China. However, it may also happen that an
LoAs are requested in relation to trademarks registered in other
countries than China. For example, this may happen in commercial
relationships involving of cross-border Ecommerce.

Trademark Licensing Recordation

Chinese Trademark Law also regulates the recordation on the
trademark license stating that such recordation is
“mandatory”. However, the Trademark Law only provides
that “without (recordation) filing, the trademark licensing
shall not be used against a bona fide third party”. In the
practice, trademark license recordation is mostly considered as
arbitrary.

Yet we noticed in recent year that local MSA starting to enforce
this regulation, by issuing “Notice of Minor Illegal
Behaviors” to the licensee.

Joint Liability on Multiple Claims

Trademark Law imposes a supervising liability on the trademark
owner for quality of commodity, and a civil claim on product
quality issues might also extend to trademark owner. In such
scenario, in the lack of trademark license contract and/or
recordation, the Authorization Letter Trademark might constitute
the evidence and/or the link between the two parties.

Management of LoAs

Given the importance of LoAs, issuers and trademark owners are
recommended to establish a management system of their LoAs. Such
management system may include adding serial numbers on the LoAs,
compiling record forms of LoAs, publishing lists of authorized
parties on their official website or official wechat account to
allow third-party verification. Defining coherent contents of the
LoAs, together with an orderly management of the same, contribute
to a better protection of trademarks in China.

Fabio Giacopello*

HFG Law & Intellectual Property

IP CHINA

TOILETPAPER: the “new” lack of distinctiveness

The present article touches the topic of refusal of registration
issued by the Chinese Trademark Office (CNIPA) on the basis of lack
of distinctiveness (art. 10 Chinese Trademark Law –
“TML”).

In recent times we are indeed experiencing an increase in
provisional refusals of trademarks that are not only based on the
usual ground of art. 30 TML (prior similar trademarks), but they
are based on lack of distinctiveness (art. 10 TML).

This is the case – for example – of “TOILETPAPER”.

Founded in 2010, – as reads on the official website -
TOILETPAPER is an artist’s magazine created and produced by
Maurizio Cattelan, a leading figure in international contemporary
art known for his fondness for humor and provocation, and Pierpaolo
Ferrari, famous photographer and artistic director.

Since the first issue of TOILETPAPAER was published in 2010,
Cattelan and Ferrari have created a quirky and audacious universe
where ambiguous stories and disturbing imagination are presented,
combining commercial photography with a surrealist visual approach.
Inspired by a popular culture, the world of advertising, religious
iconography and art history. TOILETPAPER investigates the current
phenomenon of hyperconsumption of images, all with a delicious dose
of irony.

Nowadays TOILETPAPER organizes art exhbitions and artistics
events, but has also developed an interesting collection of
lifestyle objetcs that are sold via the website and in retail
stores worldwide.

As any operator doing business in China the company approached
us and appointed HFG for the trademark registration in China.
Clearance done, we optimisticallyfiled the trademark in 2021
designating several classes in relation to lifestyle products.
Unfortunately, the trademark application were all rejected due to
lack of distinctiveness.

Well, why lack of distinctiveness?

“Toilet paper / hygienic paper” (in Chinese:
卫生纸) is listed Nice Classification and in the
Chinese classification in class 16, sub-class 1603, basic number
160094.

I do agree that if someone attempt to register TOILETPAPER for
distinguishing the product “toilet paper / hygienic
paper” the trademark is not assolving its dstinctive function
and shall not be registered.

However, in the present case the trademark is not use for that
kind of hygienic paper used in the toilet to accomplish post-event
cleaning activity, thus we don’t understand what kind of lack
of distinctiveness the examiner saw missing. We did not designate
class 16 and any product in relation to that hygienic toilet paper.
We filed the trademark in classes 18, 20, 21, 27 and 35 (lifestyle
objects).

Optimistically, we then made appeal and explained the
usage of the trademark (art magazine, art events and artisctic
lifestyle objects) and that the lack of distinctiveness cannot
simply derive from the fact that the words chosen as trademark have
a meaning in English language. This is simply against the most
basic principles of trademark law.

Herein the reasoning from CNIPA-TRAB:

The applicant has filed many pieces of evidences such as
brochures, relevant reports, outdoor displays, official websites,
licensing agreements, orders, sales invoices, customs declarations,
relevant search results, trademark registration information in
foreign countries, etc.

After appeal, the CNIPA held that the applied trademark
being used on designated goods cannot distinguish the origin of
goods, and lacking distinctiveness as a trademark. Thus, the
applied trademark has constituted the situation prescribed by
Article 10.1.3 of the Trademark Law.

We tend to believe that the Trademark Office is flooded with
millions of trademark applications and the judgement of the
examiners is currently very severe not only on the similarity with
prior trademarks but also on the absolute ground, such as the lack
of distinctiveness and/or the misleading effect.

However, we tend to – respectfully but firmly – disagree with
their decision in considering TOILETPAPER lacking distinctiveness
in relation to art magazine and lifestyle goods.

Fabio Giacopello

HFG Law & Intellectual Property

Click here to continue reading . . .

Footnote

[*] Despite the article is quite simple I
wish to thank Marco Vinciguerra, Fredrick Xie and Ashely Jia for
the contributions. Amazing teamwork.

The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.

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