by Elena Wu
In China, trademarks may be vulnerable to cancellation if they have not been genuinely used for three consecutive years. This procedure, commonly referred to as a non-use cancellation action, is frequently used by competitors seeking to clear obstacles in the trademark register.
A recurring and critical issue in such proceedings is: Can the use of a trademark on promotional gifts be recognized as "genuine, public, and legitimate commercial use"? Many companies apply their trademarks to complimentary items as part of marketing campaigns, loyalty programs, or bundled sales. However, since these items are given away rather than sold, whether such use satisfies the legal requirements for "trademark use" often becomes a pivotal point of dispute.
Chinese administrative and judicial practice consistently emphasizes that the assessment depends not merely on the presence of a trademark on a gift, but on two substantive criteria: whether the gift has substantially entered the channel of commerce, and whether the trademark actually performs a source-identifying function in the perception of the relevant public.
1
The Legal Concept of “Trademark Use”
According to Article 48 of the Chinese Trademark Law, the use of a trademark refers to the application of the mark on goods, packaging, containers, transaction documents, advertising materials, exhibitions, or other commercial activities for the purpose of identifying the source of goods or services.
Two essential conditions therefore emerge:
1. Commercial Nature: The use must occur in the course of production or business operations, serving a genuine commercial purpose, rather than being merely internal or decorative.
2. Distinctive Function: The use must enable the relevant public to identify the provider of the goods or services through the mark.
When evaluating the evidentiary value of promotional gifts in non-use cancellation proceedings, Chinese authorities and courts focus on whether these two conditions are satisfied.
2
Key Examination Points in Judicial Practice
1) Entry into Commercial Circulation
One of the first issues examined is whether the promotional goods actually entered the market circulation. In practice, this means the items must have been made available through channels where they can reach an indeterminate group of consumers or business counterparts.
If the items are distributed only internally, for instance, to employees or within a closed corporate environment, they generally fail to meet this requirement. Such distribution does not expose the trademark to the public in a way that contributes to market recognition.
Chinese case law illustrates this distinction clearly. In one dispute involving the trademark “震旦, Zhèndàn” the trademark owner relied on internal publications and corporate materials as evidence of use. The authorities concluded that these materials were not publicly circulated and therefore could not demonstrate trademark use in the marketplace. As a result, they were not accepted as evidence of genuine use.
By contrast, courts have taken a different approach when promotional items were clearly distributed to customers or the public. In a well-known case concerning the “Evergrande” brand, the trademark owner had produced commemorative silver medallions bearing the trademark and distributed them to clients.
2) The Source-Identification Function
Even when promotional items reach consumers, a further question arises: does the trademark actually identify the source of the goods?
This requirement reflects the fundamental purpose of trademark law: allowing consumers to distinguish the commercial origin of products or services. If the mark displayed on a promotional item does not perform this function, its use may not qualify as trademark use under the law.
This issue frequently arises when companies place their trademark on goods produced by third parties. In such situations, the relevant public may continue to perceive the original manufacturer’s brand as the source identifier, while the promotional mark is seen merely as advertising.
A well-known example involves the “Happy Ren Pharmacy” case. The pharmacy distributed household cleaning products as promotional gifts and affixed its own mark to items manufactured by well-known detergent brands. The court concluded that consumers could still clearly recognize the products as belonging to those original brands. Because the pharmacy’s mark did not function as an indicator of the product’s commercial origin, the activity did not qualify as trademark use.
A similar conclusion was reached in another case in which a trademark owner placed third-party goods, such as soap products, into packaging bearing its own trademark and distributed them as gifts. The courts determined that the packaging did not effectively signal the source of the goods and therefore did not constitute trademark use.
3) Promotional Gifts as Part of an Integrated Commercial Transaction
Chinese courts have also recognized situations in which goods distributed together with a primary product may support a finding of trademark use.
In the “Alpine” case, the dispute involved musical instruments sold together with instrument cases bearing the trademark at issue. The court held that the use of the trademark on the cases qualified as commercial use, regardless of whether the cases were technically sold or provided as complementary items. The key consideration was that the goods formed part of a single commercial transaction in which consumers perceived them as related products associated with the brand.
This reasoning has practical implications for companies designing promotional campaigns. When a gift item is closely connected to the main product, functionally or commercially, and is delivered as part of a unified sales transaction, the trademark displayed on the accessory item is more likely to be recognized as genuine use.
3
Evidence in Non-Use
Cancellation Proceedings
As with most trademark disputes in China, the outcome of non-use cancellation proceedings largely depends on the quality and coherence of the evidence submitted.
Authorities typically expect to see a credible chain of documentation showing the life cycle of the goods involved. Evidence may include production records, procurement documents, sales invoices, logistics materials, advertising campaigns, and promotional materials. These elements should collectively demonstrate that the goods bearing the trademark were genuinely used in the marketplace during the relevant three-year period.
Consistency between the mark as used and the mark as registered is also critical. If the mark has been significantly altered or presented inconsistently, its evidentiary value may be weakened.
Equally important is the identity of the party using the trademark. The use must be carried out either by the trademark owner or by an authorized licensee whose activities can legally be attributed to the owner.
4
Strategic Implications for Businesses
1. Design with "Trademark Distinctiveness" in Mind: Ensure the trademark is prominently placed on the gift and can independently point to your brand, rather than being merely decorative or slogan-like.
2. Ensure Public and Traceable Distribution: Distribute gifts through public channels to an indeterminate consumer base, avoiding limitation to internal or specific groups. Maintain complete distribution records.
3. Maintain Consistency in Trademark Use: The trademark as used should be substantially consistent with the registered version. Significant alterations may weaken the evidentiary value.
4. Foster Collaboration Between Marketing and Legal Teams: Integrate intellectual property risk control into the campaign design phase to ensure the activity generates evidence that meets procedural requirements.
Conclusion
In Chinese trademark practice, whether the use of a trademark on promotional gifts constitutes "genuine use" is consistently judged against two core criteria: substantial entry into commerce and the actual performance of a source-identifying function.
Companies should consider both IP compliance and evidence preservation when planning promotional campaigns. Integrating marketing strategies with trademark protection creates synergy, achieving promotional goals while solidifying trademark rights and mitigating potential risks.