A revision to the Trademark Law of the People's Republic of China ("Trademark Law") was adopted at the 4th Session of the Standing Committee of the Twelfth National People's Congress of the People's Republic of China on August 30, 2013. The revised Trademark Law will come into effect on May 1, 2014.

This latest version, which we will refer to as the "2013 Trademark Law", is essentially the third version of an original Trademark Law adopted in 1982, and follows earlier revisions adopted in 1993 and 2001. The 2013 Trademark Law was adopted after the circulation of numerous draft versions for public comment beginning in 2009, and is thus the product of a long process of debate and compromise among government stakeholders, industry, legal academia, and the legal profession in the People's Republic of China ("PRC").

The 2013 Trademark Law is comprised of eight Chapters, and it contains 73 Articles, as compared with 64 Articles in the 2001 Trademark Law. It attempts to address a number of issues that were either not explicitly or not sufficiently addressed in the 2001 Trademark Law, including the registration of sound marks, the problem of bad faith filings, the administration and sanction of rogue trademark agents, etc. Many of the processes introduced in this version of the Trademark Law, such as the introduction of an explanation and correction procedure in the trademark application process, as well as the introduction of electronic and multi-class filings, and the imposition of time limits on the review of matters before the Trademark Office and the Trademark Review and Appeals Board, will require further elaboration in Trademark Law Implementing Regulations, which should be issued just before or around the time the 2013 Trademark Law comes into effect.

We set out below what we believe to be the more significant changes in the 2013 Trademark Law. Our comments on the relevant changes are presented in roughly the same order they appear in the text, with references to the relevant Chapters and Articles in the 2013 Trademark Law.

General Provisions

1) Positive Obligation of Registration and Use of Trademarks in Good Faith

Article 7 provides that "[a]pplications for registration and use of trademarks shall comply with the principles of honesty and good faith." The addition of a positive obligation of good faith should indeed be helpful in addressing the persistent problem of pirate filings. It is noteworthy, however, that this provision is not listed as a possible grounds for opposition in Article 33 (see below), so it is unclear what practical effect this provision will have in the context of trademark oppositions going forward.

2) Expansion of Signs that Can be Registered as Trademarks

Article 8 addresses the types of signs that can be registered as trademarks. This Article does not limit the signs that can be registered as trademarks to those that are "visually perceptible" as was the case in the 2001 Trademark Law. It also explicitly expands the range of trademarks that can be the subject of a registration to include sound marks.

3) Clarifications Regarding the Determination and Use of Well-Known Trademarks

Articles 13 and 14 confirm the existing practice of restricting well-known trademark recognition to cases in which such protection is requested and appropriate in light of the specific facts of the case. Article 14 explicitly provides that well-known protection for famous marks can be asserted in the context of cases before the Trademark Office ("TMO"), Trademark Review and Appeals Board ("TRAB"), and before the Administrations for Industry and Commerce ("AICs") and People's Courts.

Also noteworthy is language in the final paragraph of Article 14 that prohibits references to the description "well-known trademark (驰名商标)" on goods, packaging/containers for goods, and in advertising and other business activities. The practice of referring to trademarks as "well-known" for advertising purposes has been widespread, particularly for Chinese brands, and this practice is now subject to sanction by the AICs. Article 53 provides that for violations of this paragraph of Article 14, the AICs are to issue a rectification order and a fine of RMB 100,000.

4) Unauthorized Trademark Filings by Agents or Representatives

Article 15 expands the prohibition of the unauthorized registration of trademarks by agents or representatives of their principal's trademarks. It includes a new paragraph that prohibits the filing of trademarks that are the same or similar to those of a third party when there is a contractual or business relationship between the applicant and the third party. The prohibition also applies if there has been "any other relationship" with the applicant in which the applicant was made aware of the existence of the third party's trademark.

5) Curbing the Actions of Rogue Trademark Agents

Article 19 provides that trademark agencies shall conduct their activities according to the principles of honesty and good faith, and to keep confidential any trade secrets made known by its principal. Agents are also required to explicitly inform its principal if there are circumstances in which an application for registration is unregistrable under the Trademark Law, or if the agent knows or should know that an application for registration is a preemptive registration of a third-party trademark, or would otherwise fall under the purview of Article 15 described immediately above.

