Introduction

Rampant trade mark squatting has been a recurring problem in the PRC, despite the Chinese government's efforts in recent years to crack down on such behaviour through legislative and regulatory measures, such as the amendment to the Trade Mark Law (“2019 Amendment”) and Several Measures on Regulating Applications to Register Trade Marks (“Measures”), both introduced in 2019, the Special Action Plan for Combatting Bad Faith Trade Mark Hijacking and Measures for Collaborative Governance of Violations and Offences in the Patent and Trade Mark Agency Industry in 2021, and more recently, the updated Guidelines for Trade Mark Examination and Review, which came into effect on 1 January 2022 (“Guidelines”). Whilst these legislative and regulatory measures introduced welcome changes to the trade mark registration system, including empowering the China National Intellectual Property Administration (“CNIPA”) to proactively reject applications based on bad faith during substantive examination and the introduction of a blacklist for trade mark agencies that engage or facilitate in bad faith behaviour, ultimately these changes did little to reduce the number of bad faith filings submitted by squatters.

On 13 January 2023, the CNIPA published a draft amendment of the Trade Mark Law for public consultation until 27 February 2023 (“2023 Draft Amendment”). The 2023 Draft Amendment (in its current form) introduces sweeping revisions to the Trade Mark Law, expanding the original 73 articles to 101 articles and substantially amending 45 articles, leaving only 27 existing articles unchanged. The proposed revisions to the Trade Mark Law have been made with the express objective of targeting trade mark squatting and other bad faith filing behaviour. Some of the most significant changes are discussed below.

New Definition of Bad Faith Filing Behaviour

The 2019 Amendment introduced Article 4, which empowered the CNIPA to reject an application filed in “bad faith without intent to use” during substantive examination. What constituted “bad faith without intent to use” had been left undefined, although some guidance was subsequently provided in the Measures and the Guidelines.

The 2023 Draft Amendment includes a newly added Article 22, which specifies four types of filing behaviour for which bad faith will be presumed, together with one catch-all provision:

  1. applying to register a large number of trade mark without intent to use, disrupting the order of the trade mark registration system;
  2. applying to register trade marks through deception or other improper means
  3. applying to register trade marks that are detrimental to the interests of the State, the public interest, or that have other significant adverse effects;
  4. contravening Articles 18 (pre-emptive registration of a well-known trade mark), 19 (pre-emptive registration by agents, representatives or other related parties without authorisation) and 23 (pre-emptive registration obtained by improper means of a trade mark that has attained a certain degree of influence) of the 2023 Draft Amendment, intentionally damaging the legitimate rights or interests of others, or obtaining improper benefits; and
  5. engaging in other bad faith filing behaviour.

Mandatory Transfer as an Alternative Remedy to Invalidation

Under the current law, if a brand owner discovers that a third party has registered their mark in bad faith, their only recourse is to apply to invalidate the registration. Under Articles 45 to 47 of the 2023 Draft Amendment, a brand owner can request the transfer of a hijacked trade mark registration (similar to the remedy provided in domain name disputes) as an alternative to invalidation if the mark under dispute is:

  1. a pre-emptive registration of the brand owner's well-known trade mark;
  2. a pre-emptive registration filed by the brand owner's agents, representatives or other related party without authorisation; or
  3. a pre-emptive registration obtained by unfair means of the brand owner's trade mark that has attained a certain degree of influence.

The most important advantage conferred by this new remedy is that it will allow a brand owner to obtain a registration with an early filing date, thus obviating the need for the brand owner to file their own application and deal with intervening third party marks. Under the current regime, even if a brand owner successfully invalidates a copycat registration, their problems may not be over – there could be any number of intervening third party marks that predate the brand owner's own application, and invalidating one copycat registration might only clear the way for the intervening marks.

Administrative Fines and Other Penalties

The 2023 Draft Amendment also includes proposed revisions relating to administrative penalties and fines that may be imposed for bad faith behaviour.

Article 68(4) of the current Trade Mark Law provides that administrative sanctions such as a warning or a fine may be imposed for trade mark applications filed in bad faith. This provision has been amended under Article 67 of the 2023 Draft Amendment, which provides that, where an application is filed in bad faith in contravention of the new Article 22, administrative warnings or fines up to RMB50,000 may be imposed, and for more serious infractions, fines of up to RMB250,000 may be imposed and any illegal gains may be confiscated.

