1. What are the criteria for obtaining a well-known trademark in China?
China issued the revised Well-Known Mark Recognition and Protection Provisions (the "Revised Provisions") in early July 2014. The Revised Provisions provide helpful guidance on the nature and types of evidence to be submitted in support of an application for recognition as a well-known trademark.
According to Article 13 of the PRC Trademark Law, in order to obtain a well-known trademark in China, you will have to show that a third party:•
- Without your authorization, uses a trademark that is identical or similar to your well-known trademark that is not registered in China on identical or similar goods and is likely to cause public confusion; or
- Without your authorization, uses a trademark that is identical or similar to your well-known trademark that is registered in China on dissimilar goods and is likely to cause public confusion so that your interests are likely to be impaired.
Also, it is required to provide the following evidence as stated in Article 9 of the Revised Provisions in order to show that the trademark is well recognized among the relevant public:
- Documents showing the degree of knowledge or recognition of the trademark in the relevant sector of the public, e.g. a market survey;
- Documents showing the duration of the use of the trademark, including those related to the history and scope of the use and registration of the trademark, e.g. the certificate of registration;
- Documents showing the duration, extent and geographical area of promotion of the trademark, e.g. promotional materials;
- Documents showing the record of successful enforcement of the trademark rights, such as documents certifying that the trademark was once protected as a well-known trademark in China or other countries; and
- Other evidence certifying that the trademark is well-known, including materials in the past three years in respect of the output, sales volume, sales income, profits and taxes and sales regions of the principal goods to which the trademark applies.
2. How to protect unregistered trademark by claiming personal name right under the PRC Trademark Law?
Only a natural living person can claim personal name right under Article 32 of the PRC Trademark Law. The trademark in question should be identical to the claimant's name, or a well-established translation of it.
This can be illustrated by the famous Michael Jordan case, in which the Supreme People's Court has laid down a threefold test:
- The particular name should have obtained a certain reputation in China and be known to the relevant public;
- The particular name should refer to an individual; and
- There should be a stable, corresponding relationship between the particular name and the individual.
The Supreme People's Court held that the Chinese character name "乔丹" fulfilled the test. It was demonstrated that "乔丹" has been widely known as a designation for Jordan among the relevant Chinese public in the field of sports and basketball. As a result, the Court ruled in favour of Jordan and held that registering "乔丹" as a trademark without the prior approval of Jordan constituted infringement of Jordan's right to his personal name.
The Michael Jordan case affirms that name right is a prior existing right under the PRC Trademark Law and that a registered trademark shall not infringe other's right to use his name. Nevertheless, the extent of the right to use a name shall be determined on a case-by-case basis.
3. How to protect trademarks and other IP rights against online counterfeiting?
(i) Systematic monitoring of online platforms
Monitor global and China-based e-commerce platforms, search engines and social media sites on a regular basis. In order to crack down on online counterfeiting, repeat offenders and hot targets should be consistently monitored and tougher penalties should be imposed.
Reporting infringing listings on the most popular e-commerce platforms is straightforward. Sites such as Taobao and Alibaba.com have efficient and sophisticated take down mechanisms online. The smaller platforms however may require a more direct and individualized approach.
(ii) Cooperation with other victim brands
Working in conjunction with other victim brands to combat counterfeiting may also be effective. This could take the form of joint investigations of serial infringers or a division of labour to monitor and attack counterfeiters appearing on certain platforms. The concerted effort of the victim brands can help defray costs and maximize the impact of the anti-counterfeiting operation.
(iii) Using civil litigation
Civil litigation is useful as a means to obtain a public judgment so as to publicly warn counterfeiters of the ramifications of counterfeits. There are provisions for court-ordered evidence preservation which allow you to gather useful information for a lawsuit. You can also file an asset preservation request targeting the infringer's assets, e.g. through pre-action seizure of funds held in the infringer's bank account, which would give the infringer greater incentive to reach a settlement.
4. Does OEM use constitute trademark use in China?
"OEM" refers to "Original Equipment Manufacturing" which means that a foreign purchasing party owns a trademark or has the legitimate right to use the trademark in jurisdictions outside China, and a Chinese manufacturer is paid to manufacture goods within China and label the goods with the trademark. The below are the leading cases, which affirms the position that it does not constitute trademark infringement.
