With China becoming an increasingly important market for South
African companies, the proposed changes to Chinese trade mark law
that were recently announced are of great importance. There has
long been a perception that trade marks in China are difficult to
protect, that the system favours locals, and that foreign companies
often come off second best. This perception may not necessarily be
fair, but there have certainly been a number of worrying reports of
trade mark hijackings over the years, in other words cases of major
international brands being registered by locals, and then offered
back to the true owners for exorbitant prices. Major UK
retailers like Sainsbury's, John Lewis and Topshop were victims
of this practice.
The case that made the biggest headlines, of course, involved
Apple. As part of its pre-launch clearance exercise for the
iPad brand, Apple bought various trade mark registrations for the
mark including, it believed, one that covered China. But the
company that sold these trade mark registrations to Apple in fact
didn't own the Chinese registration. As a result, Apple found
itself in the unenviable situation of having to negotiate with a
company that did own a Chinese trade mark registration for iPad
after it had already launched the product in that county. Needless
to say, Apple ended up having to pay a very high price for the
The 'first to file' system that applies in
China and a number of other countries says that the person who
first files the trade mark application gets the registration. The
harshness of this rule can be tempered in various ways, for example
by giving protection to marks which - although not yet used
in the country - are in fact well known there. Another way is to
require good faith and penalise bad faith. This is the solution
that the Chinese authorities seem to have opted for.
Although Chinese law does already allow for the cancellation of
trade mark registrations that were obtained in bad faith or are for
marks that are well known, these proceedings tend to be difficult
and expensive. The authorities have therefore now created a general
good faith requirement for trade mark filings, which means that
every trade mark application must be filed in good faith. On top of
that, it will in future also be possible for an aggrieved party to
oppose a trade mark application if the party filing the application
knew or should have known of the trade mark because of some
relationship with the aggrieved party.
To further discourage bad faith applications, there will in
future also be penalties for trade mark agents (attorneys) who act
in bad faith. And there will be a significant increase in the
damages that can be awarded for trade mark infringement, including
the option to award triple damages in cases where there is bad
faith, and penalties of up to 500% of the profits earned from the
Further changes include a move to multi-class filing, in other
words a system whereby you can cover more than one class of goods
or services in one application. This is a good thing, because
the cost of filing one application covering various classes is
generally cheaper than the cost of filing separate applications in
those same classes. Another change is that there will be time
limits within which the authorities must examine and complete trade
mark applications, which will expedite and bring more certainty to
the whole process.
These changes are due to come into effect in May 2014, and they
are very welcome. But they don't change the simple fact that if
you have any interest in doing business in China your best bet is
to get your trade mark registered in that country as soon as
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
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