China’s trademark reforms, two years on (sponsored discussion)
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China’s trademark reforms, two years on (sponsored discussion)

Two years ago, China introduced major amendments to the Trademark Law. Lily Changxin Lei and Wen Zhong of Liu Shen & Associates analyze the impact they have had

The latest Trademark Law made several changes designed to speed up the examination and opposition procedure. Have the changes achieved the goal so far?

Lily Changxin Lei: According to my far-from-being-exhaustive research, at least more than 80% of cases (trademark applications, non-use cancellations, oppositions, review applications on rejection/opposition decision/cancellation and etc. filed after May 1 2014) have been examined and concluded within the statutory time limit. Yet it is noticed and assumed that of the 80% and more concluded cases, extensions of time (varying from three months to six months depending on the nature of the case) have been applied a lot. According to the law, where special circumstances arise, extension of time can be applied upon approval of the competent authorities.

Trademark applicants or their agents will not be able to know if and for what reason an extension of time is applied. They may only make assumptions based on the time when they receive Office Actions (Notification of refusal, Notice of publication, Review decision, opposition decision etc). According to the law, the time for responding to a Notice of Amendment, supplementing materials, pending other procedures etc shall not be counted in. It is noticed that time for waiting in the queue for handling at the Trademark Office Mail Room, which can be months, will not be counted in either.

Multi-class application is one of the key changes in the revised Law. What are the pros and cons of multi-class application? What issues need to be considered when agents file trade marks in multi-class?

Lily Changxin Lei: From where the trademark applicants stand, the cons of a multi-class application are way more than the pros.

Cons: a multi-class application does not save money at all, as opposed to class-by-class applications. The official fee for filing, assigning, recording change, licensing renewing etc is still charged class-by-class.

Division is only possible between the rejected part and the approved part when the application is partially rejected by the Trademark Office. This means it is not possible to divide an application (or later a registration ) anyway in case of assignment and renewal.

When division happens in the case of a partial rejection, it takes money and time. Meanwhile such division will delay the process of the approved part of the ­application.

When a Notice of Amendment (for instance on non-standard description of goods) happens, handling the Notice will delay the process of the whole application. Even worse, a mis-handling of the Notice may result in invalidation of the filing date of the whole application. The non-problematic part will be seriously affected by the problematic part.

Pros: It is easy to manage the portfolio since only one registration number and date is allocated, especially for companies with a large trademark portfolio.

Weighing the pros and cons, we would advise our clients to stick to single-class applications. Although it is a trend to do multi-class applications, we think it better to wait until further complementary rules and systems on charging and division of cases come into being.

Should an applicant insist on filing a multi-class application, the agent had better have an overview of the trademark and descriptions of goods in a way to solve evident problems prior to filing to avoid entanglement affecting the whole application.

New provisions have been added to tackle trade mark squatting. What has been the result so far?

Wen Zhong: Speaking of newly added anti-squatting provisions, we are mainly talking about Articles 15 (against agent’s or representative’s application), 58 (protecting prior use) and 59 (prohibiting third party’s use as trade name of the other’s registered/unregistered trademark). Acting as practicing attorney on IP contentious works, we have this conception that China trademark examining attorneys and judges have taken a comparatively hard line against trademark squatting ever since the amendments to the Trademark Law.

For example, within the past year and a half, we have received quite a few winning decisions from CTMO or TRAB where the similarity of goods and marks may be not as well-established as the bad faith of squatting would be, but we won the cases, and we have seen quite often even not-commonly applied Articles 10 and 44 are applied now to reject obvious squatting applications. Our deep inside feeling is that if a trace of squatting can be detected, then the application may face many more difficulties in approval; we contribute this to the spirit of the new law which stressed the prohibition against trademark squatting.

Moreover, from our unofficial source of IP case data, and from May 1 2014 to date, we noticed the following court precedents:

1) in relation to Article 58, there have been 10 court judgments found nation-wide made after the effective date of the new Trademark Law, where the plaintiff claimed on prior use right of the registered trademark, and half of the claims were supported by courts at different levels, up to the high court level. The unsupported claims are basically due to insufficient proof of the alleged prior use.

2) in relation to Article 59, 24 court judgments have been found and the support rate is 75% protecting the registered or unregistered well-known trademarks from being used as trade name by the other party.

3) in relation to Article 59 (agent’s application), five precedents are spotted, and the supporting rate is 100%. We think the said unofficial data may say something in support of our aforementioned feelings about the result of the new provisions against trademark squatting.

How does the revised law determine a bad-faith registration?

Lily Changxin Lei: In practice, it has been difficult to prove bad faith, which usually expresses itself in malicious intention, ill purpose and possible harm. Malicious intention and ill purpose may have some overlap. If evidence can be produced to prove some of the following, there may be a case for claiming bad-faith:

•    The registrant has access to the real owner’s trademark through previous negotiation/cooperation/employment/etc;

•    The registrant has no intention or capacity to use the trademark at all;

•    The registrant offers to assign or license the trademark at unreasonable high price;

•    The registrant uses the registration to force the real trademark owner into commercial cooperation;

•    The registrant fakes information/document obtaining the registration;

•    The real owner’s trademark has been used in Mainland China and has established a reputation.