Article 20 provides for a self-regulation system for the trademark agency industry, and the disciplining of members that violate the scope of industry regulations.

Applications for Trademark Registration

6) Multi-Class Applications and Electronic Filings

Article 22 of the 2013 Trademark Law introduces the practice of multi-class filings for individual trademarks and electronic filing. These are indeed welcome changes to the practice under earlier versions of the Trademark Law.

Examination and Approval of Trademark Registrations

7) Shortened Time Period for Examination of Trademark Applications

Before the passage of the 2013 Trademark Law, the trademark examination process has routinely taken from 12-18 months. Article 28 of the 2013 Trademark Law provides that the TMO must now complete examination on absolute and relative grounds "within nine months of the date on which the application documents are received."

8) Explanation and Correction Procedure

Article 29 introduces the practice of issuing an explanation or correction request when the TMO believes that the content of a trademark application requires explanation or correction. This procedure appears to be similar to "examination opinions" that were part of examination practice prior to the 2001 Trademark Law, and the reintroduction of a similar practice should ideally curb the current TMO practice of automatically rejecting applications for non-traditional trademarks, and reduce the number of rejection appeals that go before the TRAB. We would expect to see further clarifications of the explanation and correction procedure in the forthcoming Implementing Regulations.

9) Grounds for Opposition

Article 33 provides that the owner of a pre-existing right or any interested party can oppose a preliminarily approved trademark on the basis of Article 13 (2) (similar to an unregistered well-known trademark for identical or similar goods), Article 13 (3) (similar to a registered well-known trademark for dissimilar goods), Article 15 (trademarks filed by agents or representatives without authorization), Article 16 (1) (misleading geographical indication), Article 30 (same or similar to prior filed trademark), Article 31 (first used of two or more trademarks filed on the same day), and Article 32 (prejudice existing priority right or preemptive registration of trademark with a certain degree of influence). In addition, anyone can file an opposition against a preliminarily approved trademark that is believed to violate Article 10 (signs prohibited to be used as trademarks), Article 11 (signs that are not to be registered as trademarks), or Article 12 (registrability of three-dimensional trademarks).

According to Article 35, the TMO will have twelve months to issue a decision on an opposition. If the TMO needs additional time for special circumstances, it can obtain an extension of an additional six months upon approval by the State Administration for Industry and Commerce ("SAIC").

If the TMO decides to approve the registration, the mark will become registered. If the opponent is dissatisfied with the TMO's decision, it can file a request with the TRAB to invalidate the mark in accordance with Article 44 or Article 45 (discussed below). Under the 2001 Trademark Law, the opponent could appeal the TMO's decision to the TRAB, and the mark would not obtain registration until after the appeal process had run its course.

The new procedure for opposed trademarks that are approved for registration by the TMO is a double-edged sword. While it will be appreciated by the applicants of opposed trademarks that were filed in good faith, it could also be a boon for the applicants of third party trademarks filed in bad faith. In relation to these bad faith applicants, they would obtain perfected and exclusive rights to use the subject trademark in the PRC for the period in which it takes the interested third party to successfully invalidate the mark in accordance with Article 44 or Article 45.

If the TMO does not approve the registration, and the applicant is dissatisfied with the decision, it can file an application for review before the TRAB within fifteen days of receipt of the TMO decision. The TRAB must complete its review and issue a decision within twelve months of receipt of the application for review. If the TRAB needs additional time for special circumstances, it can obtain an extension of an additional six months upon approval by the SAIC. If the applicant is dissatisfied with the TRAB decision, it can file suit with a People's Court within thirty days of receipt of the notification. The People's Court shall then notify the opponent to participate in the suit as a third party.

The TRAB can suspend its examination in the process of handling a review in accordance with Article 35 when the necessity of determining relevant prior rights depends on the result of another case that is pending with a People's Court or an administrative authority. The TRAB should resume the examination procedure when the cause for the suspension has been eliminated.

