KEY CHANGES OF THE DRAFT AMENDMENTS TO THE TRADEMARK LAW OF THE PEOPLE’S REPUBLIC OF CHINA (DRAFT FOR COMMENTS)
Definition of trademarks (Article 4)
The revised Draft expands the scope of trademark definition, including the wording “other elements” in addition to “words, graphics, letters, numbers, three-dimensional signs, colour combinations and sounds”.
The amendment shall allow non-traditional trademarks (such as i.e. positon/colour marks which have been anyhow confirmed in judicial practice) to be granted within the framework of the straightforward examination procedure.
Well-known trademark protection (Article 10 & 18)
One of the major proposed amendments concerning well-known trademark protection is that a well-known trademark unregistered in China can enjoy protection both on identical and similar goods, and on dissimilar goods, including anti-dilution concept to well-known trademarks known by the public (Article 18). Under the current law, an unregistered well-known trademark can only enjoy protection on the same or similar goods.
Noticeably there has been a modification in the wording moving from the concept of “well-known to the relevant public” under current Article 10 of the Trademark Law to “widely well-known to the general public” set-forth in Article 18 of the Draft. Such modification may discriminate a priori against SMEs or specific sectors whose products are not directed to the “general public”.
Bad-faith trademarks (Articles 22, 67 & 83 etc.)
The current Draft provides an opportunity to fill gaps with the 2019 revision, which did not tackle the (core) issue of bad-faith registrations properly notwithstanding the inclusion in Article 4 of the provision “Malicious trademarks registration applications not for the purpose of use shall be rejected”.
Although the 2019 modifications acted as an indicator of the direction that the Government wanted to take against bad-faith applications, they were clearly insufficient to address such long-standing issue.
On the contrary, the whole new Draft is structured so as to made clear that the key intention of the legislator is to effectively address the issue of trademark squatting, not only clarifying the specific circumstances of malicious pre-emptive application (in Article 22 which, among others, states that large volume applications without intention to use shall be considered bad-faith filings) but also providing a more balanced overall framework, with the inclusion of numerous connected provisions such as:
- Articles 45, 46 and 47 on the mandatory transfer system for malicious pre-emptive trademark registration;
- Article 14 and 21 that intensify the obligation to use trademarks by forbidding repeated trademark applications;
- Article 67 which imposes fine for bad-faith trademark registrations;
- Article 23 stressing the importance of protection of prior rights, which also expressly indicates that enterprise names having a certain influence belong to the concept of “prior rights”;
- Article 48 clarifying that after a maliciously registered trademark is declared invalid, the applicant shall bear legal responsibility for infringement;
- Article 83 that provides that if a bad-faith registration causes losses to others its applicant shall provide civil compensation, including reasonable expenses paid by the other party;
- Article 84, which introduces the system for counterclaims against malicious lawsuits.
The Compulsory transfer of trademarks (Article 45 & 46)
The Compulsory transfer of trademarks registered in bad-faith (Article 45 & 46) could become a useful tool for right owners, although it will be available only under certain circumstances.
Although the ratio for enclosing a compulsory transfer is justifiable and rather in line with the first to file principle, the compulsory transfer, in practice, may not be a straightforward tool available to all companies, since it shall be necessary to prove that the trademark has a certain influence.
The Draft also grants (in Article 83 and 84) to genuine trademark owners the right to claim civil compensation from trademark hoarders for the losses caused by both the squatting activities and by any malicious litigation (i.e., infringement litigation against the genuine brand owners based on bad-faith registrations).
Criminal liabilities will be faced if the national or public interests are at stake.
Repeated trademark registration forbidden (Article 14 and 21)
The principle set-forth in Article 14 “One applicant, one identical mark” is one of the core amendment of the first Draft of the 5th revision of China Trademark Law that, in actual practice, will immediately impact right owners; it will quite possibly be framed more accurately in the further Drafts.
The concept of “One applicant, one identical mark” seem to strengthen two of the underlining principles of the new Draft: tackle the (core) issue of bad faith registrations/applications and pose emphasis on the obligation of trademark use.
From WIPO statistics, in 2021, 9.3 million trademarks have been filed in China (number counted based on single class applications): the registry and the workload of examiners undoubtedly suffer the burden posed by repeated applications. Such applications are often filed as a precautionary measure to “save” a trademark that has not been actually used in the last 3 years or as a means from trademark squatters to re-file a bad-faith trademark as soon as the original registration becomes object of a non-use cancellation action/invalidation.
The Draft revision therefore provides that “unless otherwise specified, the same applicant shall only register one identical trademark for the same goods or services” and that a trademark application cannot be identical to a prior trade mark for the same goods/services which has been removed, cancelled, or invalidated within one year of the application date (Article 21).
Article 21.1 contemplate exceptions, bringing the provision in line with the Laws of many foreign jurisdictions:
- the applicant has the right to re-file if he removes the earlier registration/s;
- re-filing with slight improvements are allowed.
The concept of “slight modification” of Article 21.1 will quite possible to be clarified/framed in the Implementing regulation.