On 8 April 2018, the Supreme People's Court has rendered a retrial judgment on the "Dong Feng" case. The Court affirmed that OEM use of a trademark on goods does not constitute trademark infringement once again after the PRETUL case in 2015. In the "Dong Feng" case., the plaintiff's trademark "Dong Feng" was recognized as a well-known trademark in China. The defendant, i.e. the domestic manufacturer, exported goods bearing the "Dong Feng" mark to Indonesia under the instructions of an Indonesian consignor who registered an identical mark in Indonesia in 1987.
In the second instance decision, the Jiangsu High Court held the defendant liable for trademark infringement, ruling that the defendant had failed to exercise reasonable care in verifying the consignor's trademark rights, given the well-known status of the "Dong Feng" mark in China and the bad faith on the part of the Indonesian consignor.
The defendant applied for re-trial, in which the Supreme People's Court overturned the lower court's judgment and held that:-
- The essential attribute of a trademark lies in its primary function of distinguishing the source of goods or services. The act of using a trademark that is not intended to serve as a badge of origin will unlikely cause confusion as to the source of the goods or services. In the present case, all products were exported to Indonesia and would not cause confusion to consumers in the Chinese market; and
- The reasonable duty of care should be deemed discharged when the domestic manufacturer has verified the trademark rights of the foreign purchaser. Since OEM is a popular and legitimate form of international trade, unless the domestic manufacturer is found to have breached its duty of reasonable care after accepting the entrustment and that its act of entrusted processing has resulted in material harm to the right of the domestic trademark holder, the domestic manufacturer will unlikely be held liable for trademark infringement.
The decision of the Court is consistent with its ruling in the PRETUL case, affirming that the OEM use of trademark in general does not amount to trademark infringement.
5. What are the main considerations for trademark filing in China?
(i) Clearance search before filing
It is essential to conduct a pre-application clearance search to assess the inherent registrability of the trademark. Does the mark violate any statutory prohibitions? Is the mark distinctive and non-descriptive? Since China adopts the "first-to-file" system, i.e. whoever files first gets the right, you should always conduct searches to determine whether there are any potentially conflicting marks.
(ii) Direct filing vs. Madrid Protocol
There are two ways to register your trademark: (1) designating China under a Madrid Protocol application; or (2) filing a national trademark application directly with the China Trade Mark Office (CTMO).
Filing through the Madrid system may seem to be a more cost-effective method as it allows trademark owners to obtain protection in a number of countries under a single application. This "one-size-fits-all" method may sound attractive as it seems simple and flexible. However, the Madrid system is not flawless. There may be problems in enforcing your rights. Upon registration, the only formal certificate for the trademark registered is the one issued by WIPO as China does not issue a separate registration certificate. Yet, trademark owners are often required to produce a copy of the registration certificate issued by the CTMO. It generally takes around 3-5 months to obtain the certificate from the CTMO, which may cause delay in the enforcement of IP rights in China.
Further, the strict requirement in the description of specifications in China may mean a smaller scope of protection than initially intended. Local counsel advice is recommended before filing.
(iii) Classes/descriptions of goods and services
It is now possible to file a multi-class application under the PRC Trademark Law. However, filing a multi-class application is no cheaper than filing multiple single-class applications. CTMO charges official fees by class and no discount is offered if the filing under different classes comes under a single application, unlike in most jurisdictions. Also, multi-class application is more likely to attract opposition and delay.
Similar to most Western jurisdictions, the Chinese filing system is based on the 11th version of the Nice Classification. In China, each class is further divided into different subclasses, which contain a list of "standard items" of goods and services. It is generally preferable to file applications based on descriptions of goods and services that are deemed "standard" under the published index. Failing to comply with such standard may result in objections or even total rejection of the application.
It is worth-noting that in most cases, goods or the services falling in different subclasses are not regarded as similar, which implies that similar or identical marks can be registered within the same class as their specifications may fall within different subclasses. Therefore, it is highly advisable to seek prior advice on specifications before filing so as to maximize the protection of your mark by covering all related sub-classes.