According to Article 36, if an opposition is ultimately held untenable and registration approval granted, the time in which the applicant grants registered rights to the relevant trademark is counted from the date of expiration of the three-month period following gazettal of the mark. The rights obtained cannot be invoked against a third party that used the same or similar mark in the interim period, but damages caused to the trademark registrant by the user's bad faith can be claimed.

10) Trademark Application Review

Article 34 provides that a trademark applicant has 15 days to apply for the review of a rejection of a trademark application to the TRAB, and that the TRAB must make a decision on the review within nine months of receipt of the appeal submission. If the TRAB needs additional time for special circumstances, it can obtain an extension of an additional three months upon approval by the SAIC. If the applicant is dissatisfied with the TRAB decision, it can further appeal the matter to the People's Court within thirty days of receipt of the review decision.

Renewal, Modification, Assignment and Licensing of Registered Trademarks

11) Renewals Process and Grace Periods

Article 40 provides that renewal formalities should be handled within twelve months of the expiration of the validity period of the relevant trademark (as opposed to six months under the 2001 Trademark Law). If a renewal application is not filed during this period, a six month grace period can be obtained.

12) Assignment Formalities and Transfer of Similar Marks

Article 42 provides that the assignee shall guarantee the quality of the goods for which an assigned mark is used. This article also codifies the current TMO practice of requiring that a trademark registrant assign other trademarks that are the same or similar to an assigned trademark covering identical or similar goods in order to avoid registry conflicts. The TMO is also not to approve assignments that would lead to confusion or "other adverse effects."

13) Trademark License Recordals and Implications of Non-Recordal on Third-Parties

Article 43, the provision that requires the license of trademarks to be recorded with the TMO for the record, now stipulates that a trademark license that is not recorded cannot be the basis of an action against a third party acting in good faith.

Announcement of the Invalidity of Registered Trademarks

14) Invalidation of Trademarks on the Basis of Improper Registration

The first paragraph of Article 44 tracks the language of first paragraph of Article 41 of the 2001 Trademark Law. It provides that the Trademark Office can invalidate trademarks on its own accord, and that individuals or business units can petition the TRAB to invalidate registered trademarks that violate provisions of Article 10 (signs prohibited to be used as trademarks), Article 11 (signs that are not to be registered as trademarks), or Article 12 (registrability of three-dimensional trademarks), or that were obtained by deceptive or improper means.

Invalidation actions under Article 44 are not limited by any specified statute of limitations.

The second and third paragraphs of Article 44 introduce time-limits for the invalidation actions set out above. For trademarks that are invalidated by the TMO, the concerned party can apply for review of the decision to the TRAB within fifteen days of receipt of the notification. The TRAB is required to issue a decision within nine months of receipt of the review petition. If the time limit requires extension for special circumstances, the review period can be extended three months upon approval by the SAIC. A TRAB decision can be further appealed to a People's Court within thirty days of receipt of notification.

The same time periods will also apply to invalidation petitions filed by individuals or business units that petition the TRAB to invalidate trademarks in accordance with the provisions of Article 44. If the TRAB rules to invalidate a trademark, and the concerned party timely appeals the decision to the People's Court, the People's Court will notify the relevant other party to participate in the suit as a third party defendant.

15) Invalidation of Trademarks on Other Grounds

Article 45 begins by mimicking the language of the second paragraph of Article 41 of the 2001 Trademark Law. It provides that the owner of a pre-existing right or any interested party can request the TRAB to invalidate a registered trademark on the basis of Article 13 (2) (similar to an unregistered well-known trademark for identical or similar goods), Article 13 (3) (similar to a registered well-known trademark for dissimilar goods), Article 15 (trademarks filed by agents or representatives without authorization), Article 16 (1) (misleading geographical indication), Article 30 (same or similar to prior filed trademark), Article 31 (first used of two or more trademarks filed on the same day), and Article 32 (prejudice existing priority right or preemptive registration of trademark with a certain degree of influence). Invalidation petitions on these grounds must be made within five years of the date of registration of the relevant trademark. The owners of well-known trademarks will not be subject to this five-year limit if the challenged mark was filed in bad faith.

