Items to Be Studied Regarding Trademark System in Japan - From the perspective of Article 4(1)(xi)-

April 26, 2004
HARAKENZO WORLD PATENT & TRADEMARK PATENT LAW FIRM
Patent Attorney Yasunobu MATSUMOTO

1. Introduction
Since last year, measures of reforming the current trademark systems have been studied in the Trademark System Subcommittee (TSS). Especially, consent system, Examination-after-opposition system and countermeasure system against trademarks not in use have been argued over.
It seems that these three systems can be adopted one by one as an independent system. However, behind the necessit of argument regarding these systems, there are problems closely related to one another.
Hereinafter, the current situation and problems of the ongoing trademark system are studied from the perspective ofTrademark Law Article 4(1)(xi)1) in an attempt to deliberate on improvement measures.
Trademark Law Article 4(1)(xi) prescribes that trademark applications are not granted registration if the mark and designated goods thereon are identical with or similar to trademark applications filed and registered on ahead. This Article is laid down in order to prevent confusion regarding the origin of products by excluding trademark applications within the scope of identicalness and similarity of prior-filed and -registered trademark applications which is regarded as the scope of causing such confusion. In practice, the present
Article is applied to a great number of applications as a reason of refusal of registration, and as such, the present Article contains large issues of the ongoing trademark system.

2. The Point at Issue Regarding Trademark Law Article 4(1)(xi)
(1) Regarding the judgment of similarities of trademarks and goods/services:
The purpose of Trademark Law is to protect the business reputation one has acquired through the use of the mark (Article 1)2). Such "goodwill" changes depending on the circumstances of the market where the trademark is used.
In like manner, similarity of marks and existence of confusion are intrinsically fluid, changing depending on a dimension of goodwill.
Nevertheless, under the current trademark system, all trademark applications are examined ex officio (Article 15)3). Also, regarding Article 4(1)(xi), similarity is mainly judged generally and abstractly by comparing appearance, pronunciation and meaning generated from both prior- and later-filed trademarks. As such, under the current system of ex officio examination, the similarity of trademarks is judged based on the composition of the mark itself.
Moreover, at the time of filing a trademark application, it is possible to designate goods by so-called generic terms. Under the present condition, therefore, similarity of goods is judged by mere formality employing "Similar
Group Codes" in view of expediting the examination, not by potentiality of concrete confusion in the actual trade.
From the perspective of the function of trademark in the actual market, it is suggested that not only the composition, but also the actual situation of trademark should be reflected in the examination by specific and concrete judgment of similarity in accordance with the reality of the actual trade. In other words, the concept of similarity can be evaluated as one concrete example of confusion of origin in the examination process, just like in the judgment at suits against appeal/trial decision and infringement lawsuits.
Also, in relation to the above, even if a trademark is deemed as not similar to other trademarks in the actual market, the applicant of the said trademark application can not have it registered in case the trademark is judged as similar to other trademarks filed and registered prior thereto, which consequently narrows the scope of choices of trademarks available to a third party. This becomes problematic when the applicant of a trademark application has obtained consent from the applicants or owners of the prior-filed or -registered trademarks.

(2) Regarding cancellation trial based on non-use of the mark
Trademark Law is aimed at protecting the goodwill of the mark (Article 1). Therefore, under the Law, trademark is premised on being used (Article 3(1) main clause)4). Although this assumption is self-explanatory from trademark's role in the market, there are a lot of registered trademarks which are not actually in use. This is a situation caused by principle of registration adopted in Trademark Law which allows trademarks to be registered regardless of whether the trademark is actually in use at the time of filing applications (Article 18)5).
As a result, since the actual condition of trade is not adequately concerned in the current ex officio examination system, trademark applications can be refused based on the existence of prior-filed trademark applications not in use.
In response to the situation like this, applicants may be able to avoid refusal of applications by filing a request for a trial of cancellation of trademark registrations based on non-use. However, in practice, the applicants tend to accept such refusal of applications without trying any further. Besides, at the stage of trademark search prior to filing, existence of prior-filed trademarks causes applicants to hesitate to go on to actual filing of the applications.
Moreover, under the current system where generic identification of goods is accepted, cancellation of a part of generic identification of goods/services would not totally mean, in a lot of situations, that the applications will not be refused by the remaining part of the generic identification of goods/services, since they can be under the same Similar Group Codes.
Therefore, in the current situation where a large number of above-mentioned registered trademarks not in use exist, later-filed trademark applications can be refused despite there is no possibility of confusion of origin in actual situation. The point at issue is whether the situations like this would narrow the scope of choices of trademarks available to a third party.

