China: New Measures To Target Bad Faith Trade Mark Applications In China

The revised Trade Mark Law was enacted in 2014 to much fanfare, as it included important new provisions targeting bad faith applications by trade mark hijackers, a recurring problem that has plagued brand owners in China. Unfortunately, in the 5 years since the enactment, the new provisions have done little to reduce trade mark hijacking activity and the onus has remained with brand owners to oppose or invalidate hijacked marks.

Recently, the Chinese Government has signalled its renewed efforts to target bad faith applications through a series of regulations and amendments to the Trade Mark Law. In February 2019, the National Intellectual Property Administration of China ("CNIPA") published 'Several Measures on Regulating Trade Mark Filing for Registration (Draft for Comment)' ("Draft Regulations") for public consultation. The consultation period ended on 14 March 2019 and as of the date of writing, the Draft Regulations are still being finalised. Separately, the Standing Committee of the National People's Congress approved amendments to the Trade Mark Law to take effect from 1 November 2019 ("2019 Amendment"). Both the Draft Regulations and the 2019 Amendment aim to address bad faith registration of trade marks in China, in order to prevent trade mark hijackers from exploiting the registration system.

2019 Amendment

The 2019 Amendment provides for the rejection of bad faith applications filed without intent to use (Article 4), and this ground can also be pleaded in opposition (Article 33) or invalidation (Article 44) proceedings. Trade mark agencies are also obligated to reject instructions where they know or should have known that the applications are filed in bad faith without intent to use (Article 19), and those that file bad faith applications will be subject to administrative penalties such as warnings or fines (Article 68). The 2019 Amendment also provides that the courts may impose penalties in relation to trade mark lawsuits filed in bad faith.

Apart from the above provisions targeting bad faith applications, the 2019 Amendment also introduces new measures to target trade mark infringement in Article 63, including: (1) increasing the maximum statutory damages for infringement from RMB 3 million to RMB 5 million; (2) increasing the maximum multiplier for punitive damages for serious and malicious infringement from three to five; (3) empowering the courts to order the destruction of counterfeit goods, and the materials and tools used to manufacture such goods; and (4) prohibiting counterfeit goods from being redistributed in the market, even after the infringing mark has been removed.

Intent to Use – a Double-Edged Sword?

There has been some concern that the "intent to use" requirement introduced by the 2019 Amendment may block legitimate applications filed by brand owners for defensive purposes. This is clearly not the intention of the drafting committee, as the "intent to use" requirement was coupled with bad faith specifically to address this issue (the original wording of the "intent to use" amendment to Article 4 made no reference to bad faith). Nevertheless, there remains a possibility that third parties may try to oppose or invalidate marks filed by brand owners for defensive purposes on the ground that there was no bona fide intention to use.

Another potential issue is that the "intent to use" requirement could, at least in theory, be circumvented by hijackers if they are able to show some use of the mark in question. If implementing regulations are released in the future, they may provide further clarity on the criteria that will be used to determine if an application is filed in bad faith without intent to use.

Draft Regulations – Targeting "Abnormal" Applications

The Draft Regulations also attempt to address trade mark hijacking by targeting "abnormal" trade mark filings, including:

  1. applications that copy marks widely recognized by the relevant public and which free-ride on the goodwill of others (Article 3.1);
  2. applications for marks that enjoy a "certain degree of influence" and are already being used by others (Article 3.2);
  3. applications for similar or identical marks where the applicant knows or should have known of another party's earlier rights (Article 3.3);
  4. repeated applications for a clearly improper purpose (Article 3.4);
  5. applications filed in large numbers within a short period that clearly exceed reasonable limits (Article 3.5);
  6. applications filed without a genuine intent to use, or where there is no actual need to obtain trade mark rights in respect of the relevant goods or services (Article 3.6); and
  7. applications that violate the principle of good faith, infringe upon the legitimate interests of other parties, or disrupt the market order (Article 3.7).

Parties who act as trade mark agents or otherwise assist with abnormal filings are also caught by the Draft Regulations (Article 3.8).

Whilst the types of abnormal trade mark filings listed above do cover the more common types of bad faith applications, the definitions are still quitevague. For example, Article 3.5 does not specify the volume of applications that would be considered to exceed reasonable limits – will several dozen applications filed on the same day meet this threshold, or would an applicant need to file hundreds of applications in order to fall within this definition? How will the authorities differentiate between legitimate brand owners with large brand portfolios from trade mark hijackers? Will applications filed by legitimate brand owners for defensive purposes be considered abnormal applications under Article 3.6?

