China: Eight Key Points about the Third Amendment to the PRC Trademark Law

Last Updated: 10 September 2013

The Standing Committee of the National People's Congress passed the Third Amendment to the PRC Trademark Law ("Revised Trademark Law") on August 30, 2013. The new Trademark Law will be implemented on May 1, 2014.

Besides its share of critics, this revised PRC Trademark Law, in general, responds to the public concern on complex trademark prosecution procedures, rampant bad faith trademark squatters and difficult trademark protection. A detailed explanation of some key changes affecting brand owners and trademark practitioners is provided below:

  • Expansion of Non-traditional Trademark Registration

The Revised Trademark Law proposes to accept non-traditional trademark registrations to cover sound.

This enlargement of trademark family may attract lot of new filings from those countries where sound mark has already been registrable. The examination criteria in the Chinese Trademark Office will be the next point of public attention.

Unfortunately, the revised Trademark Law fails to cover single color trademark registration which was under heated discussion during this revision process.

  • Procedure Facilitation: Statutory time-limit for examination, electronic filing, multi-class application, Office Action and trademark renewal

Time-Limit

This revision will be the first time in the PRC trademark history that sets a statutory time-limit for trademark examinations by both the Chinese Trademark Office ("CTMO") and the Trademark Review and Adjudication Board ("TRAB").

The CTMO has already allowed electronic filings for several years through a trial pilot program; however, this practice is now officially and explicitly written into the revised Trademark Law.

Multi-Class Application

Furthermore, the Revised Trademark Law also simplifies the registration procedure by allowing an applicant to submit one application for a trademark in multiple classes. The current practice only allows the filing of one trademark in one class and additional trademark applications are required for additional classes.

Office Action

Moreover, the proposed change to expend the use of office action which will offer trademark applicants an opportunity to present additional arguments or amendments to their application if required by the CTMO.

Renewal

Lastly, a renewal application can be filed 12 months prior to expiration, compared to 6 months under the old law. The 6 month grace period will still exist.

All these changes will provide more conveniences and benefits to trademark applicants. However, it should be noted that some changes may affect the trademark strategy of trademark practitioners and owners, especially due to the new time limits of examination of various types of cases.

Unfortunately, the revised Trademark Law fails to extend the responding time to the rejection from CTMO which was previously proposed during this revision process. This together with failure in extending some other responding times by the brand owners may be disappointing to many brand owners and practitioners.

  • Material Change in the Opposition Procedure

It is worthy of special mention that the CTMO's opposition procedure is materially changed in the revised PRC Trademark Law. Firstly, it strictly limits the party that can file an opposition and the grounds for their opposition. In the past, any party could oppose any trademark on any grounds (i.e., absolute grounds or relative grounds), but the revised Trademark Law only allows the owner of a prior right or an interested party to lodge an opposition on relative grounds before the trademark is registered. This change may reduce the number of opposition cases and help alleviate the bad faith opposition filing problem.

Moreover, if an opposition claim is denied by the CTMO, the CTMO will allow immediate registration and the application will no longer be pending until it is resolved in the subsequent appellate procedure. An opposing party's only recourse afterwards is through a new procedure – "invalidation". As many oversea brand owners are generally the party who files these oppositions, this change will greatly affect the trademark strategy of oversea brand owners in China. If a brand owner loses their opposition filing, they can only attempt to invalidate the trademark and will face the disadvantageous situation where the bad faith applicant obtains the full registered trademark right during the whole invalidation process. Whether and how this problem can be tackled will remain to be further clarified in future implementing regulations and/or judicial interpretations and it is highly recommended for brand owners to put more focus on opposition first.

  • Efforts on Restraining Trademark Squatting

The revised Trademark Law clearly prohibits the dealers, distributors, agents, and those who have business contacts with the brand owners to register the same or similar trademark on same or similar goods.

The new law also introduces in first time the responsibilities of trademark agencies. Besides the confidential duties and other obligations, the new version also prohibits the registration of trademark in the name of trademark agency beyond its business scope. It is a positive improvement to owners of famous brands because some trademark agencies in the past years registered many famous trademarks on behalf of their anonymous clients with bad faith.