3. A Reform Measure
Measures being suggested in order to cope with the above-mentioned issues concerning Law Article 4(1)(xi) are consent system, Examination-after-opposition system and a countermeasure system against trademarks not in use, all of which are also discussed in the TSS.
The following is a quick study of the said three systems:

(1) Consent system
Consent system is a system in which registration for later-filed applications is allowed even if the later-filed applications are within the scope of similarity of registered trademarks filed prior thereto, as long as the owner of the registered trademarks consent to the registration of the later-filed applications. Introduction of this system has been discussed for some time past.
If the consent system is adopted, there is an advantage of adding the elements which reflect the intention of parties involved in the actual trade to the examination regarding Law Article 4(1)(xi), while maintaining the current ex officio examination system. In other words, as long as the affected parties agree in that the marks are not similar in the actual market, the applicant of the later-filed application can be granted its registration, even if the trademarks are deemed similar in the general and abstract judgment of similarity based on the specification in the application. This, as a result, would broaden the scope of choices of trademarks available to a third party.
Regarding this point, there is an assertion that an increase in the number of coexisting registrations within the same scope of similarity may result in confusion of origin.
However, the consensus between the parties would not be reached if such confusion of origin likely happens.
Also, after registration, separate transfer of similar trademarks and partial transfer of identical trademarks are granted under certain conditions (Article 24bis, 24quater). Since these kinds of transfer of trademark registrations have not caused any particular problem, adoption of consent system under similar conditions would not cause any problem.

(2) Examination-after-opposition system
Examination-after-opposition system (EAO system) is a system where ex officio examination is not carried out regarding so-called refusal on relative grounds (i.e. trademark is similar or identical to those already registered, trademark may cause confusion with goods and services concerning other person's business, etc.).
Ex officio examination is carried out, only after when there is an opposition raised by the owner of prior-trademark registration, based on parties' assertions and evidence. This system and later-mentioned Appeal against Non-Use system (ANU system) have already been adopted in CTM.
According to the EAO system, since the judgment of similarity of trademarks takes place based on parties' assertions and evidence, examination is carried out from the perspective of whether there is a concrete confusion. Therefore the actual condition of trade will also be reflected.
Also, if the ANU system is adopted together with the EAO system, trademarks will not be refused because of similar trademarks registered prior thereto which are not in use. In this manner, an increase in the number of applications reflecting the actual state of use will be promising.
Nevertheless, upon adoption of the EAO system, there are several important issues to be considered from the perspective of Article 4(1)(xi).
First of all, the EAO system may increase burden on owners of trademark registrations borne by the necessity of watching later-filed trademark applications within the scope of similarity. Under the EAO system, owners of trademark registrations are constrained to conduct searches as a part of maintenance of their trademark right. This, however, does not make the trademark search for prior trademark applications unnecessary. In this regard, on the other hand, there is another assertion that reduction of costs of application fee and registration fee will be promising by adopting the EAO system.
Moreover, regarding the costs of search and opposition, measures such as the one which obligates the applicants to bear the costs of opposition if the applications are not registered because of the opposition will be necessary from the perspective of equitable principle.
Also, an increase in the number of coexisting registrations within the same scope of similarity would be an issue, because this may cause increase in possibility of confusion of origin. There are two kinds of coexisting registrations:
Coexisting registrations due to no opposition being filed for later-filed trademark application which are within the scope of similarity of the trademark applications filed prior thereto, and Coexisting registrations which are deemed in the same scope of similarity as a result of use of trademarks after registration.
The former kind of coexisting registrations can be coped with by invalidation trial, without statute of limitation. As to the latter kind, there is no provision under the current Law. Therefore, in order to reflect the dynamic aspect of trademark to post-registration proceedings, provisions such as making
Law Article 4(1)(xi) or (xv) 6) later reasons for invalidation are necessary. Furthermore,
if judgment of similarity is done individually and concretely under examination, generic identification of goods/services will be amended.

