Supreme People’s Court's evolving attitude to letters of consent

New draft regulations – as well as a survey of recent cases – suggest that the Supreme People’s Court is starting to take letters of consent seriously when it comes to conflicts with prior marks

In October 2014 the Supreme People’s Court published its Draft Regulations on Certain Issues Concerning the Trial of Administrative Cases Involving the Granting and Determination of Trademark Rights for public comment. Article 20 (on co-existence agreements) states that where the Trademark Review and Adjudication Board (TRAB) refuses a trademark application, decides that a mark shall not be registered or adjudicates to invalidate a registered mark based on its conflict with prior mark(s), if the owner(s) of the prior mark(s) and the owner of the trademark at issue reach an agreement during the course of litigation and consent is given to registration of the later mark, the court may permit this. While this appears to be the first time that the term ‘co-existence agreement’ has arisen in Chinese judicial interpretations, such instrument – as well as its easier substitute, ‘letter of consent’ – has in fact been used to overcome ex officio refusals for years.

How well can letters of consent work?

Table 1 summarises eight court decisions on administrative litigations concerning ex officio refusals of trademark applications which were concluded in the past four years.

Table 1: Recent court decisions

Year of decision	Refused mark	Cited mark	Decision	Reasoning
2011	COSMOS	COSMOS	Refusal maintained	Letter of consent was not submitted during review/was not notarised and legalised/the marks were identical
2012	UGG	UCG	Refusal sustained	Highly similar marks
2013	RANGER	RANGER	Refusal sustained	Identical marks
2013	STELUX	STELLUX	Refusal reversed
2014		OILERS	Refusal reversed
2014	SIRON	SIRION	Refusal sustained	Formality defects in the letter of consent
2015		SCHUNK	Refusal reversed
2015	GARRETT		Refusal reversed

It is possible to discern a clear change in the courts’ attitude towards letters of consent in these judgments.

In both UGG v UCG (2012) and RANGER v RANGER (2013) the court sustained the refusals issued by the TRAB. In both cases it stated that the letters of consent issued by the owners of the cited mark could not exclude the likelihood that consumers might be confused. For this reason, the letters of consent were insufficient to constitute a factual or legal basis for approving the refused mark.

However, in those cases where the TRAB’s refusals were reversed, the reasoning on the impact of letters of consent is consistent. In particular, there is a feeling that where the refused mark and the cited mark bear a certain level of similarity, a letter of consent issued by the owner of the cited mark should be taken into consideration because:

it is the most effective evidence for excluding a likelihood of confusion presumed by trademark administrative organs or courts; and
trademark rights are a kind of civil right and trademark owners can thus handle their rights themselves, unless this involves significant public interest.

Based on this – as well as the aforementioned draft regulations – it is clear that letters of consent have become a strong type of evidence when it comes to overcoming ex officio refusals, provided that the two marks are not identical.

Formal requirements

The authenticity of a letter of consent is the first factor to be examined. A notarised and legalised letter of consent is usually considered a genuine expression of intent. In the administrative litigation concerning the refusal of the mark COSMO due to a prior COSMO mark (Beijing No 1 Intermediate Court [2011], Administrative Judgment 2724), the court refused to admit a letter of consent which was submitted during litigation, based on the fact that it had been written outside China, but had not been notarised or legalised, meaning that its credibility could not be ascertained.

Due to these formal requirements, it is much more straightforward to submit a letter of consent issued by a rights holder than a co-existence agreement concluded between the parties, even though the latter may appear to be more substantive. In administrative litigation concerning the refusal to register the mark SIRON due to a prior SIRION mark (Beijing No 1 Intermediate Court [2014], Administrative Judgment 2543), the applicant submitted a co-existence agreement concluded with the owner of the prior mark. However, because the accompanying notarisation document certified only the applicant’s signature and not that of the owner of the prior mark, the court refused to consider the agreement. If an applicant wishes to submit a co-existence agreement, both parties’ signatures must be notarised and legalised.

Content requirements

In preparing a letter of consent, the following information should be clearly set out:

the name of the prior registrant, which must be consistent with the information recorded in the trademark register;
the name and application number of the refused mark;
the scope of goods and services that are subject to the letter of consent; and
explicit consent not only to the mark’s registration, but also to its use in China.

In some cases the owner of the prior mark and the applicant of the refused mark may have concluded a worldwide co-existence agreement which does not list the exact application number of the refused mark at issue, since this may not have been available when the agreement was concluded. Under such circumstances, whether the co-existence agreement will be considered in a particular review proceeding depends largely on the specific terms and conditions set out therein. Rights holders should ask the owner of the prior mark to issue a letter of consent with respect to each trademark concerned based on the co-existence agreement, to avoid any doubt in the minds of TRAB examiners or judges.