Most eye-catchingly, the revised Trademark Law introduces the principle on good faith (so called "honest and trustworthy principle") for trademark use and registration. The outstanding Article 7 which says that "The principle of honest and trustworthy should be followed when trademark is used and filed for registration" seems to show forth the resolution to restrain trademark squatting on bad faith, because this article may be used as a safeguard to those bad faith registrations which cannot be stopped by other specific grounds set in the revised law.

  • A More Trademark Owner Friendly Protection System: Public Confusion; Increased Damages; Burden of Proof

Confusion in Trademark Infringement

The revised Trademark Law introduces a confusion claim, for the first time in its history of legislation. Article 57.2 prohibits any party "without the consent of the owner of the registered trademark, to use a trademark that is similar to a registered trademark in relation to identical goods, or uses a trademark that is identical with or similar to a registered trademark in relation to similar goods, which can easily cause confusion."

Although the principle of confusion has been used in the practice for long time, it is the first time to be written in the law. It will help the AIC or the court to fairly decide trademark infringement cases when the marks are similar and/or the goods are similar.

Damage Calculation

The damage is the actual loss suffered by the trademark registrant, or the profit earned by the trademark infringer if the actual loss is hard to be determined. Where the actual loss and infringer's profit are all hard to be determined, the damage can be determined according to the reasonable times of license fee. Under the current law, the trademark registrant can elect its actual loss or infringer's profit.

Additionally, the disputed infringer will be required to provide its financial books as evidence to show the profits earned, which was difficult for trademark owners to obtain, failing to obtain these records meant that the only evidence the court would be able to use to calculate damages was based solely on the evidence that could be provided by the trademark owner.

Punitive Damage

The revised Trademark Law proposes punitive damages, which is the first time for punitive damages to be introduced in the Chinese IP laws. This intends to punish severe trademark infringement on bad faith, and the damages will be 1 to 3 times of above normal damages.

Furthermore, the heavier penalties from AIC will be posted on those who implement trademark infringement activities more than twice within five years.

Statutory Damage

Furthermore, the revised Trademark Law proposes to increase the cap of statutory damage from RMB 0.5 million to RMB 3 million. It is a significant increase which may effectively restrain trademark infringement.

No Compensation on non-use Mark

It is also worth mentioning that the revised Trademark Law provides the possibility of no compensation to the trademark owner if the trademark owner cannot demonstrate its use of the mark in the past three years and cannot prove any other loss suffered. For brand owners, they must pay attention to the collection and reservation of use evidences in their routine work.

  • Right of Prior Use and Fair Use

The right of prior use is introduced in the revised Trademark Law. A person/entity may continue to use its trademark even after an identical or similar trademark is registered in identical or similar goods/services, if it has used the trademark before the application date of the trademark and obtained certain influence. However, the continued use is limited to the original scope, and the trademark registrant may ask the prior user to attach alterations to its trademark to differentiate the goods/services provided by the two.

However, no definition to "original scope" and "influence" is mentioned in the new law, and it may need be further clarified in the forthcoming implementing regulations or judicial interpretations.

The revised Trademark Law stipulates that the trademark registrant cannot prevent others from using the generic name, picture, model type of the goods, or descriptive features of the goods, or geographic name which are comprised in the registered trademark. Under the new law, using these elements is deemed as a fair use and does not constitute infringement to trademark right.

  • The term "Well-known Trademark" should not be used in advertising and other business activities

There has been controversy in the past years regarding the use of well-known trademarks in large advertising campaigns and publications in China, which encouraged Chinese companies to compete for recognition of well-known trademarks. In order to stop this departure from legal nature, the Supreme People's Court, CTMO and TRAB have enacted strict rules and practices for granting well-known status in recent years.

It is a significant move for the legislator to rule that the term "well-known mark" should not be used on goods, packages or containers of goods, or in advertising, exhibition or any other business activities, and the violation of the stipulation of the non-publicity clause is subject to monetary penalties. With the severe limitation on the commercial utilization of the title, the public can be now more optimistic about the real and proper legal functionality of "well-known trademark" in the Chinese laws and practices.

Conflict between Trademark and Trade Name

The revised Trademark Law makes it clear that the Anti-Unfair Competition law will be applied if any company uses a registered trademark, or a well-known unregistered trademark as its trade name and causes public confusion. In that, using other's trademark in company name may be restrained.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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