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How China's new trade mark law will improve protection

China’s amended Trademark Law is expected to be enacted in 2013: Jinchen Song and Jiayan Xie of DEQI Intellectual Property Law Corporation explain how it will improve IP protection

The Trademark Law of the People's Republic of China was first adopted in 1982, and amended twice, in 1993 and 2001, to meet domestic and international requirements. The Trademark Law has played a significant role in protecting trade mark rights, maintaining fair market competition, and promoting the development of China's economy and society. However, it is increasingly unable to meet the practical needs of the country. The complicated registration procedures, the increasing number of bad faith registrations, the serious unfair competition, the rampant trade mark infringement and the weak protection on trade mark rights are often criticised by trade mark owners. In order to implement a national IP strategy, making full use of the trade mark system, and better serve the economy and society, the third amendment of the Trademark Law is quite necessary.

Progress of the third amendment

The third amendment was launched in 2003 by the State Administration for Industry and Commerce (SAIC). After numerous investigations, solicitation of opinions and repeated revisions, the SAIC submitted the draft amendment to the Legal Affairs Office under the State Council (SCLAO) for review in November 2009.

After further amendments, in September 2011, the SCLAO published the Draft Amendment for public comments. In October 2012, the SCLAO submitted the Draft to the National People's Congress (NPC) for review.

In December 2012, the NPC issued the Draft Amendment for public comments. It is expected that the Trademark Law after the third amendment will be enacted in 2013.

Contents of the third amendment

There have been several versions of the Draft Amendment, made by the SAIC, the SCLAO and the NPC respectively. Here we talk about the amendments mainly based on the version of the NPC (the Draft).

Further conveniences for trade mark registration

Sound is permitted to be registered as a trade mark. A single colour is also registrable if it obtains distinctiveness through use.

Multi-class applications are allowable, which is obviously convenient for applicants who often have a large number of filings.

The examiner's report is introduced to allow the applicant to amend the application documents or provide necessary explanations for the application. This is very helpful to prevent direct rejection of the application and thereby quicken the registration procedure.

The deadline for filing appeals of rejection is extended from 15 days to 30 days. The deadline for filing lawsuits against the administrative decision of punishment is extended from 15 days to two months. These extensions would be warmly welcomed by overseas applicants, as they would have more time to consider and to prepare the subsequent procedures.

E-filing for trade mark applications is allowable. E-filings are already received by the Trademark Office (the CTMO). The Draft confirms this in law and it is expected to push further improvements in E-filing procedures.

Maintenance of fair market competition

The Draft regulates "the well-known trade mark should be recognised, upon the request of the involving party, as a fact that is necessarily to be recognised to deal with the specific trade mark dispute". This amendment confirms the principle of passive protection for case-specific recognition, that has already been used by the Chinese administrative authorities and courts in handling trade mark disputes involving well-known trade marks. It is expected that through this amendment, the owner of the well-known trade mark could be prohibited from advertising the mark improperly and the unfair competition in this respect would be reduced.

To further fight against bad faith registration, the Draft prohibits the registration of a mark that is already used by others on similar goods or services if the applicant clearly knows the existence of the mark through contract, business or other relationships.

Under the current laws, if the owner of priority rights wants to accuse the pre-emptive registration of others, he shall provide evidence to prove simultaneously that "the mark is already used by him in mainland China" and "the mark has obtained certain influence through his use". In practice this is usually difficult for the owners, especially for those who only have advertising and sales but no products in China, as the standards for "certain influence" in China are very difficult to meet. According to the Draft, if the owner of the prior right has evidence that the later applicant clearly knew the mark through relationship of contracts, business or other, it is not necessary for him to prove the "certain influence" of his mark, which is helpful in reducing the burden of proof on the legitimate owners.

In practice, there are many other bad faith pre-emptive registrations, which could not be addressed by the Draft Amendment this time.

If the owner of priority rights has already used his mark in China and achieved a certain influence for this mark, the later applicant should know this mark, even if the two parties had no contracts, business dealings or other relationships as described in the Draft. Under current practice, the administrative authorities and the courts could directly presume the registration by the later applicant is "a preemption by unfair means" referred to in article 31 of the Trademark Law, so the owner of the priority rights does not necessarily have to adduce evidences of the "unfair means" or "bad faith" of the infringer. Regretfully, the Draft does not confirm this.

If a mark is highly distinctive and has obtained certain influence in China, whether another party's registration of dissimilar goods or services will create confusion is of great concern to trade mark owners. Under current law, the cross-class protection is only given to well-known trade marks, but it is widely known that the recognition of well-known trade marks in China is rather strict and expensive. Many marks are very distinctive and enjoy a high degree of fame in China, but they are not as well known as required, or the evidence is insufficient to prove it. For these marks, many cases show that confusion might also be caused even they are used on dissimilar goods or services. To protect such trade marks, the earlier Drafts made by the SAIC and the SCLAO have clauses to prohibit the preemptive registration on dissimilar goods or services. But the Draft by the NPC deleted these clauses, and it is hoped that they will be reconsidered in due course.

There are also some marks that have not been used in China, or the use of them is not widespread enough, but their fame and influence has reached China through advertising or other activities. Preemptive filing of these marks is also a serious problem in practice. The Draft failed to mention this either.