In addition to the above, evidence proving the following may also help:

•    Registrant is in the same industry as the real owner;

•    Goods of the parties have the same sales channel, geographic coverage etc;

•    Registrant has registered large amount of trademarks that obviously belong to someone else.

•    Taking advantage of famed (or well-known) marks, confusing the public and disordering fair competition and market are possible harms.

Does the latest Trademark Law bring any changes to the area of well-known trade marks?

Lily Changxin Lei: In my understanding, the amended Trademark Law is meant to bring the well-known mark back to its original and appropriate status and position. “Well-known mark”, being a category in the Law, means to be entitled to some special, wider and stronger legal protection against unfair competition. It should not be an honor. Also, well-known marks do not necessarily refer to high quality.

Previously, due to misinterpretation and inappropriate practice, some trademark owners made every effort and tried everything, including faking cases, to get their trademarks designated as well-known marks. Now the amended Law forbids using the title of well-known marks in commercial activities and even imposes an administrative fine upon such use. Most trademark owners believe it fair, as nobody shall be allowed to use the well-known marks as an honorable title in propaganda, and everybody has an equal chance to fair competition with their own products and services. In this regard, the amended Law does not have any large impact on trademark owners.

On the other hand, however, as well-known marks are entitled to special, wider and stronger protection, a large number of trademark owners are still quite interested in their marks being recognised as well-known marks, though under current circumstances, administrative authorities and courts having jurisdiction on recognizing well-known marks are super cautious in well-known mark recognition. Unless in an extremely necessary cases, the authorities and courts would rather apply to other Law articles or finding other facts to reach the same judgment than deciding that a mark is well-known.

Do trade mark holders get sufficient compensation as expected, after the revised Trademark Law increased damages granted in infringement cases?

Wen Zhong: We think that the trademark holders now have the reason to expect a reasonable compensation determined by the China courts for trademark infringement. The Beijing IP Court is the first set-up IP court specialized in hearing IP cases, and is the base of the China Supreme Court for establishing a nation-wide Case-Guidance System. So the judgments made by the Beijing IP Court are of reference value to the general compensation level after the Trademark Law was revised in this regard, or at least can give the indication on how it will go in the future.

Take 2015 statistics for instance: the Beijing IP Court accepted and heard six trademark infringement cases in 2015, and the total compensation requested amounts to ¥4.74 million ($750,000); on average, ¥790,000 requested for each case. Among those, ¥3.72 million are supported by the court, and on average ¥620,000 for each. Compensation supporting rate is 78.48%. What is more, compensation requests were fully supported in three cases and in one of the three cases, the amount of compensation requested was ¥3 million which was fully supported by the court, too.

It is the trademark infringement case that gets the highest average compensation amount and highest supporting rate with respect to all the IP-related infringement cases being heard by the Beijing IP Court. So, to our review, the compensation level is increased considerably compared with the past; for ease of reference, from 2008 to 2012, a well-recognized academic institute had made a survey on the compensation level of trademark infringement litigations; the result revealed that among 488 cases litigated before the court, the average compensation amount was only 62,000, while the average request was 330,000.

Lily Changxin Lei

Lily Changxin Lei, attorney-at-law, is a partner of Liu, Shen & Associates, heading the firm’s trademark ­practice.

Lily obtained her BA degree from the Institute of International Relations, majoring English literature and international relations. She also has a Certificate of Incompletion of graduate from Beijing Foreign studies University on United Nation subjects. Part of her legal training is on a Young Chinese lawyer’s training Scheme in London University, Clifford Chance and Chambers of Christopher Morcom QC.

Lily’s expertise includes advising corporate clients on trademark filing strategy, trademark portfolio management, providing full–range service on trademark prosecution, including clearance search, trademark filing, trademark licensing and assignment, opposition and invalidation, administration litigation and the like. She advises US, European and Japanese companies on trademark protection strategies in China. She also advises Chinese companies on trademark protection in China and abroad, through national, Madrid and EU registration channels to obtain greatest protection at the least cost. As a team leader, she supervises the practice of the firm’s trademark team.

Lily makes presentations on INTA Forum and seminars sponsored by corporate clients and firm clients, on trademark issues in China.

Wen Zhong

Wen Zhong is an attorney at law and partner of Liu, Shen & Associates. He has two Masters of-law degrees, from Law school of Liaoning University in China, and Law School of Toin University of Yokohama in Japan as a Government-financed student, and up to 2016, he has handled more than 550 trademark opposition and invalidation cases, over 30 trademark infringement cases, about 10 copyright infringement cases, over 15 unfair competition cases, and jointly handled several patent infringement cases, etc. The companies he has represented are mostly multi-national companies such as Realnetworks, ABB, BASF,LEGO and Schneider Electric, etc.

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