The People's Republic of China is considered by some to be the next great
economic superpower, and U.S. companies seeking to gain a foothold
in the Chinese marketplace often begin by attempting to secure
trademark rights in China for their many brands, famous and
otherwise. However, they are often stymied by China's
complicated trademark registration system, a body of law relatively
unfriendly to well-known foreign brands, and a number of bad apples
that seek to take advantage of foreign trademark owners. It is good
news, then, that this year marks the PRC government's first
major reform of its Trademark Law in over a decade.
Changes to Chinese Trademark Office Practice
The new law largely aims to bring Chinese Trademark Office (CTO)
practice in line with the trademark offices of other major
jurisdictions worldwide, and in the process implements many changes
that U.S. and other Western brand owners will find quite welcome.
The law increases the availability of electronic filing and search
systems, prescribes time limits for CTO examination and review
functions, and includes support for non-traditional marks such as
sound marks. It also allows for multiple-class applications —
a particularly happy development given the frequent need for broad
registration strategies in China, and one likely to result in lower
costs across the board, both with respect to official fees and the
amount of time companies and law firms spend juggling multiple
On the contentious side of things, opposition and cancellation
proceedings are similarly streamlined and shortened, with stronger
rules in place to limit standing to interested parties.
Targeting Bad Faith
Fairly or unfairly, in trademark circles China is often
considered to be a "Wild East" of sorts — a
trademark jurisdiction rife with bad-faith applicants, opposers,
and distributors, those who seek to take advantage of well-known
brands or "stick up" Western brand owners by securing
trademark registrations and then holding them for a hefty ransom.
The new law targets these bad apples and paves the way to a
friendlier atmosphere for brand owners. To this end, it includes
provisions prohibiting applications filed in bad faith, including
imposing fines for the "trademark agencies" that file
such applications. In addition, use of a registered or well-known
trademark as a business name by someone other than the owner is
prohibited. A "restitution" provision affords brand
owners potential remedies to recoup losses previously suffered at
the hands of bad-faith registrants in infringement proceedings.
There are also formal protections in place for the owners of
"well-known" marks, as well as those brand owners that
have used a mark in China on an unregistered basis.
On the trademark infringement side of the coin, the new law
increases maximum fines for trademark infringement by six times
(from about $81,000 to $486,000), and mandates a likelihood of
confusion test that is similar to the thorough analyses adopted by
other major trademark jurisdictions. It also includes provisions
recognizing the equivalents of contributory and vicarious
infringement, as well as a burden-shifting provision that requires
discovery in some cases — a rarity in the Chinese legal
Brand Owners Should Remain Wary
It remains to be seen whether the new and improved Trademark Law
signals a reprieve of sorts for U.S. brand owners. On paper, it
looks promising, though Chinese trademark practice will continue to
include hidden pitfalls — including a complicated sub-class
system that exists alongside the International Classification system —
that frustrate trademark practitioners and present clear dangers to
brand protection in China. More importantly, it is unclear whether
incremental improvements to trademark practice will subdue the
various bad-faith operators that are the source of significant
frustration for brand owners in the PRC. The new law will go into
effect in May 2014.
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