(iv)Marks to be filed(v) The use requirement
China permits the filing of a wide range of marks, including sounds, 3D marks and colour combinations.
The lack of use requirement allows right holders to register their marks to cover a wider range of goods and services than would be allowed in most other jurisdictions. The trademark may only be subject to cancellation by third party if it has not been used within the continuous period of three years at any point after the date of registration.
(vi) Chinese-language trademarks
It is advised to register:
- The original English or foreign trademark; and
- The Chinese transliteration or translation of the original trademark.
It is crucial to register the Chinese transliteration or translation of the original trademark in order to prevent a third party from registering the Chinese version of the trademark preemptively and to facilitate the promotion of the foreign brand among Chinese customers.
6. What are the strategies in dealing with bad faith trademark filing in China?
There are various articles in the PRC Trademark Law that deal with bad faith trademark filing:
- Article 7: trademark application and use should follow the "good faith principle"
- Article 15: Where an agent or representative registers, in its own name, a trademark of one of its principals without authorization, and the principal objects to the registration, the trademark shall not be registered and shall be prohibited from use
- Article 32: trademark application may not infringe another person's prior rights and no applicant may register a trademark that is already in use by another person by improper means
- Article 44: a trademark would be rendered invalid if its registration was obtained by fraudulent or other illegitimate means
Strategies to remove the bad faith filing:
- Before the applied-for mark is registered, you should file an opposition against it. However, if the right holder has no prior trademark registrations in China, and does not have a history of sales in China, the chance of success of the opposition will not be optimistic;
- After the applied-for mark is registered, you should file an application for non-use cancellation after the mark has been registered for three years; or
- You should file an application for invalidation within five years from the date of registration of the mark. You will have to prove the well-known status of the mark in case the application is filed beyond the five-year period.
Key evidence for opposition and invalidation:
- Evidence of agency relationship, such as distributorship agreement between the right holder and the former agent;
- Evidence showing that the squatter had prior knowledge of the right holder's mark; and
- Evidence showing that the squatter had applied for a large number of trademarks similar or identical to the right holder's or others' trademarks.
Further, at the same time of taking action against the bad faith filing, IPR holders should remember to file new applications as soon as possible to avoid squatters from getting an earlier filing date.
7. What are the differences between the class specifications accepted by China Trade Mark Office (CTMO) in China and in other jurisdictions?
Similar to most jurisdictions, China adopts the 11th version of the Nice Classification. Each class is further divided into different subclasses, each of which contains a list of "standard items" of goods and services.
Under the latest policies of the CTMO, examiners are increasingly rejecting specifications that differ from the standard items, even if only in minor ways. Upon the issuance of a Notice of Correction by the CTMO, you will only be given one chance to respond by replacing the rejected descriptions with the standard items. CTMO's rejection of a request for approval of non-standard items may result in the total rejection of the application. Furthermore, under the current Trademark Law, the CTMO would only issue filing receipts after the specifications have been reviewed and approved. Hence, for applications which are rejected by the CTMO following non-acceptance of the non-standard items, they are technically deemed not to have been filed in the first place. It is therefore important to seek advice before filing.
Further, retail services in Class 35 (apart from retail or wholesale services in relation to various pharmaceutical, veterinary and sanitary preparations and medical supplies) are not accepted.
8. How to effectively use customs recordal system to combat counterfeiting in China?
Customs recordals can be used for registered trademarks, copyright and design patents.
The customs recordal system is useful as it stops both the import and export of infringing products. Recordals mean automatic monitoring across all parts of China and trademark owners need to act only when notified. In order to effectively utilize customs recordals, right holders should:
- Act on customs notifications expeditiously in order to seize infringing goods;
- Record trusted licensees with customs to prevent unnecessary delay; and
- Provide customs trainings to the customs officials regularly at the most used ports to familiarize customs officials with the products.
9. What are the latest guidelines for determining patent infringement in China?
On 20 April 2017, the Beijing People's High Court announced the Revision of the Guidelines for Determining Patent Infringement (the "Revised Guidelines"). The Revised Guidelines provide, for the first time, guidance on topics such as standard-essential patents (SEPs) and design patents covering graphic user interface (GUI).