For invalidation petitions filed under Article 45, the TRAB is required to issue a decision within twelve months of receipt of the petition. If the time limit requires extension for special circumstances, the review period can be extended six months upon approval by the SAIC. A TRAB decision can be further appealed to a People's Court within thirty days of receipt of notification. The People's Court will notify the relevant other party to participate in the suit as a third party defendant.

The TRAB can suspend the examination of an invalidation action filed in accordance with Article 45 when the necessity of determining asserted prior rights depends on the result of another case pending before an administrative authority or People's Court. The TRAB should resume its examination when the cause for the suspension is eliminated.

16) The Effect of Invalidation Rulings

Article 47 of the 2013 Trademark Law provides that if a trademark is ruled invalid in accordance with Article 44 or Article 45, the exclusive right to use the trademark is deemed not to have existed at all. Any such ruling will have no retroactive effect on any prior written judgment, ruling or mediation agreement on trademark infringement, or any trademark assignment or license contract performed prior to the declaration of invalidity. Nevertheless, any damages caused by others by the trademark registrant's bad faith are to be compensated, and a full or partial refund of compensation for trademark infringement, trademark transfer fees or royalties may be made if failure to do so would be obviously unfair.

Administration of Trademark Use

17) Trademark Use Defined

Article 48 defines "trademark use" as including use on goods, the packaging of goods, containers, transactional documents, as well as use in advertising, exhibitions and other business activities, that distinguish the source of goods.

18)Altered Trademarks, Non-Use Cancellations, Cancellation of Registrations for Trademarks that Become Generic

Article 49 provides that trademark owners shall not unilaterally alter registered trademarks. In such cases, the AICs are to order rectification within a specified period, and the TMO can cancel the registration of such trademarks when use is not appropriately rectified.

Registrations for trademarks can also be cancelled by a petition to the TMO by any individual or business unit if they have not been used for three consecutive years without legitimate reasons, or if the mark has become the generic name for designated goods. Cancellation actions filed under these grounds are to be reviewed by the TMO within nine months of receipt of a cancellation petition. The time limit can be extended for three months in special circumstances and upon approval by the SAIC.

Article 54 provides that a concerned party can appeal a decision by the TMO to cancel or not to cancel a trademark to the TRAB within fifteen days of receipt of the notification. The TRAB is to issue a decision within nine months of receipt of a petition. An extension of three months can be obtained in special circumstances and upon approval by the SAIC. If the concerned party is dissatisfied with the TRAB decision, it may file suit with a People's Court within thirty days of receipt of the decision.

The TMO is required to gazette a decision to cancel a trademark under these provisions, and according to Article 55, the exclusive right to the registered trademark terminates on the date of gazettal.

19) Handling of Cases Involving Statutory Requirement for Use of Registered Trademarks

Article 6 provides that goods in the regulated industries that are required to bear registered trademarks cannot be sold into the market unless and until the relevant trademarks are registered. Article 51 stipulates that in cases involving violations of Article 6, the AICs can order an application to be filed within a specified period of time, and can impose a fine of not more than 20% of illegal revenue if it is in excess of RMB 50,000, or a fine of no more than RMB 10,000 if there is no illegal revenue, or revenue is otherwise less than RMB 50,000.

20) Passing Off an Unregistered Trademark as Registered

Article 52 provides that in cases involving the passing off of an unregistered trademark as registered, or use of a unregistered trademark in violation of Article 10, the AICs should order cessation of the acts in question, order rectification within a specified period, and may circulate a notice or issue a fine. The fine issued should not exceed 20% of illegal revenue if revenue is in excess of RMB 50,000, or no more than RMB 10,000 if there is no illegal revenue, or revenue is otherwise less than RMB 50,000.

