China: An In-Depth Look At The New China Trademark Law

Xiang Gao, partner and trademark attorney at Peksung, interprets the new China trademark law and new implementing regulations of the law.

The Trademark Law of the People's Republic of China was adopted in 1982 and amendments were made in 1993 and 2001. The third amendment to the Trademark Law (the new amendment) was promulgated on August 30, 2013 and became effective on May 1, 2014. New Regulations for the Implementation of the Trademark Law of the People's Republic of China (the new regulations) were promulgated on April 29, 2014 and became effective on May 1, 2014.

I summarize main changes on them below with some comments on practice in China under the new changes.

Expansion Of Scope Of Registrable Trademarks

According to the new amendment, the registrable subject matter of trademarks are any signs, including words, devices, letters, numbers, 3-D signs, color combinations and sounds, etc., as well as combinations of the aforesaid elements. Sounds are newly added. According to the new regulations, it is necessary to provide a musical sample; explain how the sound mark is used; and describe the sound mark by using a staff or numbered musical notation with literal explanation, or by using literal representations if it cannot be described by using a staff or numbered musical notation. China is a first-to-file country, so whoever registers a trademark first will have exclusive right to use it. Therefore, it is always recommended filing trademark applications as early as possible. It is more urgent for newly allowed type of mark because of vacancy of prior right.

Addition Of Multi-Class Applications

Concerning national filing, after May 1, 2014 an applicant can submit one application to register a mark in multiple classes. Because multiclass applications are permitted, divisional applications will also be allowable if the initial applications encounter problems. Division can be requested within 15 days of the receipt of the notification of partial rejection issued by China Trademark Office (CTMO) in respect of partial goods or services. After split, the application with unblocked goods or services generates a new application to be preliminarily published with a new filing number but reserved original filing date. However, the CTMO does not lower official fee for a multiclass application, namely, the CTMO still charges RMB 800 (US$131) per class, and a multiclass application might mean higher chances of division of application later, therefore, it seems wiser to still use former single-class filing approach in most cases.

Addition Of Letter Of Examiner's Opinion For The Applicant's Explanation

During examination, if the CTMO thinks it necessary for the applicant to explain or make an amendment to the content of the application, it can ask the applicant to make such an explanation or amendment within 15 days of the receipt of the notification, although the applicant's failure to do so does not result in the abandonment of its application.

Explanation Of Timeframes For Examination And Review Procedures

The new amendment significantly sets up examination and review times for all proceedings.

The stipulation of timeframes is unique and it will further promote efficiency. As an example, the CTMO shall complete an examination of an application for registration within nine months of the receipt of the application documents. Where there is an opposition, the CTMO shall make a decision within 12 months of the date of expiration of the publication of the preliminarily approved mark. In special situations, an extension of six months can be approved.

However, the new regulations state that some periods shall not be included into the timeframes, therefore, it is possible that the actual process in some cases could be a little longer.

Appeals to the TRAB are available but the strict 15-day appeal deadline, not extendable, remains unchanged. Therefore, it is crucial to know the CTMO's decisions as early as possible and then lodge an appeal with the TRAB before the deadline if the appeal is confirmed– the detailed arguments and evidence are still allowed to be supplemented within three months of the date of filing the appeal.

Allowance Of Earlier Filing Of Renewals

An application for renewal of the registration can be made within 12 months of the date of expiration; the old law stipulates six months. The 6-month grace period for renewal post-expiration has been retained. The extension helps registrants to have renewal certificates timely issued to facilitate enforcement actions or renewals of related customs recordal registrations.

Recordal Of License

If a licensor licenses another party to use its registered trademark, the licensor shall arrange for recordal of the license to the CTMO. The trademark license, if not recorded, shall not be against bona fide third parties. Chinese local administrative organs more recognize or more easily believe the recordal certificate issued by the CTMO than the license contract. Therefore, it is better to arrange for recordal of the license for the convenience of the licensee's commercial operation in China. On the other hand, recordal is necessary in order to remit licensing fees outside China.

Addition Of Articles On Combating Bad Faith Registration

The new amendment incorporates the "principle of honesty and good faith" of Civil Law into Article 7, which stipulates that "when applying to register and using a mark, an applicant must abide by the principle of honesty and good faith". However, it is looked as a general principle and cannot be solely applied.