(3) Countermeasure against trademarks not in use
In the TSS, the ANU system is being discussed as a means for countermeasure system against trademarks not in use.
Under the ANU system, in case there is an assertion that a trademark registration is not in use in the proceedings of opposition, invalidation trial, etc., such proceedings will be dismissed if the owner of the trademark registration fails to prove that the mark is in use.
According to the said system, trademark applications are not refused because of the trademark registration not in use, and consequently, the scope of choices of trademarks available to a third party will be broadened.
Nevertheless, the number of trademark registrations not in use itself will not be decreased by the said system and the present cancellation trial based on non-use.
Therefore, the number of trademark registrations within the same scope of similarity would increase. And if the owner of a prior trademark registration not in use starts to use the mark after later-filed trademark applications are registered, confusion regarding the origin of mark may occur. This problem becomes serious when such use is for unjust purpose.
Regarding this point, some assert that if this system is used together with the EAO system, trademark owners would attempt to reduce the burden of watching which may lead to decrease in the number of trademark registrations not in use.
Even so, as a countermeasure against trademarks not in use, the problem will not be solved fundamentally without reducing the number of applications for trademarks which are not planned to be used or the number of trademark registrations not in use. As to the former kind of trademarks, there is a limit of restricting the number of applications for trademarks not planned to be used as long as principle of registration is adopted, therefore this problem should be solved from the latter kind. As such, stronger system is required, not just the ANU system which merely dismisses opposition, etc. In concrete, prove of use of marks after a certain period of time can be considered.
In order to make the most of the cancellation trial based on non-use, generic designation of goods should be revised, in view of the said trial which aims to broaden the scope of choices of trademarks available to a third party.

4. Conclusion
As discussed above, not just there are several points at issue in the present trademark system, but also there are a lot of matters to be concerned in the new system suggested as a reform measure.
When it comes to the EAO system, it is ideal if existence of concrete confusion is judged by ex officio examination, in view of maintaining stability and practical effect of right. However, it is extremely difficult for examiners to collect all the examination materials, and also it is necessary to take into account the prolongation of examination, etc. There is a way of asking parties to submit documents at intermediate treatment after ex officio examination, however, there is not much necessity in limiting the parties to the owners of cited trademark right.
As such, in the light of placing emphasis on the realities of trademark as a single element of business activities in a market economy, we may leave relative refusal reasons like Article 4(1)(xi) to be resolved among the affected parties. However, even in this case, we must keep a close eye on the problems regarding supervision of trademark owners, and stability and effectiveness of trademark right.

Notes:
1) Article 4(1)(xi) states "trademarks which are identical with, or similar to, another person's registered trademark applied for prior to the fiing date of the trademark application concerned and which are used on the designated goods or designated services covered by the trademark registration referred to or on similar goods or services" shall not be registered.
2) According to Trademark Law Article 1, the purpose of the Law "shall be to ensure the maintenance of the business reputation of persons using trademarks by protecting trademarks, and thereby to contribute to the development of industry and to protect the interests of consumers".
3) Article 15 states the following:
The examiner shall make a decision that a trademark application is to be refused where it falls under any of the following paragraphs:
(i) the trademark in the trademark application is not registrable in accordance with Section 3, 4(1), 8(2) or (5), 51(2) (including its application under Section 52bis(52-2)(2)) or 53(2) of this Law of Section 25 of the Patent Law as applied under Section 77(3) of this Law;
(ii) the trademark in the trademark application is not registrable in accordance with a treaty;
(iii) the trademark application does not comply with Section 6(1) or (2).
4) The main clause of Article 3(1) states that "any person may obtain a trademark registration of a trademark to be used in respect of goods or services in connection with his business".
5) According to Article 18(1), "a trademark right shall come into force upon registration of its establishment".
6) Article 4(1)(xv) states that "trademark which are liable to cause confusion with goods or services connected with another person's business (other than the trademarks mentioned in Paragraphs (x) and (xiv))" shall not be registered.

- Documents distributed at the 3rd Trademark System Subcommittee of Intellectual Property Policy Committee of Industrial Structure Council.
- Documents distributed at the 5th Trademark System Subcommittee of Intellectual Property Policy Committee of Industrial Structure Council.
- The minute book of the said Subcommittee.