Protection of the Exclusive Right to Use a Registered Trademark

21) Trademark Infringements

Article 57 is an elaboration on Article 52 of the 2001 Trademark Law, and it enumerates the acts that constitute infringement of the exclusive rights to a registered trademark. Significant changes include the following:

  • It distinguishes (1) the act of using an identical trademark for the same or similar goods without authorization (counterfeiting) from (2) the act of using a similar trademark on the same or similar goods without authorization when such an act would "easily lead to confusion". This provision thus explicitly introduces the likelihood of confusion into infringement analysis for cases that do not involve obvious counterfeits, which is consistent with the current practice of the People's Courts.
  • It directly addresses the issue of secondary liability for trademark infringement by adding the "intentional provision of facilitating conditions" and "helping others to carry out acts of infringing the exclusive right to use a trademark" under the purview of trademark infringement. According to this provision, secondary liability for infringement clearly requires volitional knowledge on the part of the facilitator.

22) Infringing Enterprise Names

Article 58 addresses cases in which a third party uses a registered trademark or unregistered well-known trademark as a trade name in an enterprise name when such use is liable to mislead the public "and constitutes unfair competition". According to this provision, such acts are to be handled under the PRC Unfair Competition Law.

It is unclear under this provision whether all factual scenarios entailing the unauthorized use of a registered trademark as the trade name in a Chinese enterprise name are to be handled under the PRC Unfair Competition Law. Under the 2001 Trademark Law and Article 53 of the of the Implementing Regulations of that Trademark Law, the holders of well-known marks could file petitions with the local AICs for cancellation of registered enterprise names. There is no mechanism under the current PRC Unfair Competition Law to petition the cancellation of enterprise names, so it is unclear whether this provision will be an improvement on current practice in relation to enterprise name infringements.

23) Fair Use

Article 59 provides that the owner of a registered trademark cannot prohibit the fair use of generic names, designs, the model numbers of goods, and place names, or expressions of the quality, primary raw materials, functions, intended purposes, weight, quantity, or other characteristics of covered goods.

Article 59 also provides that the owners of registered trademarks cannot prohibit others from making fair use of the shape of three dimensional marks resulting from the nature of the goods, the shape that is necessary to achieve a technical result, and the shape that adds substantial value to the goods.

In addition, if a third party had used a trademark prior the filing of an application for an identical or similar trademark by a trademark registrant, and that trademark had acquired a certain degree of influence, the owner of the registered trademark cannot prohibit the earlier user from continuing to use the trademark for the original scope of use, but it may request the addition of an appropriate distinguishing sign.

24) Resolution of Infringement Disputes, Statutory Fines, and Mediation

Article 60 replaces Article 53 of the 2001 Trademark Law. As with the 2001 Trademark Law, it provides that if the AICs can order immediate cessation of infringing acts, confiscation and destruction of infringing goods and the tools for producing infringing goods and counterfeit labels, and may impose a fine. The fine imposed can be up to five times the amount of illegal business revenue if such revenue is RMB 50,000 or more, or a fine of up to RMB 250,000 if the illegal business revenue is less than RMB 50,000. If infringers conduct two or more acts of infringement, or there are "other serious circumstances" within a five-year period, a heavier punishment is to be imposed. These increased administrative fines are indeed a welcome change, and they should, in theory, increase the deterrent effect of AIC enforcement actions against infringers.

Article 60 also provides that when a seller of infringing goods is unaware that the goods were infringing, the seller will be ordered to cease all sales and not otherwise subject to sanction by the AICs, provided that there is evidence that the goods were lawfully obtained, and information provided on the source of goods.

In disputes over the amount of damages for infringement, the concerned parties can request the AICs to mediate, or can file suit with the People's Courts. If AIC mediation or implementation of a mediation agreement were to fail, the parties can file suit with the People's Courts in accordance with the PRC Civil Procedure Law.

25) AIC Investigations of Trademark Infringement

Article 62 sets out the powers of the AICs when investigating and handling cases of suspected infringement. The first two paragraphs essentially track the language of the 2001 Trademark Law, but Article 62 adds a third paragraph that provides for the suspension of AIC investigative and enforcement proceedings when a right owner simultaneously files suit with a People's Court on the same facts. The AIC is to resume or conclude its investigations once the court proceedings are concluded, and it is assumed that the AIC's handling of the case will take account of the court's judgment or resolution of the related civil suit.