Besides the prohibition of the unauthorized registration and use of a trademark in the name of an agent or a representative of the holder of the trademark in Article 15, the new amendment adds a second paragraph:"Where the application is for the registration of a trademark identical or similar to another party's unregistered trademark which was used earlier for the same or similar goods, and the applicant clearly knows another party's trademark due to non-agent/representative contract, business or other relations between the applicant and another party, the applicant's application for registration shall not be allowed if another party opposes it." Therefore, an applicant does not need to be an agent or representative in this situation. However, it is still unclear if the earlier use is restricted to within China's territory.

Revised Grounds Of Opposition And Simplified Opposition Procedures

Under the old law, anyone can file to the CTMO an opposition to a preliminarily approved mark within three months of the date of the publication. Under the new amendment, within the same time limit, anyone can still file an opposition based on absolute grounds, but only prior right holder or a party with an interest can file an opposition based on other available grounds.

If the CTMO rejects an opposition, the opposing party cannot appeal against the CTMO's decision to the TRAB, but it can apply to the TRAB to invalidate the mark after it is registered, allowably on the basis of the same facts and grounds as the previous opposition, which is an exception to the general rule. By contrast, if the CTMO allows an opposition, the applicant of the opposed mark can appeal against the CTMO's decision to the TRAB.

Added Invalidation Procedures

The dispute procedure under the old law is conceptually broad and vague. Under the new amendment, cancellation and invalidation are clearly separated. The grounds under which invalidation actions against registered marks can be initiated are similar to the opposition grounds mentioned above. The differences in invalidation procedures are (1) based on absolute grounds, the CTMO can announce invalidation at anytime or anyone can file to the TRAB at anytime for its announcement of invalidation; and (2) based on other available grounds, prior right holder or a party with an interest can file to the TRAB for its announcement of invalidation within five years after registration (exception: no time limit for invalidation against bad faith registration of well- known trademark of a holder's). The invalidation of a registered mark does not have retroactive force on the court's rulings or mediation paper, on the AIC's already made and implemented decisions, and on the assignment or license contracts that have already been executed before the invalidation. However, a third party is entitled to compensation for loss incurred as a result of the registrant's bad faith.

Simplified Cancellations

Any entity or individual may apply to the CTMO to cancel a registered mark if the mark has become generic in respect of the designated goods, or if the mark has not been used for three consecutive years without proper excuses. Also, the CTMO can cancel a registered mark on its own initiatives if the registrant, in the course of use of the registered mark, alters the registered mark or other registration matters and fails to make rectification with a prescribed limit of time.

Clarified Protection For Well-Known Marks

The new amendment keeps standard for evidence requirement as high as before. What are newly added are as follows:

First, recognition of well-known status of a trademark shall be based on the trademark holder's request when it thinks its right is infringed, and it is to affirm a matter of fact necessary to be affirmed in a trademark case.

Second, the new amendment provides clarification on the venues for asserting well-known mark rights, including the CTMO, the TRAB, and the relevant courts.

Third, the new amendment adds that manufacturers and dealers shall not use the wordings "well-known mark" on goods, packages of goods or containers of goods, or in advertising, promotions, exhibitions or other commercial activities. Violations are punishable with fines of RMB100,000 (US$16,100). This is to prevent anyone from using "well-known mark" as an honorable title to mislead consumers into believing the quality of goods or services using the mark are well regarded by the country.

Improved Judicial Protection Measures

Punitive damages

In case of trademark infringement, the amount of damages is determined by the loss suffered by the right holder, the profits earned by the infringer, or the referred multiple of the license fee. The new amendment imposes punitive damages against wilful infringement and stipulates that the amount of the punitive damages could triple the amount of damages determined in accordance with the methods mentioned above.

Increasing statutory damages Under

the old law, the cap of statutory compensation is RMB 500,000 (US$80,600). The new amendment raises the compensation ceiling for trademark infringement to RMB 3 million (US$484,000), six times the previous limit.

Alleviation of the burden of proof for the right holder

Where the right holder has tried to provide evidence and the infringement-related accounts or other materials are held by the infringer, the court, in order to determine the amount of compensation, can order the infringer to provide the accounts or other materials. If the infringer does not provide them or provides false information, the court can refer to the right holder's petition and evidence to determine the amount of compensation.

Added Non-Use Demurrer

Where a holder of a registered trademark asks for compensation and the accused party argues non-use of the registered trademark, the court may ask the holder to provide evidence of actual use of the registered trademark during the preceding three years. If the holder cannot prove use in the preceding three years or cannot prove any other loss suffered, the accused party does not bear responsibility for compensation.

With the new law and regulations implemented, we anticipate speedup of the examination process, more efficient combat against bad faith application or registration, and more severe crack down on infringement.

Originally published in The Asian Lawyer, July 2014.

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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