China: China’s New Trademark Law Introduces Key Changes

Keywords: China, trademark law, changes,

The PRC government passed a decision to amend the PRC Trademark Law on 30 August 2013. Following on from our legal update "Proposals to Amend PRC Trademark Law may Impact on Trademark Squatting", issued earlier this year, this update gives a full summary of the key changes to the PRC Trademark Law, which will come into effect on 1 May 2014.

Modernising Trademark Application Process

• Electronic filings are officially recognised. Yet, it may take time for the China Trademarks Office (CTMO) to fully implement the online filing and search system.
• Multi-class applications are allowed under the new law. Traditionally, each application is only allowed to be filed in one class only. CTMO officials indicate that in line with the international standard, a multi-class application will likely be allowed to be split subsequently and such mechanism will probably be detailed in the PRC Trademark Law Implementing Regulations (Regulations).
• Registration of sound mark is allowed under the new law. Yet, the examination standard and procedures are still under consideration. It is expected that the Regulations will shed some light on this.
• Office actions may be issued by CTMO to address formality or substantive issues during the examination process. In response to such office actions, applicants are entitled to amend or clarify their applications.

Streamlining Trademark Opposition Procedures

• Who can oppose a mark? To curb 'unmeritorious' oppositions, only prior right owners or interested parties are allowed to oppose based on relative grounds (i.e., conflict with prior registrations, well-known marks and prior rights, etc.) whilst oppositions based on absolute grounds (i.e., generic for the goods/ services in question, descriptive of the goods/ services, lack of distinctiveness, etc.) may be filed by anyone. In comparison, the present law basically allows everyone to raise an opposition. The Regulations are expected to clarify further the opponent eligibility.
• Opposition procedures are shortened. If CTMO decides in favour of the application (i.e., the opposition fails), the mark will immediately proceed to registration. The losing opponent would no longer have a right to appeal to the Trademark Review and Adjudication Board (TRAB) and can only challenge the registration by filing an invalidation petition with TRAB. It is hence very important for an opponent to submit full arguments and adduce adequate evidence at the opposition stage as they will not be afforded a second chance as before. On the other hand, if CTMO decides in favour of the opponent, the applicant can appeal to TRAB within 15 days as usual. TRAB's review decision will still be subject to an appeal to court.

Speeding Up Examination Time

• Statutory time limits are introduced for the trademark registration, review, opposition, invalidation and cancellation procedures. As noted from the following table, all the examination processes will be significantly expedited.

• For the sake of clarity, many stakeholders have urged that the regulations should further specify how to calculate the time limits precisely, what may amount to the special circumstances and whether the relevant authority will notify the parties in writing should a time extension be required.
• While on the discussion of time limits, it is also worth noting that trademark renewal will be allowed to be filed within 12 months (instead of 6 months under the old law) before the mark is due to expire.

Tackling Trademark Squatting

• Bad Faith applications - The new law expressly lays down an important broad principle - all trademarks must be applied and used in accordance with the principles of honesty and integrity. Besides, it specifically provides that if the applicant is aware of the other party's mark through a contractual relationship, business dealings and other relationship, the applicant's application to register a trademark identical/similar to that party's mark for the same/similar goods or services will be rejected if it is opposed by the party with prior use.
• Remedies for brand owner against bad faith registrants - If a registered trademark is declared invalid for reasons of fraud or bad faith or on other grounds, the registration will be deemed void ab initio. Although this does not retrospectively affect court or administrative decisions or assignments or licences concluded, if the non-return of trademark infringement damages, licence fees or assignment fees is obviously against the notion of fairness, the whole or part of it should be returned. Further, if the registrant caused any damage to others in bad faith, he or she should compensate for such damage.
• Recognition of prior use - A registered trademark owner (e.g., a squatter) is not allowed to prohibit a prior user from continuing to use an identical/similar mark within the original scope of use, but may request the prior user to add appropriate markings to distinguish the marks.
• What constitutes "use"? - "Use" has been defined to cover use on products, packaging, containers and business papers, or use in advertisements, at exhibitions and for other business activities to designate the origin of the products. This is said to be more favourable to squatters because it may lessen the onus to prove use if a squatter's registration is challenged for non-use.

