China: Making The Infringers Pay (1)

Last Updated: 29 May 2014
Article by   Kangxin

Q1.What are some of the important changes that the Trademark Law bring to litigation proceedings?

【Celia Y. Li】

Comparing with the previous Trademark Law, the new Trademark Law of PRC makes significant effort to providing trademark right holders more comprehensive legal protection and enhance legal sanctions against bad-faith infringers, by modifying and/or adding provisions referring to recognition of infringement subject and activities, calculation method of compensation, burden of proof, etc.. For details, please refer to our further discussion below.

1. Article 48 – Concept of 'Use of Trademark'
Specifying that "use of a trademark" means using a trademark on goods, on the packages or containers of goods, in the trade documents of goods, or for advertisements, exhibitions, and other commercial activities for the purpose of identifying the origin of goods.

2. Article 57(2) – Modification of infringement elements over certain particular infringing activities
In the infringing activities that 'Using a trademark similar to a registered trademark on identical goods or using a trademark identical with or similar to a registered trademark on similar goods', adding 'cause confusion among relevant customers' as a new element.

3. Article 57(6) – Specifying that intentionally who 'provides facilitation for infringement upon others' trademark right or aids others in committing such infringement' can be pursued as a joint defendant.

4. Article 58 – Specifying that the Anti-Unfair Competition Law of PRC will be applied in the case that any entity uses a registered trademark or an unregistered well-known trademark of others as a trade name in its enterprise name to mislead the public which constitutes unfair competition.

5. Article 63(1) – In Determination of Compensation, Adding New Standard and explicating Statutory Order
a) Apart from 'actual loss' and 'benefit acquired from infringement' which has specified in the previous law, adding 'reasonable royalties' as a new standard.
b) Specifying the calculation order as i. 'actual loss', ii. 'benefit acquired by infringer' or iii. 'reasonable royalties'.

6. Article 63(3) – Increasing the ceiling of statutory compensation
Where it is difficult to determine the actual losses suffered by the right holder from the infringement, the profits acquired by the infringer from the infringement, or the royalties of the registered trademark, the court may award damages of not more than CNY 3 millions according to the circumstances of the infringement.

7. Article 63(1) – Adding punitive damages provision
If the infringement is committed in bad faith with serious circumstances, the amount of damages shall be the amount, but not more than three times the amount, determined by the methods under Article 63(1).

8. Article 63(2) – Rearrangement of burden of proof
Where the right holder has made its best efforts to adduce evidence but the account books and materials related to infringement are mainly in the possession of the infringer, in order to determine the amount of damages, the court may order the infringer to provide such account books and materials; and if the infringer refuses to provide the same or provide any false ones, the court may determine the amount of damages by reference to the claims of and the evidence provided by the right holder.

9. Article 64 – Adding 'non-use for last three years ' defense
In the case that the trademark right holder is neither able to prove its actual use of the registered trademark in the last three years nor able to prove that it has suffered other losses from the infringement, the alleged infringer shall not be liable for damages.

Q2.Many rights holders complain about the relatively low damage awards in China. What has the new Trademark Law done to address this?

【Celia Y. Li】
The maximum statutory compensation is RMB500,000 ($80,300) under the old law. For the purposes of improving the protection of trademark rights and further cracking down on trademark infringement, the maximum statutory compensation is increased to RMB 3 million according to Article 63(3) of the New Trademark Law.

In addition, because the old law did not provide for punitive damages, courts did not have a legal basis to suitably punish certain bad faith infringers. In response to this , Article 63 of the New Trademark Law imposes punitive damages against willful infringement and stipulates that the amount of punitive damage could be triple the amount of the potential registered trademark-licensing fee, right holders' actual loss or infringer's gains.

【Brandy Baker】
Keep in mind that in addition to increased damages, fines in administrative enforcement cases have also been increased. Where revenue exceeds RMB 50,000 ,fines may be up to 5 times the profits made.If revenue is less, the fine may be as much as RMB 250,000. Fines have also been increased for repeat offenders.

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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