There is still good news for actions against bad faith registration. The Draft introduces a new clause: the application for registration, and use, of a trade mark shall comply with the principle of good faith. Although the definition of good faith is not specifically given in the Draft, and could not be used solely as the base to oppose or invalidate bad faith registration, it is a general principle and may to be used together with other provisions to deter any registration which is obviously in bad faith but could not been addressed in current laws.

The Draft prohibits the use of others' trade marks as a trade name. Under current law, such use would constitute a violation of China's Anti-Unfair Competition Law. In order to provide a connection in the Trademark Law, the Draft regulates that where the use of another's well-known trade mark or registered trade mark causes confusion among consumers and constitutes unfair competition, the use should be regulated according to provisions in the Anti-Unfair Competition Law.

The Draft allows the legitimate use of the earlier mark after its preemption. According to the provision, if, before the application of the mark, another party has already used the mark on similar goods or services, the later registrant is not entitled to prohibit the use of the earlier owner within the original scope, but is entitled to ask additional elements to differ from each other.

According to the current law, if the owner of the priority right could not cancel or invalidate the preemptive filing, he might be accused of trade mark infringement by the later registrant or blackmailed for trade mark transfer. The new provision allows the earlier owner to continue the use within the original scope, which will ensure the normal operation of the owner and reduce their damages and risks. On the other hand, such an amendment will help the owner from being robbed by infringers for high transfer fees or licensing fees.

Simplified opposition procedure

Under the current law, any person may file an opposition against a published trade mark for any reason, which causes a large number of bad faith oppositions. Meanwhile, a four-level examination for Chinese oppositions, namely the CTMO's ruling, the Trademark Review and Adjudication Board's (TRAB) review, and two instances of court trial, makes the opposition procedure extremely complicated and time consuming.

To address the problem, the Draft limits the opponent to owners of prior rights and interested parties, and limits the opposition reasons to possible damage to priority rights. On the other hand, the Draft regulates that, after examining the opposition, the CTMO could make a decision of approving or rejecting the registration of the mark. For approving the registration, the opponent cannot file an appeal with the TRAB, but should file an invalidation request with the TRAB after the registration if he is dissatisfied with the decision. For rejecting the registration, the opposed party could file an appeal with the TRAB, and later file a lawsuit if he is dissatisfied with its decision.

Compared with the earlier versions of the amendment, the Draft by the NPC is retrogressive in optimising opposition procedure. Different procedures to remedy decisions of the CTMO violate the principle of legal supervision over all administrative proceedings, and it would also create inequities of procedural rights to the two sides.

The earlier Draft by the SAIC proposed the oppositions to be field directly with the TRAB. If the involving party is not satisfied with the decision of the TRAB, he is entitled to file a lawsuit with the court. This proposal will cancel one level of administrative examination and largely improve the efficiency for trade mark right confirmation, so it is generally agreed by the theory circle and judicial circle. Besides optimising the opposition procedure and reducing the cost to the trade mark owners, the elimination of opposition in the CTMO provides an infinitely more workable procedure.

Severe punishment for trade mark infringement

The act of "intentionally providing and facilitating conditions for infringement and assisting another to infringe" should constitute trade mark infringement that should be liable for infringement.

Punitive damages could be awarded if the infringing act is serious, up to three times the claimed loss, the illegal profit or the royalty. The maximum statutory damages are increased from Rmb500,000 ($80,167) to Rmb1 million.

A party infringing another's trade mark right twice within five years would be given severer penalties.

If necessary, the courts could order the infringer to provide the accounts and materials, which would lighten the burden of proof on the infringed party.

Gaps and uncertainty

The Draft Amendment to the Trademark Law introduces many changes intended to further aid applicants, attack bad faith registrations, and boost the protection of trade mark rights, but these changes are not as significant as expected, nor as in earlier versions. On the issues of opposition procedure, protection of unregistered trade marks, and marks of OEM products, the Draft still leaves gaps and uncertainty. Hopefully, the final amended Law and the following amended Implementing Regulations may address these questions further.

Jinchen Song

Jinchen Song is the co-founder of DEQI Intellectual Property Law Cooperation. He obtained his BS in applied physics from Beijing Technology University and his LLB in IP law from the Law School of Beijing University. He began his IP practice in 1998 and joined DEQI as a partner in 2001.

Jinchen practices Chinese IP law in patent prosecution, counselling and litigation, specialising in patent procurement, patent reexamination, appeal and invalidation proceedings, and in counselling on patent validity, patentability and infringement issues. He is also experienced in patent management and IPR licensing.

Jinchen is an active participating member of the All China Patent Attorney's Association. He is also one of the contributing authors to the China supplement of Software Patents Worldwide.

Jiayan Xie

Jiayan Xie is a trade mark attorney at DEQI Intellectual Property Law Corporation. She obtained her LLB degree in international relations from Renmin University of China and received IP training in the United States in 2006.

Jiayan has practiced Intellectual Property law for 10 years. She mainly focuses on trade mark prosecution, counselling, enforcement and other matters relating to trade mark protection. She has extensive experience in trade mark clearance search, registration, opposition and appeal, and represents international and multi-national corporations in prosecution, cancellation and litigation proceedings. Her expertise also extends to the protection of copyright and domain names.


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