Best timing

Currently, letters of consent may be submitted only as evidence in a review proceeding after a trademark application has been refused by the Trademark Office. Due to the limitations of the trademark application procedure, even if a letter of consent is provided when the application is filed, it will not come to the attention of the trademark examiners because it is not an official document and thus will not be scanned into the official database while the substantive examination is being carried out. Besides, at the time of filing, the application has not yet been allocated an application number. A letter of consent with a clear indication of the trademark number will thus not be considered to be valid.

Subject to the 2014 revisions to the Trademark Law, an examination report may be issued during the substantive examination. Theoretically, a potential blocking mark could be indicated in such a report. However, it is still unclear whether a formal refusal could be avoided by submitting a letter of consent in response to the examination report.

Therefore, the best time to submit a letter of consent is after a refusal notice has been received and a request for review has been filed.

Occasionally, it may take so long to approach the owner of the prior mark and negotiate with it for a letter of consent that the TRAB’s statutory nine-month term for concluding review cases may expire. In such situations the applicant may have to initiate administrative litigation in order to have the letter of consent considered by the court. It is a concern as to whether this new piece of evidence, which was not submitted during the administrative proceeding, would be considered during the administrative litigation. When COSMO v COSMO was decided in 2011, the judgment expressly indicated that the copy of the letter of consent and the translation thereof should not be accepted as valid evidence by the court, as they were not submitted during the respective administrative proceedings or been notarised or legalised.

When UGG v UCG was handed down in 2012, the court accepted a newly submitted notarisation and legalisation document in support of the letter of consent which had been submitted during the administrative proceedings. However, in the five cases decided during 2013 and 2015, the letters of consent were all submitted for the first time during the litigation. Although the outcomes of the five cases varied due to other factors, none of the judgments rejected the newly submitted letter of consent. Such a significant change is consistent with the Supreme People’s Court’s opinion, as reflected in the draft regulations. This is an encouraging sign and applicants of refused marks should utilise all available procedures to keep applications open while they try to obtain letters of consent.

Danny Chen is a partner at Unitalen Attorneys at Law
[email protected]

The US perspective on letters of consent

Generally speaking, there is a longstanding policy in the United States to defer to the parties’ consent and judgement regarding likelihood of confusion. Federal appeal courts have overturned trademark examiners’ refusals where the parties have entered into a nuanced and detailed consent agreement (eg, In re Dupont, 476 F 2d 1357 (CCPA 1973), which reversed the Trademark Trial and Appeal Board’s (TTAB) refusal of registration and instead deferred to the detailed consent agreement between the parties; Amalgamated Bank Of New York v Amalgamated Trust & Savings Bank, 842 F 2d 1270 (Fed Cir 1988), which cited Dupont in deferring to the consent agreement between two banks with similar names; In re Four Seasons Hotels Ltd, 987 F 2d 1565 (Fed Cir 1993) reversing the TTAB’s refusal and noting the parties’ agreement to avoid likelihood of confusion over time).

However, the courts distinguish between ‘naked’ agreements, which they may not always recognise, and more detailed agreements which reflect an understanding of market dynamics and set out an ongoing pledge to avoid confusion. The Trademark Manual of Examining Procedure sets out the prescribed standards for consent agreements and notes that: “‘Naked’ consent agreements (i.e., agreements that contain little more than a prior registrant’s consent to registration of an applied-for mark and possibly a mere statement that source confusion is believed to be unlikely) are typically considered to be less persuasive than agreements that detail the particular reasons why the relevant parties believe no likelihood of confusion exists and specify the arrangements undertaken by the parties to avoid confusing the public” (Section 1207.01(d)(viii)).

In the words of the manual: “Thus, examining attorneys should give substantial weight to a proper consent agreement. When an applicant and registrant have entered into a credible consent agreement and, on balance, the other factors do not dictate a finding of likelihood of confusion, an examining attorney should not interpose his or her own judgment that confusion is likely.”

At what stage should a letter of consent be presented?

Again according to the Trademark Manual of Examining Procedure: “An applicant may submit a consent agreement in an attempt to overcome a refusal of registration under §2(d) of the Act, or in anticipation of a refusal to register. However, an examining attorney may not solicit a consent agreement” (Section 1207.01(d)(viii)). Additionally, the manual provides that, generally, “the USPTO will not suspend an application to give an applicant time to secure a consent agreement” (Section 716.02).