The 2023 Draft Amendment also provides that, where a brand owner suffers loss due to a bad faith filing under the new Article 22(4), the brand owner may file a civil action against the bad faith filer, and the damages awarded should amount to at least the reasonable expenses incurred by the brand owner to deal with the bad faith filing (the new Article 83). For bad faith filings under the new Article 22(3) (filings that are detrimental to the interests of the State or the public interest), the procuratorate may also take court action against the bad faith filer.

New Obligations to Show Use

As trade mark filing fees in the PRC are relatively low, trade mark squatters will often file large numbers of trade marks in the hopes of attracting potential buyers at a later date, with no intention of actively using or maintaining the marks in the meantime. To target such behaviour, new obligations to show use have been included in the 2023 Draft Amendment. Article 5 of the 2023 Draft Amendment expressly states that a party should only apply to register a trade mark that it uses or undertakes to use the mark on its goods or services. The new Article 61 of the 2023 Draft Amendment goes further and requires registrants to file a declaration of use every five years after registration in order to maintain their trade mark registrations.

The 2023 Draft Amendment represents a departure from the current regime with regard to use – under the current law, a registrant is not required to prove use of their mark unless a third party tries to cancel the registration on the basis of non-use. The new Article 61 imposes a positive obligation on registrants show use every five years to prevent their registrations from being cancelled by the CNIPA.

Restrictions on Repeated Filings

A common issue encountered by brand owners when dealing with bad faith filers is repeated filings. A brand owner will successfully oppose, invalidate or cancel a copycat mark only to discover that the bad faith filer has refiled one or more applications for the same mark. The 2023 Draft Amendment introduces new restrictions on repeated filings of a mark for the same goods / services. Article 14 of the 2023 Draft Amendment provides that, subject to other provisions, a party may only hold one registration for a mark covering the same goods or services. Article 21 of the 2023 Draft Amendment further provides that, where a party's mark has been deregistered, cancelled or invalidated, the same party may not refile a mark for the same goods / services within one year. This prohibition is subject to a number of exceptions, such as, amongst other circumstances, in cases where an earlier registration was removed for failure to renew or failure to defend a non-use cancellation action, provided such failure was for reasons outside the applicant's control, or failure to file a declaration of use provided the mark has been in actual use.

New Grounds for Cancellation

Under the current law, a party may apply to cancel another party's trade mark registration on the basis of non-use for a consecutive three-year period, or if the trade mark has become generic in respect of the designated goods or services. Article 49 of the 2023 Draft Amendment introduces several additional grounds for cancellation, including for example, cases where use of the registered mark causes confusion amongst the relevant public in respect of the quality or other characteristics of the relevant goods or their place of origin; or where use or the exercise of the exclusive rights conferred by a registered mark will cause serious harm to the public interest and have significant adverse effects. Article 49 also provides that in certain circumstances (such as where there is serious harm to the public interest), the CNIPA may make an ex officio decision to cancel a registered mark.

Procedural Changes

Some of the proposed revisions in the 2023 Draft Amendment are intended to streamline and expedite the trade mark registration process. Article 36 of the 2023 Draft Amendment shortens the opposition period from three months to two months. The opposition process will now also be shortened – under the current regime, an opponent is unable to contest an unfavourable opposition decision, but an applicant whose mark has been successfully opposed may contest the decision by filing a review (and if the review is unsuccessful, further contest the decision by filing a court appeal). Article 39 of the 2023 Draft Amendment removes the applicant's right to file a review – an applicant unhappy with an opposition decision will need to appeal to the courts.

Online Use of Trade Marks

The 2023 Draft Amendment also addresses the use of trade marks online. For example, Article 59 expressly includes use on the internet as a valid form of trade mark use; Article 72 provides that unauthorised use in e-commerce of a mark identical or similar to another party's registered trade mark and will likely mislead the public may constitute trade mark infringement.

Conclusion

The 2023 Draft Amendment would, if enacted, result in the substantial changes to the current trade mark registration regime. The introduction of a positive obligation to submit regular declarations of use in order to maintain a registration should help remove a significant number of registrations filed by trade mark squatters, and reduce the need for brand owners to file non-use cancellation actions against unused marks. On the flip side, the new obligation will increase the administrative burden and maintenance costs for legitimate trade mark owners. The restrictions on repeated filings for the same mark should also deter bad faith filers from repeatedly refiling copycat marks, although it could also prevent brand owners from refiling marks for legitimate reasons – the latter issue could to addressed by further elaborating on the circumstances in which repeated filings may be allowed.

Given the extent of the proposed changes, it will be interesting to see how many of the draft amendments will ultimately be adopted. It seems likely that at least some of the proposals will be substantially altered or deleted before enactment.

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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.