Authored by He Jing (firstname.lastname@example.org)
China’s National People’s Congress (NPC) has released the latest version of the proposed amendment to its Trademark Law for public comments until January 31, 2013. This window may present the last opportunity for the international business community to make requests for reforms to the Law.
The latest draft proposes changes to about 40 provisions. Some of the changes are well anticipated and may prove beneficial for all brand owners. For example, the expansion of trademark formats to include sounds and single colours which may be sufficient to distinguish the subject goods. Also, the provisions allowing trademark applications to cover goods in multiple classes, which will alleviate some of the burden of applicants who wish to file in multiple classes.
However, on one of the most compelling issues — bad faith trademark filings or trademark squatting — the proposed changes could have some unintended consequences, which may arguably create a more complicated situation.
Substantial changes are being proposed for opposition proceedings, including the imposition of limitations on eligible opposition filers and the immediacy of effect of opposition decisions. Under the proposed changes, an opposition filer must be a party having pre-existing rights (including trademarks, trade names, design patents, copyrights etc) or interested parties. Once an opposition decision is issued by the Trademark Office, it is to take effect immediately. Should the opposing party be unsuccessful, it will have to file an invalidation action to continue the fight while the opposed mark will be registered immediately.
Foreign brand owners may be concerned at how this impacts on their fight against bad faith trademark squatters. The amended opposition procedure could make the situation very risky as a squatted mark would become immediately effective should a foreign brand owner lose the opposition action.
This in turn means squatters can then sue foreign brand owners straight after an opposition decision in their favour. Even worse, because the opposition can only be filed in the first place by right holders privy to some pre-existing rights and interested parties, the proposed changes require overseas brand owners to file against squatters using their real identities. A defeat in the action will immediately expose the foreign brand owners to grave dangers, such as a reverse suit. In contrast, the current procedure allows foreign owners to file a case under a third party’s name.
The somewhat good news is that the proposed amendment arguably provides a new ground for brand owners to oppose the squatters. If a trademark squatter has had some “contractual”, business or “other” relationship such that it must know the cited brand, the squatter may be opposed. However, the evidentiary burden may still be high.
China’s NPC is clearly intending to strengthen enforcement by giving more powers to administrative authorities and courts. However, given the possibility that squatting victims may themselves be sued or harassed by the bad faith trademark registrant, the increased exposure to liability raises the complexity of the situation.
The proposed changes introduce punitive damages into the system. Local authorities may impose up to five times the “illegal business revenue” as a fine against infringers. Such rules could be taken advantage of by trademark squatters who may have actually used a contested mark in the marketplace as additional leverage against foreign brands that come to China at a later stage.
None of the proposed changes address the controversial OEM (original equipment manufacturer) liability issues. For those foreign brands that have been sourcing their manufacturing from China and suffer from trademark squatting problems there, no good news is yet available yet.
What is somewhat comforting is the new defence that has been introduced by the NPC. A defendant may request the trademark owners to prove the actual use of trademark. The failure to prove the actual use may result in no damage award. This provision could arguably help to alleviate some of the pain in the case where a legitimate brand owner is sued by trademark squatters. As most squatters would not use the marks in reality, this new provision, if passed, will prevent them from obtaining meaningful monetary damages from legitimate trademark owners.
Taking overall account of the changes, the proposed draft amendment has not included any effective measures against bad faith trademark filings. If no dramatic last minute changes occur over the next few months, the same headache over trademark squatting will be set to continue.
Copyright 2013, The Bureau of National Affairs, Inc.