Clarifying Well-known Mark Protection

• The new law expressly confirms the case-by-case recognition principle for well-known marks and the channels of seeking well-known mark recognition, both of which have all along been in place but are not codified.
• Use of the phrase "well-known trademark" on goods, their packaging or containers, or in advertisements, exhibitions or other commercial activities is prohibited under the new law. Any violation may be subject to injunction and a fine of RMB100,000 (~US$16,000).

Strengthening Trademark Enforcement

• Use of a mark as a business name - The new law confirms that use of a registered trademark or an unregistered well-known trademark as a business name or part of it shall be prohibited under the PRC Anti-unfair Competition Law. In the past, the law has not been very clear on this.
• Knowingly facilitating or assisting infringement - By itself, knowingly facilitating or assisting infringement shall constitute an infringement.
  • Applicable fines for trademark infringement - These have been significantly increased:Where the illegal business revenue is over RMB50,000 (~US$8,000), a fine of up to five times the revenue may be ordered.
  • Where the illegal business revenue is less than RMB50,000 (~US$8,000), a fine of up to RMB250,000 (~US$40,000) may be ordered.
  • A heavier fine may be imposed if the infringer is found to have committed two or more instances of infringement within five years.
• • Infringer's disclosure obligation in damages assessment - An infringer may be ordered by court to disclose its account books or other information for the purpose of assessing damages; if the infringer fails to do so, the amount of damages may be determined with reference to the amount proposed by the trademark owner.

  Damages assessment

  • For serious infringement cases, the court is empowered to order punitive damages up to three times of the damages assessed based on losses suffered by the trademark owner, profits gained by the infringer or notional royalty.
  • Where the trademark owner's loss is difficult to assess, the maximum damages will be increased from RMB500,000 (~US$80,000) to RMB3,000,000 (~US$480,000).
  • When claiming for damages, trademark owners may be requested to adduce proof of use of their registered trademark during the preceding three years if the infringer disputes that the trademark in question has not been in use. No damages will be awarded if proof of use cannot be adduced.

Regulating Trademark Agency Profession

• Legal obligations of trademark agencies - Trademark agencies shall adhere to the principles of honesty and integrity and are strictly bound by the duty of confidentiality towards their clients. Trademark agencies must also inform clients if the marks involved cannot be registered under law (a statutory obligation but without consequence upon violation).
• Statutory prohibitions - A trademark agency is not allowed to (i) accept instructions if it knows or should know that the applied mark is filed in bad faith, has infringed a third party's prior right or is filed to pre-empt the rightful owner; (ii) file trademark applications other than those filed for its clients; falsify any documentation, seal or signature when it handles trademark matters; defame a competitor to solicit businesses or otherwise unfairly prejudice the trademark agency profession.
• Violation consequences - Any violation of the above statutory prohibitions will be subject to administrative penalties, i.e., a warning from the Administration of Industry and Commerce (AIC) plus a fine of between RMB10,000 and RMB100,000). The management of the violating agency may also be penalised, i.e., an AIC warning plus a fine of between RMB5,000 and RMB50,000, and the violating agency may be blacklisted by the AIC and/or subject to disciplinary actions of the China Trademark Association or other trademark industry organisations. CTMO and TRAB may also cease accepting filings from a violating trademark agency if the violation is serious and may announce the same to the public.

It remains to be seen how these new provisions are going to be implemented in practice. According to some CTMO officials, it is expected that many of the uncertainties will be clarified in the Regulations which are now under consideration by the government, and which will be published for public consultation in the near future.

Previously published on 13th September2013

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