On 20 March 2020, the China National Intellectual Property Administration ("CNIPA") issued decisions to invalidate two of Facebook's trade mark registrations in Class 42. This marks a huge setback for the social media company in a more than decade-long dispute with individual trade mark owner, Dr. Su Kaiming (a medical doctor), in China.
It is common knowledge that Facebook's social media platform has been blocked in China since July 2009, in addition to bans in Iran, Syria, and North Korea. What is less known, is that despite not being able to operate in China, Facebook is still one of the country's top advertising platforms. According to CNBC, Nasdaq and The Motley Fool, citing research by the Pivotal Research Group,"Facebook sells more than USD5 billion a year worth of ad space to Chinese businesses and government agencies looking to promote their messages abroad, analysts estimate. That makes China Facebook's biggest country for revenue after the United States, which delivered USD24.1 billion in advertising sales in 2018." 1, 2, 3, 4
Mark Zuckerberg, Facebook's CEO, has demonstrated a serious commitment to China by making several high-profile visits. learning Mandarin, giving Chinese President Xi Jinping's book (The Governance of China) to his employees, and going for a well-publicized jog around Tiananmen Square in March 2016. In 2018, Facebook attempted to set up a £30 million (USD38.5 million) subsidiary in Hangzhou to incubate start-ups and give advice to local businesses, but this plan had to be aborted after Chinese approval was apparently withdrawn.
Facebook's trade mark problems started against the above backdrop. On 19 May 2006, Dr. Su filed an application for the mark FACEBOOK covering "research and development for others; computer programming; computer software design; updating of computer software; maintenance of computer software; computer system design; creating and maintaining web sites for others, etc." in sub-class 4209 and 4220 of Class 42. Dr. Su was a medical doctor and had no reasonable explanation for adopting this coined word except that Facebook was entering China at that point.
On 20 November 2007, Facebook filed an application for the mark FACEBOOK and on 4 March 2014, it filed a further application for the mark FACEBOOK 脸谱 (the first Chinese character means "Face" and the second Chinese character is a phonetic transliteration of the word "Book") ( click here to read our previous article on Chinese transliterations of foreign marks) Both of Facebook's applications covered sub-class 4220 of Class 42, namely for "creating and maintaining web sites for others; data conversion of computer programs and data [not physical conversion]; providing search engines for the internet; hosting computer sites [web sites]" and "services: rental of non-downloadable computer software; computer programming; data conversion of computer programs and data [not physical conversion]; computer system design featuring information, personal resume, audio, video, images, text, graphics, and data created or determined by users; convert physical data and documents into electronic media; hosting computer stations (websites) in the form of virtual communities in which registered users form groups and organize events, participate in discussions, join social, business and community networking; rental of non-downloadable software that provides electronic media or information over a communication network; etc.," and are likely to have been blocked by Dr. Su's earlier application under today's examination practices. Therefore, Facebook mounted a vigorous campaign to oppose Dr. Su's earlier application.
Initially in 2011, the CNIPA issued an unfavorable decision against Facebook's opposition, which was not surprising considering that China is a "first-to-file" country; and Facebook neither owned any relevant prior application / registration in Class 42 in China, nor was it well-known enough in China as of 2006 (the filing date of Dr. Su's application) to claim protection of its unregistered rights through reputation gained from extensive use within China. Furthermore, although Dr. Su had also filed applications in November 2006 for the marks AMUL, WIPRO and 威普罗 (a phonetic transliteration of the name "WIPRO"), which were marks belonging to multi-billion dollar Indian companies, the low number of trade marks imitated was deemed insufficient to render Dr. Su a trade mark squatter.
Under the 2001 China Trade Marks Law in force at that time, an unsuccessful Opponent could still appeal. Upon Facebook's appeal, the CNIPA (acting as appellate body) overturned the decision and upheld the opposition on the ground that Dr. Su's mark would cause "an unhealthy influence to society" if it were to proceed to registration (Article 10.1.8 of the said old law), but declined to uphold the opposition on the other grounds pleaded by Facebook (Articles 13.2, 29, 31 and 41.1 of the said old law ).
Both parties were dissatisfied by the decision and appealed to the court of first instance. In two separate judgments, the court ruled that Dr. Su's mark did not violate Article 10.1.8 and therefore, reversed the CNIPA's decision and rejected Facebook's claims. Facebook pushed this matter further by filing an appeal to the court of second instance, which maintained the two first instance judgments. Thus eight years after filing, Dr. Su finally overcame Facebook's opposition, and succeeded in obtaining registration for the mark FACEBOOK.
In 2019, in another attempt to remove Dr. Su's by now registered mark, Facebook filed an invalidation action under the 2013 China Trade Marks Law on grounds similar to those put forward in the opposition, and the new grounds that the use of Dr. Su's mark will easily mislead the public as to the quality, place of origin, or other characteristics of the goods and services (Article 10.1.7 of the 2013 China Trade Marks Law, which is substantially the same as the old Article 10.1.7 of the 2001 China Trade Marks Law). While the CNIPA did not comment on Facebook's grounds based on Articles 7, 10.1.8. 13.3, 30, 32 and 44.1, as it considered that it had already dealt with these grounds in the earlier opposition, the CNIPA decided that the registration of Dr. Su's mark did not violate Article 10.1.7., and consequently, maintained the registration of Dr. Su's mark on 25 February 2020. As of now, there is no news that Facebook has appealed against this unfavorable invalidation decision.
In the meantime, Facebook's two later applications had unexpectedly matured to registration on 21 April 2014 and 14 April 2015, and Dr. Su counter-attacked by filing invalidations against these two registrations based on his now firmly established prior mark. On 20 March 2020, the CNIPA issued decisions to invalidate Facebook's two later marks. These two decisions may have been surprisingfrom a commercial perspective, but legally they were a straightforward and mechanical operation of the law based on the indisputable facts that (i) Dr. Su owned an earlier mark, and (ii) the parties' marks were identical and their respective services were identical or similar (Article 30 of the China Trade Marks Law, which provides that "where a trade mark ... is identical with or similar to the trade mark of another party that has, in respect of the same or similar goods, been registered or, after examination, preliminarily approved, the Trade Marks Office shall refuse the application and shall not publish the said trade mark.").
These two present decisions represent an uncomfortable outcome in that Dr. Su appears to be a trade mark squatter, and Facebook's high reputation in the fields of online social media and information technology, and high level of consumer recognition in China, appears to have been disregarded. It also highlights cases where the amendments to the China Trade Mark Laws and regulations in 2013 and 2019 to curb bad faith filings were ineffective in delivering justice to the true brand owner.
Commercially, Facebook has now strengthened its presence in Asia by investing USD1 billion in a new data centre in Singapore—its first in Asia, expected to open in 2022—undoubtedly with the intention to help Chinese companies reach overseas markets.
The murky path of the above decisions are in parallel with the twists and turns of Facebook's journey in China, and as Facebook continues its battles against Dr. Su, other foreign brand owners with any present or future interest in the Chinese market should be reminded yet again to invest early and comprehensively in broad trade mark filings in China.
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