(i) Standard essential patents (SEPs)
The Revised Guidelines give some directions as to how unsuccessful negotiation on licensing conditions and terms would affect the grant of injunctive relief against infringement of industrial, national or local standard essential patents.
According to Article 149, the court may not grant an injunction if the accused infringer has negotiated with the patentee for licensing of the SEP and no agreement was reached because of the patentee's willful violation of the FRAND obligations. Since the accused infringer has no obvious faults in the negotiation, the court generally shall not uphold the patentee's claim for injunctive relief.
Article 152 deals with cases in which both parties are not at obvious fault, i.e. the patentee is not in violation of its FRAND obligations and the accused infringer is not found to have made serious faults during the negotiation. It provides that the court generally should refuse the patentee's claim for an injunction if the accused infringer submits a guarantee not less than the amount of the royalty alleged.
The general principles for determining whether to grant injunctions in SEP infringement cases are set out in Iwncomm v Sony. The Beijing IP Court reiterated that both parties should negotiate in good faith in a SEP licensing negotiation. In deciding whether the accused infringer's use of SEP overrides the patentee's rights to seek injunctive relief, the court should consider the parties' fault during their negotiation. Specifically, an injunction request should be denied where no parties are at fault, or where the patentee is at fault. Where both parties are at fault, the decision of whether to grant an injunction would be based on an assessment of the degree of fault of both parties.
(ii) Design patents covering graphic user interface (GUI)
Article 77 of the Revision clarifies that when determining the infringement of a graphical user interface (GUI) related design patent, the court has to compare whether the product categories of the accused product and the design patent in question is the same or similar. The product category of a graphical user interface (GUI) related design patent shall be the product in which the GUI design is to be used.
In determining whether the design product and the accused product belong to the same or similar category, one should look at the function, purpose of use and use condition of the product incorporating the design pursuant to Article 78. The purpose of use of the product may be ascertained with reference to the following factors:
- The brief description of the design;
- The International Classification for Industrial Designs;
- The function of the product;
- The circumstances of sale; and
- The actual use of the product
The two products are regarded as belonging to the same or similar category if their functions, purposes of use and use conditions overlap.
10. What have been the most significant patent cases in recent years, and why?
Huawei v Samsung
This case concerns Samsung's alleged use of Huawei's technology without a license. Two main issues were considered by the court, namely (i) whether the patents owned by Huawei are essential to the 4G/LTE standard; and (ii) whether the FRAND obligations have been breached by either party during the negotiation process.
With regard to the first issue, the two patents asserted by Huawei were both held as essential to the 4G/LTE standard. Samsung has infringed Huawei's patent rights by manufacturing and selling 4G capable terminal products in China. Besides, the court held that Huawei's patent rights were not exhausted through being implemented in Qualcomm's products (which were then used in Samsung products) as Huawei did not grant any licence with regard to their 4G/LTE technology to Qualcomm. For the second issue, it was found that Samsung has obviously breached its FRAND obligations in the process whereas Huawei has made conscious efforts in resolving the conflict through negotiation and arbitration.
Consequently, the court ordered Samsung to immediately cease the manufacturing and sales of the infringing products. The court also indicated in the press release that this decision has a great significance on Shenzhen's "innovation-driven development strategy".
Panasonic v Zhuhai Jindao Electric Appliance Company Limited & Beijing Likang Fuya Commercial and Trading Co. Ltd
Kingdom, a beauty apparatus manufacturer in China, had been producing, selling and advertising facial vaporizers, which allegedly infringed Panasonic's patented product. Panasonic accordingly filed a design patent infringement suit with the Beijing IP Court against Kingdom and e-commerce company Li Kang, which sold the infringing products.
The Beijing IP Court ruled that Kingdom's products were similar to Panasonic's product and fell within the protection scope of Panasonic's patent. The court ordered the defendants to stop the infringement, ordered Kingdom to pay RMB 3 million (around USD 438,000) as damages and held the defendants jointly and severally liable for reasonable expenses of RMB 200,000 (around USD 29,200). The judgment and the amount of damages were upheld by the Beijing Higher People's Court.