26) Damages for Infringement of a Registered Trademark

Article 63 replaces Article 56 of the 2001 Trademark Law and sets out revised guidelines for calculating damages for infringement. As with the 2001 Trademark Law, the amount of damages for infringement should be determined by actual losses suffered to the trademark holder, and if this is difficult to determine, then in accordance with the amount of benefits gained, and may be calculated on the basis of a reasonable multiple of the royalties for the registered trademark. If there is evidence of bad faith, and if the infringement involves "serious circumstances," then the infringer can be liable for up to three-times the damages amount. The amount of damages should also include reasonable expenses incurred by the rights holder in stopping the infringement.

According to the second paragraph of Article 63, a People's Court can order an infringer to provide account books and materials relating to the infringement for purposes of determining the amount of damages. If the infringer were to refuse to cooperate, or were to provide fabricated evidence, then the amount of damages can be determined on the basis of the evidence provided by the rights holder.

If it is difficult to determine the amount of the actual losses of the rights holder, the benefits gained by the infringer, or the royalties for the registered trademark, the People's Court handling the matter can award statutory damages of up to RMB 3,000,000, a considerable increase over the statutory damages ceiling of RMB 500,000 under Article 56 of the 2001 Trademark Law.

27) Mitigation of Damages

If the owner of a registered trademark claims damages for infringement, Article 64 provides that that the alleged infringer can submit a claim that the trademark owner has not used the registered trademark for the previous three years. The People's Court can then request the trademark owner to submit evidence of actual use during the target period, and if it is unable to meet its burden of proof, or is unable to submit evidence that it has suffered any other loss as a result of the infringement, the alleged infringer will not be liable for damages.

In addition, Article 64 provides that the sellers of infringing goods will not be liable for damages if the seller had no knowledge that the goods were infringing, and provided that there is evidence that the goods were lawfully obtained, and information is submitted to the court confirming the source of goods.

28) Sanctions Against Trademark Agencies

According to Article 68, trademark agencies are subject to sanction by the AICs if they are engaged in forging or altering documents or signatures for trademark-related matters, defaming other trademark agencies or engaging in other improper actions, or that otherwise engage in acts violating Article 19 (3) or (4) (failure to inform its principal when a trademark is unregistrable, or filing trademark applications that are not the subject of its agency services). The AICs will order rectification within a certain period of time, issue a warning, and may issue a fine between RMB 10,000 to 100,000s against the agency. In addition, the AIC's can issue a warning and fine of RMB 5,000 to 50,000 against any agency personnel directly in charge of the relevant trademark matter, and other responsible personnel. Criminal liability can also be pursued in appropriate circumstances.

The AICs will also record sanctions against a trademark agency in its credit files, and in serious cases, the TRAB can decide to cease accepting any cases handled by the relevant agency, and to publish its decision to do so.

In addition, acts conducted in bad faith can be subject to civil liability if they cause harm to the lawful rights and interests of the principal. Disciplinary action by the trademark agency industry organization may be imposed as well.

29) Restrictions on the Activities of Government Employees

Articles 69, 70 and 71 provide that the employees of State organs engaged in trademark registration, administration and review must act impartially, have integrity, etc., and cannot engage the trademark agency business or any activities associated with the production of, or dealing in goods. AICs must establish internal systems for supervision of its enforcement activities, and the employees of State organs engaged in trademark registration, administration and review shall be subject to administrative or criminal sanction for acts that violate the law.

Other Noteworthy Changes to the New Law

30) Res Judicata

It is also noteworthy that the 2013 Trademark Law does not include a provision similar to that of Article 42 of the 2001 Trademark Law. Article 42 of the 2001 Trademark Law provided that if a trademark was subject to an opposition ruling, the mark could not be the subject of any further challenge on the same facts and grounds. It is indeed possible that such res judicata language will appear in forthcoming Implementing Regulations, or will otherwise characterize the practice before the TMO and the TRAB, but at this point, lodging invalidation/cancellation actions on the same grounds of a failed opposition may be a possibility, at least in theory.

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.