While the PRC Trademark Law and Implementing Regulations provide no real guidance on how or whether consent letters can be used to overcome trademark application rejections on relative grounds, in recent years, the TRAB has accepted such letters to support arguments that a rejected trademark should be registered on appeal. There has, however, been very little guidance as to the standards that should be applied by the TRAB, and by the Beijing courts when considering the relevance of consent letters, and because of this, TRAB decisions involving consent letters or co-existence agreements have been inconsistent. This Higher People’s Court decision provides important clarifications as to trademark appeals practice in China as it relates to consent letters and co-existence agreements, and as to how such appeals cases are likely to be handled by the TRAB and the Beijing courts going forward.

Case Background

On November 14, 2007, Deckers Outdoor Corporation (“Deckers”) filed an application for the “” trademark (App. No. 6379162) in Class 35 covering “agent for import and export; product quotation; tender offer; commercial information, etc.” The PRC Trademark Office (“TMO”) rejected the application on the basis of a citation of a prior “” mark (IR No. G951748) held by Unicredit S.P.A. (“Unicredit”) in Class 35 covering “agent for import and export; advertisement; commercial organization management and consultation; marketing research and investigation, etc.” Deckers appealed the CTMO’s rejection to the TRAB. To support its appeal before the TRAB, Deckers submitted a consent letter by Unicredit with a Chinese translation.

On July 4, 2011, the TRAB rejected Deckers’ appeal and upheld the CTMO’s determination that the trademark application was similar to the prior filed trademark for similar services in violation of Article 28 of the PRC Trademark Law. Deckers then appealed the TRAB’s decision to the Beijing No. 1 Intermediate People’s Court (“Intermediate Court”). During the trial proceedings, Deckers submitted a notarized and legalized copy of the same consent letter to the Intermediate Court.

On April 10, 2012, the Intermediate Court upheld the TRAB’s decision. In its ruling, the Intermediate court held that, i) both the trademark application and the cited mark were verbal marks that have a similar appearance and pronunciation, and would thus easily cause confusion among consumers if used on identical and/or similar services; and ii) the consent to co-existence of the two marks by the holder of the cited mark could not exclude the likelihood of confusion among consumers.

Deckers further appealed the Intermediate Court’s decision to the Beijing Higher People’s Court (“Higher Court”). On February 19, 2013, the Higher Court overturned the Intermediate Court’s decision and ruled that the TRAB should re-review the case and issue a new decision properly taking into account Unicredit’s consent to co-existence under the circumstances.

The Higher Court's Considerations

The Higher Court summarized the main issues of the case as follows:

Proceedings Issue

According to the Trademark Review and Adjudication Rules (“Rules”) issued and revised by the State Administration for Industry and Commerce (“SAIC”), a consent letter and its Chinese translation submitted to the TRAB in support of arguments in a trademark rejection appeal should be considered as evidence in the case even if it was not notarized and legalized, and the TRAB should examine and comment on such evidence in its review decision. The fact that the TRAB did not provide any comments on the consent letter in its review decision constitutes a procedural error and an obvious violation of the Rules.

Substantial Issue – the relationship between the consent letter and Article 28

• When determining that two trademarks constitute identical/similar trademarks on identical/similar goods/services under Article 28, the likelihood of consumer confusion should be considered;

• A consent letter is issued by a prior trademark holder who’s rights and interests are impacted by the application in question, and because of this, the prior trademark holder’s judgment is more practical and in-tune with market realities than the inference of an administrative authority or court in relation to the likelihood of confusion. A consent letter should thus be considered strong evidence to exclude a likelihood of confusion if there is no other evidence demonstrating otherwise.

• Trademark rights are civil property rights that are subject to the right owner’s disposal as long as the disposal of such does not harm significant public interests.

• Unicredit agrees with the registration and use of the trademark application in question for all the designated services by Deckers. Because of this, the influence of the consent letter on the likelihood of confusion should be considered when applying Article 28 of the Trademark Law.

• Although the two marks are very similar, the verbal differences are sufficient for consumers to differentiate them as a whole. In addition, the difference between the services of the two marks as well as the high level of fame of the "" trademark for Class 25 goods should also be considered.

• The consent letter per se demonstrates Unicredit’s judgment that the likelihood of confusion in relation to the coexistence of the two marks is modest or can be tolerated. The prior right holder’s disposal of its trademark rights should be respected absent adverse evidence that the consumers’ interests will be harmed.

Based on the above, the Higher Court ruled that the coexistence of the two marks for identical or similar services is not likely to raise confusion among consumers, and the two marks do not constitute similar trademarks under Article 28, and the trademark application in question should be approved for registration.

Discussion

The PRC Trademark Law and relevant Rules and Regulations do not provide any guidance on the value of consent letters or coexistence letters in supporting arguments presented in the context of trademark rejection appeals. In recent years, the TRAB has accepted consent letters or coexistence letters when the trademarks are not identical, and there are other factors present that would otherwise mitigate the odds of confusion. TRAB decisions in such cases have thus been highly discretionary and inconsistent.

In the last few years, the Beijing courts have reviewed a number of similar cases involving consent letters or co-existence agreements. For example, in the case of Shandong Liang Zi Zi Ran Jian Shen Yan Jiu Yuan You Xian Gong Si (“Shandong Liang Zi”) v. TRAB (2009), the Higher Court overturned the Intermediate Court’s decision supporting a TRAB ruling in an appeal involving a coexistence letter, allowing co-existence of the subject "" trademark (Reg. No. 1551944) and cited "" trademark (Reg. No. 1235891) in respect of similar services in Class 42.

Two years ago, in the case of Hoffimann GmbH Qualitatswerkzeuge (“Hoffimann”) v. TRAB, the Higher Court sustained the Intermediate Court’s judgment upholding a TRAB decision to reject the "" trademark application (App. No. G809516) in Classes 7 and 9 respectively on the basis of a  citation of the prior ""trademark (Reg. No. G668534) for similar goods. In this case, the Higher Court did not support the co-existence letter between Hoffimann and the holder of the cited mark. The Higher Court ruled that the two marks are very similar (only the last letter is different) and the goods are similar, and it concluded that the co-existence agreement would not exclude the likelihood of confusion by relevant consumers. It thus upheld the rejection of the mark on the basis of Article 28 of the PRC Trademark Law.

In the current case, the Higher Court appears to be setting a clear standard for review of a TRAB decision involving a consent letter or co-existence agreement. First, the Higher Court confirmed that a consent letter should be considered when determining the similarity of the marks under Article 28 of the PRC Trademark Law. Second, the consent letter should per se be deemed strong evidence that the likelihood of confusion is modest or should be tolerated in relation to the coexistence of the two marks. Finally, a consent letter should be respected as long as there is no evidence showing that public interests will be harmed.

Although the PRC is not a common law jurisdiction, and does not follow the doctrine of stare decisis, decisions such as this by the Higher Court in Beijing are generally indicative of how cases are and will be handled going forward. This case is thus noteworthy, and should provide helpful guidance for the handling of similar cases in the future.