A concern posed by the revision is that the basic principle of prohibiting repeated registration may undermine the ability to maintain defensive trademarks (which legitimate brand owner perceive as a necessary shield against bad-faith applications).
Statement on Trademark Use (Article 61)
The new Draft place great emphasis on the obligation of trademark use.
One further aspect that will have a significant impact on brand owners is set-forth in Article 61, which requests that the trademark owner shall voluntarily file a statement of use with the intellectual property administrative department of the State Council within 12 months every 5 years after the trademark obtains registration.
If no statement is filed by the time limit, the intellectual property administrative department of the State Council shall notify the registrant that can respond within 6 months: if no response is provided the trademark will be deemed as abandoned. The statement can include the use status of multiple registered trademarks in a lump.
From the letter of the Law it seems that no actual evidence of use shall be filed with the statement and that the authenticity of the information related with use can be ascertained only through spot check on the truthfulness of the statement conducted by the intellectual property administrative department of the State Council. The consequence of filing a false statement is the cancellation of the trademark.
No further penalty for providing false information regarding the actual use seem to be provided by the law.
Examination of opposition (Article 39)
The Draft removes the review procedure that is currently available against opposition decisions unfavourable to the opposed party.
The opposed party can only file a court appeal if the opposition is upheld.
This change aims to streamline the trademark procedure and level the playing field between opponent (which under the current Law would not be able to file a review if the opposition is dismissed) and the opposed party which is entitled to file a review if the trademark is refused registration.
The publication period has been shortened to two months (instead of 3 months as provided by the current Law).
Suspension of procedure (Article 42)
The Draft Article 42 states:
Where, in an examination or trial conducted according to the preceding paragraph, the administrative department of intellectual property under the State Council must determine the involved prior rights based on the results of another case being tried by a people’s court or handled by an administrative agency, it may suspend the examination or trial. After the cause of suspension is eliminated, the examination or trial process shall be timely resumed.
In the trial of the decision of review on refusal, decision of denying registration or ruling of invalidation made by the administrative department of intellectual property under the State Council in accordance with Article 24 and Article 25 of this Law, the people’s court shall rely on the factual state at the time when the decision or ruling being appealed is made. If the status of the trademark has changed since the decision or ruling is made, it shall not affect the trial of the decision or ruling by the people’s court, except for the obvious violation of the principle of fairness
The draft revision adds the bold provision that the people’s courts shall adjudicate the review decisions based on the status of the related cases at the time when the CNIPA’s decision was made, regardless of whether, for instance, a blocking (bad-faith?) trademark has been declared invalid during the appeal decision.
This amendment may cause unfair outcomes in administrative appeal cases, unless CNIPA changes its current practice of barely granting suspensions for the review proceedings.
Under the current practice, CNIPA generally hardly suspend review proceedings based on pending connected oppositions, invalidations, non-use cancellations filed in an attempt to remove prior trademarks blocking the application for which the review was filed.
Collective Trademark, Certification marks and Geographical indication (Articles 6, 49, 57, 63 and 65)
Greater attention has been posed by the Draft to the framework related to Collective Trademarks, Certification Trademarks and Geographical Indication, with the inclusion of numerous new Articles aiming at strengthening the supervision and management of registrants of collective and certification trademarks and increase the protection afforded to Geographical Indication (thus recognising that are not of marginal importance for the economic growth and market stability).
The newly added Article 57 of the Draft set-forth the restrictive requirements for the transfer of collective and certification trademarks and Article 63 includes provision on legal liabilities for failure to fulfil the management obligation or correctly exercise the corresponding right over collective and certification trademarks.
Article 65.2 states that the acts of knowingly selling goods in violation of geographical indication, or intentionally providing storage, transportation, mailing, printing, concealment, business premises, network commodity trading platform and other facilities for the acts in violation geographical indication shall be investigated and punished.
Trademark agency requirements (Article 68, 69, 70, 86)
The Draft aim at further regulating the acts of trademark agencies, specify the access requirements for trademark agencies and increases the restrictive requirements for the person in charge/directly responsible or the shareholder of the illegal trademark agency (Article 86).
Such provisions are welcomed and in line with the Regulation on the Supervision and Administration of Trademark Agency that has been implemented on the 1st December 2022, establishing a clear code of conduct for trademark agencies, improving the quality of trademark agency services and effectively safeguarding the legitimate trademark’s right owners.
Trademark infringement related to e-commerce activities (Article 59 & 72)
The Draft clearly adds the welcomed provision that trademark infringement activity includes using signs identical or similar to the registered trademarks of others in e-commerce activities without the permission of the trademark registrant hence causing confusion among consumers.
Calculation of compensation (Article 77)
Article 77 of the Draft referring to the amount of damages for infringement upon the right to exclusively use a registered trademark has been left almost unvaried but it includes the welcomed provision that the amount of compensation should include reasonable expenses paid by the right holder to stop the infringement.
There has been also a rephrasing modifying the requirement for the application of punitive damages from “malicious infringement” to “intentional infringement” in line with other provisions of China Laws and to discriminate the consequences based on the presence or absence of intention.