This design patent infringement case is considered significant as the Beijing Higher People's Court fully accepted Panasonic's claim for damages, which amounted to RMB 3.2 million (around USD 467,500). This is significantly more than the statutory damages of RMB 1 million (around USD 146,000) under the Patent Law.
11. Is computer software patentable subject matter?
The rapid development of the computer software industry in China has prompted the amendment of the Guidelines for Patent Examination (the "Amended Guidelines"), in which the scope of patentable subject matter has been significantly broadened. Previously, patents could only be obtained for process claims or "means plus function" claims, in which the latter has been narrowly construed by examiners of the National Intellectual Property Administration of the PRC (CNIPA). Hence, patent protection for software-related inventions was very limited.
The Amended Guidelines have created a positive climate for patenting software-related inventions as patent holders can obtain more comprehensive protection for their software. The Amended Guidelines distinguishes between computer programs per se, which are non-patentable, and computer program-related inventions, which are patentable. Software claims such as a computer program product, a machine-readable medium, and an apparatus claim are eligible for patent protection. The scope of protection has also been broadened by replacing "functional modules" with "program modules". The component parts of an apparatus claim may contain not only hardware but also computer programs. Therefore, inventions are patentable even without the accompany hardware.
12. Can an individual design for the same product enforced to be filed in one application? What is the procedure to file multiple designs in one application?
In general, a design application shall be limited to one design only. However, according to Article 31 of the PRC Patent Law, it is possible to file multiple designs in one application in the following situations:
- Two or more similar designs of the same product; or
- Two or more designs which are incorporated in products belonging to the same class and being sold or used in set.
Similar designs of the same product
In the brief description of the designs claimed, one of the designs shall be indicated as the main design and the remaining designs shall be similar to the main design in order to meet the unity requirement. If normal consumers, through an overall observation, find that the difference between the main design and each of the remaining designs does not notably affect the overall visual effect of the product, the remaining designs would be deemed as similar to the main design. The number of similar designs contained in an application for design shall not exceed 10.
Designs of products in set
For designs of products in set, the products should have the same concept of design and should be customarily sold or used at the same time. Hence, when consumers use one product of the set, they should be able to associate it with the other product of the set, such as teapot and tea cup.
13. Can we amend claims and submit new evidence from reexamination?
In case the patent application is rejected after substantive examination, you may, within three months from the date of receipt of the rejection decision, file a request for reexamination with the Patent Re-examination Board (PRB). You must explain the causes and attach the relevant evidence in the request for reexamination.
In filing the request for reexamination or responding to the reexamination notification issued by PRB, you may amend the application documents, but the amendments are subject to the following limitations:
- The amendments shall be limited to addressing the defects indicated in the rejection decision or as pointed out by PRB;
- The amendments shall not go beyond the scope of disclosure contained in the initial application documents; and
- Amendments to the application for a patent for design shall not go beyond the scope of the original disclosure as shown in the initial drawings or photographs.
Therefore, it is not permitted to introduce a new technical solution which is not recorded in the initial descriptions or claims after the filing date. It is advisable to provide a comprehensive disclosure with a number of fallback positions in the initial application documents.
14. After the acceptance of reexamination, how many times would the panel issue a reexamination notification? What are the causes to terminate the reexamination procedure?
There is no limit as to the number of reexamination notifications issued by the panel. It should be noted that only one request for reexamination can be filed in response to each rejection decision. If the panel decides to uphold the rejection decision and the applicant is not satisfied with such decision, the applicant will have to resort to administrative lawsuit before the court.
According to Chapter 4 of the Implementing Regulations of the Patent Law of the PRC (the "Implementing Regulations"), the reexamination procedure can be terminated under the following situations:
- The request for reexamination does not comply with the prescribed form and the applicant fails to rectify it within the time limit fixed by the PRB;
- The request for reexamination does not comply with the provisions of the Patent Law as well as the Implementing Regulations and the applicant fails to submit his observations within a specified time limit upon the PRB's request; or
- The applicant withdraws the request for reexamination before the PRB renders its decision.
