How the Synlait case increases the evidentiary value of letters of consent in China
Letters of consent to co-exist (LOCs) are letters issued by registered trademark rights holders, in which they consent to the registration of a later-applied-for mark that may be similar or identical to their previously registered trademark and which designate the same or similar goods or services.
Historically, China’s Trademark Review and Adjudication Department (TRAD), a department within the China National Intellectual Property Administration (CNIPA), and Chinese courts would not permit the registration of two nearly identical trademarks that designate similar or identical goods and services. In these cases, a LOC could be provided to assure the trademark authorities and the courts that two marks will co-exist without any confusion.
However, the TRAD and the courts tended to give little weight to the opinions of the parties to a LOC, and would, instead, prioritise their roles in preventing consumer confusion due to the co-existence of a previously registered mark and a later-applied-for mark.
The TRAD and courts limited the value of LOCs, as evidence that may be used to reduce—to a certain extent—a determination that there will be a likelihood of confusion, due to the use of two trademarks, and it remained that, in the view of the TRAD and courts, a LOC could not, per se, exclude that a likelihood of confusion would arise from the concurrent use of two trademarks.
However, Synlait Milk v the China Trademark Review and Adjudication Board (2019 Zui Gao Fa Xing Zai No. 245) shows that LOCs—or more accurately the opinions of the parties to a LOC—should be given greater evidentiary weight and may only be disregarded in exceptional cases involving bad faith or where there will be consequential harm to national interests, public interests, or to the interests of a third party.
The Synlait case
Synlait applied for the ‘Xin Lai Te’ mark (application number 19088699) in February 2016, which specified, inter alia, “milk powder; etc” in class 29, which was refused by the TRAD due to Shanghai Bright Dairy’s two registered ‘Lai Te’ marks that covered the same and similar goods under class 29.
Following a failed first appeal of the TRAD refusal to the Beijing IP Court, in which a LOC provided by Bright Dairy was rejected, Synlait filed a second appeal with the Beijing High Court.
Although the Beijing High Court accepted Bright Dairy’s LOC, the High Court upheld the first decision, based on the following determinations:
- Synlait’s ‘Xin Lai Te’ mark incorporates Bright Dairy’s ‘Lai Te’ mark in its entirety and differs only with the addition of the character新 (“new”).
- The meanings of the two marks were not easily distinguishable from one another, and it would also be reasonable for Chinese consumers to believe that the two marks are related as a series of marks.
- Although Synlait and Bright Dairy claimed that their companies operate under different business models and serve different consumers in the LOC provided by Bright Dairy, Synlait’s and Bright Dairy’s business activities overlap as dairy producers.
- Bright Dairy’s LOC was inadequate, as it did not explain the measures the parties would take to avoid consumer confusion, that might arise from the concurrent use of Synlait’s ‘Xin Lai Te’ and Bright Dairy’s ‘Lai Te’marks.
The High Court therefore issued a final refusal against Synlait’s application for the ‘Xin Lai Te’.
Synlait then filed an application for retrial against the refusal of its ‘Xin Lai Te’ trademark with the Supreme People’s Court of the People’s Republic of China (SPC) in December 2018. The SPC overruled the Beijing High Court, Beijing IP Court and the TRAD, by relying primarily on Bright Dairy’s LOC, and reasoned as follows:
- Synlait’s ‘Xin Lai Te’ trademark application and the two registered cited ‘Lai Te’ marks designated identical or similar goods.
- Synlait’s ‘Xin Lai Te’ mark incorporated the cited ‘Lai Te’ marks and they may be deemed similar marks, but they are not identical, and the relevant public has some ability to distinguish differences between similar marks.
- Shanghai Bright Dairy and Synlait both enjoy a certain degree of fame in the same industry, and the disputed mark ‘Xin Lai Te’ is also Synlait’s Chinese trade name. There was no evidence to show Synlait was attempting to misappropriate Bright Dairy’s goodwill or fame, by applying for and using the ‘Xin Lai Te’ mark.
- Irrespective of the marks at issue being similar and that their designated goods being identical and similar, the LOC was based on the “mutual understanding of Bright Dairy and Synlait that there will be no likelihood of confusion arising from the concurrent use of the marks within their respective fields”.
- There was no evidence to prove that the concurrent use of the marks would cause confusion amongst the relevant public.
- There was no evidence to show that any national interests, public interests, or any third party interests would be harmed by the use and registration of ‘Xin Lai Te’, so therefore the mark should be approved for registration.
Based on the above analysis, the SPC vacated the earlier decisions and ordered the CNIPA to issue a new decision to approve the registration of Synlait’s ‘Xin Lai Te’ mark.
Conclusion
The Synlait case appears to be the first time that the SPC has held that a LOC may be raised as evidence to override the TRAD’s and courts’ assessment on a likelihood of confusion that may arise from the co-existence of two marks that are used within the same industry.
“LOCs may supplant the need for an assessment on the likelihood of confusion by the TRAD and the courts and serve as prima facie evidence for the registration of a trademark.”
According to the SPC, the parties to a LOC are better positioned than the TRAD and the courts in assessing whether the co-existence of two marks will lead to confusion among the relevant public.
Based on the Synlait case, it would therefore appear that the mutual understanding of the parties to a LOC may supplant the need for an assessment on the likelihood of confusion by the TRAD and the courts and serve as prima facie evidence for the registration of a trademark.
Consequently, the Synlait case is important in that it provides guidance that greater evidentiary weight should be afforded to LOCs, and that the opinions contained in LOCs should be disregarded only in exceptional cases involving bad faith or where there will be consequential harm to national interests, public interests, or to the interests of a third party.
George Chan is a partner at Simmons & Simmons. He can be contacted at: george.chan@simmons-simmons.com
Ricky Xing is a senior IP trademark executive at Simmons & Simmons. He can be contacted at: Ricky.Xing@simmons-simmons.com
Zoe Sun is an IP trademark specialist at Simmons & Simmons. She can be contacted at: Zoe.Sun@simmons-simmons.com
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