Case law indicates that parties may also submit documentation (including letters of consent) later in the process, including at the appeal stage (eg, In re Savisa (Pty) Ltd, 2005 TTAB LEXIS 91 (TTAB, February 24 2005), where the court noted that “negotiating for a consent agreement will normally constitute good cause for requesting an extension of time to file an appeal brief”). Parties may also enter into more comprehensive consent agreements during proceedings if their initial documentation is insufficient to reflect the marketplace and the parties’ plans to avoid confusion (eg, In re Dare, 1999 TTAB LEXIS 628, 9-11 (TTAB, October 29 1999), where the court noted the applicant’s failure to submit an improved consent agreement which would demonstrate avoidance of confusion and parties’ intentions).

Is a letter of consent alone sufficient?

A letter alone may well suffice; as with consent agreements, the weight accorded to letters of consent depends on the letter’s substance.

Provided that a letter of consent is relatively detailed, there need not be a comprehensive bilateral agreement between the parties. Case law suggests that a letter of consent may suffice to overcome a refusal if it demonstrates that the parties have considered likelihood of confusion in a fairly rigorous manner (eg, In re Palm Beach, Inc, 225 USPQ (BNA) 785 (TTAB, 1985), where the letter of consent and affidavits were found to be sufficient to overcome a finding of likelihood of confusion, even though the letter contained no restrictions limiting the applicant and the registrant to diverse markets, or “recitation of steps to be taken by [the parties] to preclude conflict”). Indeed, the TTAB has reversed refusals in deference to market knowledge reflected in a registrant’s letter of consent, even when the letter was fairly bare (eg, In re Red Hawk Tobacco Co, 2001 TTAB LEXIS 657 (TTAB, September 5 2001) – while “a bilateral agreement spelling out particular steps that applicant and registrant would take to avoid confusion of consumers would be a better form of consent”, a letter from the registrant’s general counsel could be considered consent to registration and the TTAB saw “no reason to protect registrant from the consequences of what the Examining Attorney views as an unwise consent to registration of applicant’s mark”).

Can applications be amended in line with letters of consent?

Trademark Rule 2.71(a) provides that “The applicant may amend the application to clarify or limit, but not to broaden, the identification of goods and/or services” (37 CFR §2.71(a)). Assuming that the application is timely, there is no reason why an applicant may not amend the application to clarify or make the identification of goods more restrictive. The Trademark Manual of Examining Procedure does not provide explicitly for amendments on this basis, although allowing clarifying and restrictive amendments is consistent with its general guidance on amendments and, separately, its permissive approach to consent agreements.

Case law also indicates that parties may amend an application to restrict a mark in order to avoid confusion (eg, in In re SmartMoney, 2002 TTAB LEXIS 634, 19-25 (TTAB, September 30 2002), the board deferred to the parties’ agreement, noting that the applicant had offered to amend its application to restrict use of the mark and the registrant had accepted this and agreed to withdraw its opposition with prejudice once those amendments were entered).

In case of co-ownership, should consent be granted by all co-owners?

Each co-owner should definitely sign in the event of a co-owned sign. “Joint owners are individual parties and not a single entity. Where a document must be signed by someone with legal authority to bind joint owners, the document must be signed by all the owners. See 37 C.F.R. §§2.17(c)(2), 2.19(a)(1), 2.193(e)(2)(ii), 2.193(e)(3), 2.193(e)(5)(ii), 2.193(e)(6), 2.193(e)(8), and 2.193(e)(9)(ii)” (Trademark Manual of Examining Procedure 11.06(a)).

Other significant cases involving letters of consent

In addition to the cases cited above, the following cases are worth noting.

In In re RC Mannesmann GmbH (2014 TTAB LEXIS 116, 10-11 (TTAB, March 18 2014)) letters of consent and co-existence agreements were treated as being interchangeable – although the TTAB eventually found that the parties had not reached agreement to which deference would be owed. In In re Sunshine Distrib (2003 TTAB LEXIS 576, 10-11 (TTAB, December 9 2003)) weight was given to the parties’ consent agreement, despite the lack of specifics provided concerning the confidential agreement and assuming “that the decisions of these businesses are normally reliable”. In In re Selmer Co (1998 TTAB LEXIS 156, 14-17 (TTAB, May 12 1998) the decision involved a discussion of ideal consent agreement features and noted that, “had applicant and registrant chosen to elaborate upon such facts as the nature of the channels of trade for their respective products, the circumstances under which their goods have and continue to be sold, the reasons why they believe there have been no known instances of actual confusion over a 30-year period and what specific steps they would take if an incident of actual confusion should arise, the agreement itself would be more persuasive and the prospects for avoiding the delay inherent in an appeal of a refusal to register would have been substantially enhanced”.

Tamara Carmichael is a partner at Olshan Frome Wolosky
[email protected]