15. Why should you file copyright recordals in China?
Since China is a signatory to the Berne Convention, copyright arises automatically for any work created inside or outside China. Although copyright recordal is not mandatory in China, you may find it helpful in enforcing your rights.
(i)Prima facie proof of ownership
Copyright recordal serves as prima facie proof of ownership. In China, documentary evidence like copyright recordal certificates generally carries greater evidential weight. You may submit the recordal certificate as evidence to prove your prior rights in opposition or invalidation procedures. In contrast, a personal declaration of copyright ownership is not considered substantial evidence.
(ii)Prerequisite for enforcing your copyright in China
A copyright recordal certificate is helpful in enforcing IP rights either through administrative or judicial routes. Most China-based e-commerce platforms, e.g. Alibaba.com, adopt a notice-and-take-down mechanism, which requires complainants to prove IP rights before taking down infringing listings. Also, infringers are more likely to cooperate upon the receipt of an initial cease-and-desist letter if the complainant can provide a copyright recordal certificate.
The copyright recordal procedure is straightforward and inexpensive as the official fee for copyright application has been greatly reduced.
16. How to attack pirated marks based on copyright?
Copyright is a powerful tool for combating piracy in China. Article 32 of the PRC Trademark Law provides that "applications for trademark registration are not to infringe upon another's existing prior rights".
In order to assert prior copyrights under Article 32, you will have to adduce evidence to prove the following:
- Your work is original and can be reproduced in a tangible form;
- The infringing work is identical or substantially similar to your prior work;
- The person applying for the right had access or could have had access to your prior work; and
- The person applying for the right did not obtain your permission to register the mark.
This can be illustrated by the following case:
"The Adventures of Tintin" is a famous series of comic albums created by a Belgian cartoonist and the rights in association with the work have managed by Moulinsart. "The Adventures of Tintin" entered the Chinese market in 1998 and has become very popular among Chinese readers. In 2004, Moulinsart applied for the mark "Tintin" and "" in China in respect of goods and services in Classes 9, 16, 25, 28 and 41. In the same year, someone applied for the same mark "" (the "Contested Mark") in China in respect of goods in Class 18.
In 2013, Moulinsart brought an action against the Contested Mark claiming that the use of this mark constituted an infringement of Moulinsart's prior copyright. Moulinsart adduced the following evidence to support its claim:
- Trademark registrations of the marks "Tintin" and " ";
- Comic book of "The Adventures of Tintin" published by China Children's Press and Publication Group; and
- Notarized declaration on the ownership of copyright of "The Adventures of Tintin".
- Based on the evidence adduced by Moulinsart, TRAB held that:
- Moulinsart enjoyed copyright over "The Adventures of Tintin" prior to the application of the Contested Mark;
- The images on the Contested Mark are substantially similar to the characters in "The Adventures of Tintin";
- "The Adventures of Tintin" was published in China and has gained popularity prior to the application of the Contested Mark;
- The Contested Mark was a malicious imitation of the characters in "The Adventures of Tintin"; and
- The registration of the Contested Mark should be declared invalid.
17. How has the revised Anti-unfair Competition Law been implemented?
The revised Anti-unfair Competition Law (the "Revised AUCL") came into effect on 1 January 2018. It is made up of 5 chapters: General Provisions, Acts of Unfair Competition, and Investigations upon Engaging in Unfair Competition, Legal Responsibilities and Supplementary Provisions.
The Revised AUCL specifically prohibits the following 7 categories of unfair competition conducts:
- Acts of confusion which make people mistake one company's product for another company's product (Article 6);
- Commercial bribery (Article 7);
- False or misleading statements in promotions (Article 8);
- Trade secret infringements (Article 9);
- Unfair prizes-attached sale activities (Article 10);
- Commercial defamation (Article 11); and
- Internet-related unfair competition conducts (Article 12)
Article 6 of the Revised AUCL helps to fight against trademark squatters by providing that a business operator is prohibited from conducting any of the following acts of confusion to cause its products from being mistaken for others' products or from being mistaken as having a specific connection with others:
- Where the business operator uses, without authorization, logos identical with or similar to others' product names, packaging or decoration that has certain influence;
- Where the business operator uses, without authorization, others' enterprise names (including abbreviations, trade names, etc.), social organization names (including abbreviations, etc.) or names (including pen names, stage names, translated names, etc.) that have certain influence;
- Where the business operator uses, without authorization, the main parts of others' domain names, website names, web pages, etc. that have certain influence; or
- Other acts of confusion enough to cause its products from being mistaken for the products of others or from being mistaken as having specific connection with others.
