Put ethics or letter of the law first in pre-emptive filings of unregistered marks?

Article 32 of the Trademark Law sets out that “an application for trademark registration may not prejudice the existing prior rights of another nor may improper means be used to pre-emptively register the trademark of another that is already in use and has a certain degree of influence”. This is an exception to the trademark registration and first to file principles, and it aims to prohibit others from pre-emptively registering in bad faith, or squatting, on unregistered trademarks with a certain degree of influence and being protected doing so.

Two conditions must be satisfied for this provision to be applied. First, the unregistered mark must have been in use on identical or similar goods and it must have possessed a certain degree of influence prior to the filing date of the disputed trademark. Second, the registering party must have used improper means in its attempt to squat on the mark.

There has been contention over whether the “certain degree of influence” of this clause has any value in identifying a malicious registration. The question is whether requiring that the trademark being squatted have a certain degree of influence is to protect the commercial reputation of the prior rights holder created via the disputed trademark, or to establish the subjective bad faith of the trademark applicant.