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China – Starting 2013 In Good Form: A Look At The Latest Amendments To Trademark Law.

29 January, 2013

 

Legal News & Analysis – Asia Pacific – China – Intellectual Property

 

The most recent fourth draft amendments to China’s Trademark Law were published on December 28, 2012 (“December Draft“). The public has been invited to submit comments until January 31, 2013. We will keep you apprised of further developments.


Meanwhile, the more notable changes are outlined in this article.


1. Scope of registerable marks expanded


While the current law is limited to visual signs, sound marks have been added to the scope of registrable marks. In addition, a section on single colour marks with distinctive features has been added, which provides that single colours used on goods or packages may be registered as trademarks where they have acquired distinctive features through use and become readily identifiable compared to other goods.

 

Scents and moving images have not been included in the scope of registerable trademarks in the December Draft as opposed to the June 2009 and March 2010 drafts.

 

2. Protection of well-known and famous marks


(a) Improper well-known trademark recognition reasonably restricted


The December Draft has included a provision which states that well-known marks should only be recognized where necessary. Even though this has been stipulated in a Supreme People’s Court judicial interpretation for several years, it is helpful that it is explicitly stated here. Hopefully this addition will stop certain abuses of wellknown trademark recognition, especially those
obtained by improper means by certain domestic brand owners.


(b) Use of well-known trademark as enterprise name


The December Draft explicitly states that if a right owner’s well-known trademark or registered trademark is used as an enterprise name and results in misleading consumers, it will constitute unfair competition and shall be handled in accordance with the PRC Anti-unfair Competition Law. This article explicitly provides the legal basis for the right holder to fight against these types of infringers.


(c) Recognition of famous marks deleted


Recognition of famous marks, which was first included in the September 2011 draft, has now been removed. Some brand owners feel that this is a positive change since it minimizes potential local protection and confusion regarding treatment of well-known trademarks versus locally recognised famous trademarks which have existed for a number of years.


3. Good faith enhanced


(a) For trademark applications


The good faith provision in relation to trademark applications (Article 9), which was removed from the September 2011 draft, is back in the December Draft. This clause states that applications shall be made based on honesty and good faith. How, or if, it could provide practical assistance to fight hijackers is not completely clear but at least the clause is there.

 

(b) For trademark agents


The December Draft also mentions that trademark agencies shall observe the principle of honesty and good faith, but removes the option to invoke this principle as a ground for invalidation or opposition of a hijacked trademark.


(c) For damages


A new provision (Article 46) states that any damages caused by the bad faith of a trademark registrant shall be compensated. This could at least assist in deterring hijackers.


4. Trademark hijacking more difficult


An application for trademark registration will be rejected when the trademark applied for is identical or similar to another person’s trademark, the applicant has a contractual or business relationship, or any other relationship with the said person, and the latter raises an opposition. Though the wording arguably does not extend far enough, the section should at least become an added tool for brand owners in terms of dealing with trademark hi-jacking by business partners such as distributors and manufacturers.

 

5. The trademark application process


(a) Multi-class and E-filings


The December Draft affirms that multi-class applications will be provided for via e-filing or hard copy.


(b)Opportunity to amend an application


An opportunity to amend and change the trademark application within 30 days from the date of the issuance of the “Examiner’s Advice” from the CTMO has been added. This is an additional procedure during the trademark examination process which will aid brand owners in getting approval for applications that might otherwise have been rejected.


6. Time limit for appeals extended


Appeal to the Trademark Review and Adjudication Board (“TRAB“) against a refusal or invalidation decision rendered by the China Trademark Office (“CTMO“) is extended from the previous 15 days to 30 days. Appeal to the court against a decision imposing fines by an administrative department for industry and commerce (“AIC“) is extended from the previous 15 days to two months.


7. Oppositions and invalidation procedure changed


(a)Opponent’s identity


Only a pre-existing right owner or an interested party, instead of any party has the right to oppose a preliminarily approval of a trademark. The definition of what constitutes “prior rights” and “aninterested party” is an issue that will need further clarification. This amendment can potentially make it harder for brand owners to file oppositions.