In order to curb trademark squatting, harsher penalties have been imposed for violating Article 6. Article 18 stipulates the potential legal consequences, including a confiscation order in respect of the infringing commodities, an order to cease the infringing conducts and administrative fines.
Another notable feature of the Revised AUCL is the introduction of a provision which regulates unfair competition conduct on the Internet. This newly added provision clearly provides that companies should not engage in the specified unfair competition behaviours while operating their Internet-related businesses and should not impede the provision of Internet-related goods and services by other companies by misusing technical means to influence consumers' choice.
18. How does the Anti-unfair Competition Law help to fight against the trademark squatter?
This can be illustrated by the case Bayer Group v Li Qing.
Bayer Group is the owner of a famous brand "Coppertone" which produces sunscreen products. Li Qing, a local trademark squatter preemptively registered the two marks "" and "" in Class 3. The two designs were originally created by Bayer and have become the most distinctive parts of Coppertone sunscreen products. Upon registration, Li lodged complaints against Bayer with Taoabo where the Coppertone sunscreen was being sold, claiming that the Coppertone sunscreen had infringed his trademark rights. In the meantime, Li approached Bayer attempting to sell the marks at a high price. Li filed complaints with the local AIC upon rejection by Bayer.
Bayer subsequently brought an action against Li on the ground that Li's preemptive registration of the two device marks and the malicious complaints have infringed Bayer's lawful prior rights and likewise constituted unfair competition. This has violated Article 2 of the Revised AUCL for contravening the principle of good faith and generally recognized business ethics.
The Court held that:
- Bayer enjoys prior rights over the two designs;
- Li's registered trademarks are highly similar to Bayer's original designs and there was sufficient evidence showing that Li had copied Bayer's designs;
- Li was a professional malicious trademark registrant, who had registered hundreds of trademarks that were identical or similar to other famous brands and subsequently filed complaints against the genuine brand owners;
- Li's registration of the two designs and the subsequent complaints were filed in bad faith and had damaged Bayer's rights over the designs; and
- Li's conducts constituted unfair competition and trademark infringement.
The Court then ordered Li to:
- Immediately cease the unfair competition activities; and
- Pay RMB 700,000 (around USD 102,000) to Bayer as damages.
This case is significant as it recognized that the malicious registration of another party's trademark and profiting from false accusations of trademark infringement could constitute unfair competition. The Court applied Article 2 of the Revised AUCL, which is a general rule similar to Article 7 of the PRC Trademark Law. We may now resort to this good faith principle to fight against trademark squatters.
19. How to protect IP in the supply chain in China?
(i) Register your IP rights
If you are planning to sell your product both inside and outside China, you should always register the trademark in China and countries in which your product is going to be sold.
(ii) Due diligence
Sourcing the right supplier in China takes time and requires a lot of due diligence. Always obtain a copy of the business license of the Chinese manufacturer to check its business scope or investigate with local government agencies to ensure that it is a genuine business. Also, you are highly advised to conduct a site visit in order to assess the manufacturing capacity and quality control system.
It is always a good practice to have contracts to safeguard your rights. A product ownership agreement is helpful as it clearly stipulates that the Chinese manufacturer shall acquire no right, title or interest to the product that you are co-developing with the manufacturer. It effectively helps to stop the Chinese manufacturer from claiming ownership to the IP rights in your product in China as well as other countries.
You may also consider entering into a tooling protection agreement with your manufacturer. This agreement serves to prove that you are the rightful owner of the moulds and/or tools given to the Chinese manufacturer. Without such agreement, when you seek to re-allocate your production to another manufacturer, your previous manufacturer might use your moulds or tools to produce the same product and compete with you.