Draft Regulations – Power to Request Explanations and Evidence

The Draft Regulations attempt to curb abnormal filings by empowering the CNIPA to take certain actions against such marks, such as requesting explanations and evidence from applicants of abnormal applications (Article 4.1). However, the Draft Regulations provide no clear guidance on how the CNIPA will determine when explanations and evidence will be necessary – for example, will examiners consult a blacklist, or take the initiative to proactively review an applicant's filing history? The Draft Regulations also provide no clarity on what kind of explanations or evidence will be required, and the timeframes for responding. Without clear guidelines, applicants may find themselves ill-prepared to respond to requests, particularly if they are overseas and are asked to provide extensive use evidence at short notice.

Draft Regulations – Accountability of Trade Mark Agencies

Trade mark agencies that assist with filing abnormal applications will also be held accountable under the Draft Regulations. The Draft Regulations provide for sanctions to be imposed and recorded against an agency's credit file, and for suspension of the agency's licence where there has been a serious breach (Article 4.4). The Draft Regulations also allow the CNIPA to summon agencies that assist with abnormal filings to attend "rectification interviews" (Article 5.4).

Draft Regulations – a Formal Blacklist?

Currently, the CNIPA maintains an informal internal blacklist of bad faith applicants whose applications will automatically be rejected. Whilst brand owners can write to the CNIPA to report bad faith applicants, there is no official procedure or transparency in the current blacklisting process, which is entirely subject to the CNIPA's discretion.

New provisions have been introduced in the Draft Regulations in an attempt to codify the blacklisting process. Article 7 of the Draft Regulations expressly allows any organization or individual to report an abnormal application, and requires for such reports to be dealt with in a timely manner in accordance with the law. Article 5.1 of the Draft Regulations empowers the CNIPA to penalize applicants of abnormal applications by publishing their information on the CNIPA website, which would effectively amount to a formal, publicly accessible blacklist. Nevertheless, the Draft Regulations do not specifically set out a formal blacklisting procedure and much is still left to the CNIPA's discretion. It remains to be seen whether implementing rules or guidelines will be issued to further clarify the process.

In addition to being blacklisted on the CNIPA's website, abnormal filers may also be penalized pursuant to Article 5.1 of the Draft Regulations by having their information entered into the National Credit Information Sharing Platform, which would allow other government departments to impose disciplinary measures.

Conclusion

The introduction of the 2019 Amendment and the Draft Regulations clearly signal the authorities' renewed efforts to target bad faith trade mark applications in China. One lingering concern is whether the new provisions, such as the intent to use requirement under the 2019 Amendment, will have the unintended consequence of blocking applications filed by legitimate brand owners for defensive purposes whilst allowing bad faith applications to proceed as long as the applicant can show some use. Much will depend on how the CNIPA exercises its discretion when applying these new provisions, and it remains to be seen whether these measures will ultimately have the desired effect of curbing bad faith applications.

This article was originally published on AllAboutIPMayer Brown's blog on relevant developments in the fields of intellectual property and unfair competition law.

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Mayer Brown is a global legal services provider comprising legal practices that are separate entities (the "Mayer Brown Practices"). The Mayer Brown Practices are: Mayer Brown LLP and Mayer Brown Europe – Brussels LLP, both limited liability partnerships established in Illinois USA; Mayer Brown International LLP, a limited liability partnership incorporated in England and Wales (authorized and regulated by the Solicitors Regulation Authority and registered in England and Wales number OC 303359); Mayer Brown, a SELAS established in France; Mayer Brown JSM, a Hong Kong partnership and its associated entities in Asia; and Tauil & Chequer Advogados, a Brazilian law partnership with which Mayer Brown is associated. "Mayer Brown" and the Mayer Brown logo are the trademarks of the Mayer Brown Practices in their respective jurisdictions.

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This Mayer Brown article provides information and comments on legal issues and developments of interest. The foregoing is not a comprehensive treatment of the subject matter covered and is not intended to provide legal advice. Readers should seek specific legal advice before taking any action with respect to the matters discussed herein.

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