How to Deal with the Problems Related to the Double Licensing on an Exclusive Right Concerning the Same Trademark?

The trademark right owner A signed a trademark exclusive license contract with B. Later then, A signed another trademark exclusive license contract with C concerning the same trademark. Then who is the authorized licensee? Shall B require C to stop the infringement and compensate for damages? Or B could only require A to undertake the liability for breach of contract?

To solve these problems, there are 2 factors shall be taken into consideration: (a) whether any trademark exclusive licensing contract has been submitted for record-filing? (b) whether the later licensee has good faith?

Paragraph 2, Article 19 of the “Interpretation of the Supreme People’s Court Concerning the Application of Laws in the Trial of Cases of Civil Disputes Arising from Trademarks” (“Interpretation”) states where a trademark license contract is not submitted to the Trademark Office for record-filing, opposition to a third party in good faith shall be prohibited.

It is obviously where the prior contract has been submitted for record-filing, the later licensee could hardly be deemed as a third party in good faith. However, if the later contract has been submitted for record-filing, whether the later licensee could defend against the prior licensee by the record-filing? It depends on whether the later licensee is in good faith. For example, in the case [(2014) Hu Gao Min San (Zhi) Zhong Zi No.117 ], the main opinion of the court is that if the later licensee is a third party in good faith, the later trademark license contract which has been submitted for record-filing, could be used to defend against the prior trademark license contract. The prior licensee could safeguard its interests by claim for the liabilities for breach of contract, not the other way around. In addition, the third party in good faith in Article 19 of the “Interpretation” shall refer to the later licensee knows nothing about the prior licensee. The degree of the burden of proof of good faith is far lower than malicious conspiracy.

Where there is no trademark license contract has been submitted for record-filing, if the later licensee is a third party in good faith, both licensees could only claim for the liabilities for breach of contract. From the perspective of the creditor’s rights, because the creditor’s rights shall not have different legal effects due to the time sequences, both licensees could not require the counter party to stop using the involved trademark. From the perspective of the infringement on trademark, according to Paragraph 2, Article 19 of the “Interpretation”, the licensee could not take the trademark license contract which is not submitted to the Trademark Office for record-filing as an excuse to against the counter party.

In view of this, to prevent a trademark exclusive license contract from being deemed as an “non-exclusive” one, a licensee shall pay attention to the following aspects:

Firstly, to conduct due diligence on the relevant trademarks before signing the contract.

Secondly, to design the articles of the contract for record-filing, such as the record-filing responsibility of the licenser, the payment based on the completion of the record-filing, and the high penalty for breach of contract on the record-filing. If it is possible, the licensee could stipulate that the contract shall take effect upon the completion of the record-filing.

Thirdly, after the contract has been executed, the licensee shall urge the licenser to submit the contract for record-filing timely.