(b) CTMO’s decision not appealable for the opposing party


The December Draft provides that the China Trade Mark Office (CTMO) can directly decide in an opposition whether to approve the registration. A mark will proceed to registration if the opposition fails. If the opposing party does not agree with the decision, it will need to apply for invalidation to the Trademark Review and Adjudication Board (TRAB), instead of delaying the prosecution process by filing appeals. However, the applicant can himself appeal against an unfavourable opposition decision via TRAB. This is one of the changes that could increase and arguably encourage bad faith and hijacking actions. In addition, there has been discussion that the inability of an opponent to appeal the CTMO’s decision contradicts the basic premise of China’s administrative laws.


(c) Responsibility for certain invalidations assigned to the CTMO


If a registered trademark has become a generic name of the designated goods, a party may apply to the CTMO instead of to the TRAB for invalidation.

(d) Trademark invalidation date clarified

Invalidated registered trademarks shall be published by the CTMO, and the right of exclusive use of the registered trademark is terminated on the date of publication, instead of the effective date of the decision.


8. Trademark infringement acts expanded


The definition of infringement has been expanded by providing that intentionally facilitating trademark infringements, or helping others to conduct activities which infringe the exclusive trademark rights of others, is regarded as infringement. This expands the scope to arguably include contributory infringement.


9. Conflict between courts and AIC


During AIC enforcement, if there is any dispute over the trademark rights or the right owner concurrently files for civil trademark infringement litigation, the AIC can stay the case. It provides the legal basis to avoid potential conflicts between AIC decisions and court judgments. However, it may also result in delaying administrative enforcement.


10. Calculation of fines and damages


(a) Illegal turnover

 

fine of no more than 20% of the illegal turnover may be imposed for acts such as passing off a registered trademark or offering goods of poor quality which deceive consumers into believing that it is of high quality. Where no illegal turnover exists or the illegal turnover is no more than RMB 50,000, a fine no more than RMB10,000 may be imposed.


(b) Punitive compensation


If the trademark infringement with bad faith is serious, the compensation should be 1-3 times of the actual losses suffered by the right holder, or the infringement gains, or the license fees.


(c) Statutory damages increased


If the court cannot determine the damages based on losses, gains or license fees, the highest statutory damage will be RMB 1 million, which is an increase from RMB500,000 under the current law.


11. Three-years’ use required


In case the defendant argues that the registered trademark was not actually used, the right holder must provide evidence to prove actual use within the last three years. If the right holder fails in proving the actual losses and use suffered through the infringement, the defendant will not bear the liability to compensate. This is a highly debated clause and will affect the filing and enforcement strategy of most clients. It will also highlight once again the debated issue regarding what constitutes use of a trademark in China.


12. Burden of proof partly reduced


More power is given to the Peoples’ Courts to request materials from the infringer when determining the compensation amount. Once infringement is established, and if the right holder has provided the necessary proof, the court can order the infringer to provide books and materials relevant to the infringement, in order to determine the amount of compensation. If the infringer fails to provide or provides false books or materials, the People’s Court may determine the amount of compensation by referencing the evidence provided by the right holder. In summary, the December Draft aims to simplify the application process, maintain fair competition, and enhance protection of trademark rights by strengthening enforcement and good faith provisions. It also tries to add protection for well-known marks. Some of the clauses are beneficial to IP owners whereas others seem to diverge from traditional trade mark doctrine. It remains to be seen if or when there is a fifth draft after the public consultation. We will continue to follow the developments in this area closely and report any updates.


 

 

 
For further information, please contact:
 
Deanna Wong, Partner, Hogan Lovells
 
Rae Yan, Partner, Hogan Lovells
 
Feng Zhen, Partner, Hogan Lovells
 
William Fisher, Partner, Hogan Lovells
 
Henry Wheare, Partner, Hogan Lovells
 
Gabriela Kennedy, Partner, Hogan Lovells
 

 

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