(iv) Post-termination measures
You may consider buying back the remaining stocks from the Chinese manufacturer upon termination of the business relationship. Also, make sure that all the client information held by the manufacturer are returned to you or destroyed upon termination of the manufacturing contract. These measures help to prevent the Chinese manufacturer from taking advantage of your trademark.
20. What are the key points when drafting merchandise licensing contract in China?
(i) IP Protection
If the licensee registers or uses a trademark which is identical or similar to the licensed mark on similar goods or services, it may create the false impression that the two marks are connected and may harm the value of your brand. Therefore, remember to include terms in the licensing contracts to prohibit the licensee from registering and using trademarks that are similar to the licensed mark on similar goods or services without your consent.
(ii) Quality control
Quality control is always a key concern for licensors. In order to ensure that the manufactured products are up to standard and to protect its brand value, it is crucial to make sure that the contract clearly stipulates the expected standard of manufacturing as well as the inspection methods required to prevent deterioration in quality standards.
(iii) Enforcement of IP rights
The registration of your IP rights and merchandise licensing contract is just the first step. Enforcement is the key. Always incorporate the enforcement provisions in the licensing contract if you wish to resolve disputes with your licensee in a fair and reasonable manner. It is also important to stipulate the choice of jurisdiction in the contract so as to eliminate the uncertainties when seeking relief against the licensee for breach of the license.
21. Should you record trademark license contracts?
The recordal of trademark license contracts with the CTMO is not mandatory. The contract remains valid even if it is not recorded with the CTMO. Previously, if a licensor wished to receive royalty payments in foreign exchange from a PRC-based licensee, the contract had to be recorded. However, new rules have been implemented in governing the remittance of royalties offshore, which may avoid the need to record.
Recording of license contracts is generally more beneficial to licensees. According to Article 43 of the PRC Trademark Law, a trademark license that is not recorded with the CTMO cannot bind bona fide third party infringer, meaning that the license contract would be effective between the licensor and licensee only, and that it would provide no defence against any good faith third party infringer. Hence, it is advisable to record the license contract so as to expand the scope of available enforcement targets. In case of infringement, the licensee can file suit against the infringer in its own name even if the trademark owner takes no step to prosecute. Therefore, a recorded trademark license contract would provide greater protection for the licensee. However, as decordal requires both parties' signatures, mechanisms will need to be put in place for licensor to be able to unilaterally decord the trademarks should there be a contentious termination of contract.
22. What are the relevant laws governing data privacy in China?
China has been strengthening the protection of data privacy to crack down on the infringement of citizens' personal information.
(i) Criminal Law of the PRC
Article 253a: it is a serious offence to –
- Sell or provide citizens' personal information to third parties in violation of the relevant laws and regulations; or
- Steal or illegally obtain citizens' personal information by other means.
(ii) The General Rules of the Civil Law of the PRC
- Article 111: people's personal information shall be protected by law –
- Anyone who needs to obtain personal information of others should obtain the information according to the law and should ensure the safety of the information obtained
- It is not permitted to illegally collect, use, process or transfer others' personal information of others
- It is illegal to buy and sell, supply or publish others' personal information
(iii) The Judicial Interpretations on Issues Concerning the Application of Law in Handling Criminal Cases of Infringing on Citizens' Personal Information (the "Judicial Interpretations")
The Judicial Interpretations provide clearer guidance on the crime infringing on citizens' personal information by:
- Clarifying and expanding the scope of personal information;
- Further clarifying the meaning of:
- "Violation of the relevant laws and regulations"
- "Providing citizens' personal information"
- "Illegally obtaining citizens' personal information by other means"
- Lowering the threshold for criminal conviction; and
- Adopting the same threshold for criminal conviction for both individuals and organizations.
(iv) The Cybersecurity Law
- It stipulates the security-related obligations of network product and service providers;
- It requires network operators to implement a comprehensive personal information protection system;
- It provides clearer regulations over the protection of personal information;
- It sets out the framework of security protection for Critical Information Infrastructure (CII); and
- It regulates cross-border transmission of important data through CII.
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