The Standing Committee of China’s National People’s Congress finally approved the China Trademark Law Amendment on August 30, 2013, after more than 7 years of deliberation and discussions. The amendments will come into effect as of May 1, 2014.
To those who have closely followed the China trademark law amendment process, the final version is very similar to the version that the NPC reviewed during the second reading back in July. The latest version does not have many surprises: the amendment increases the cap on statutory damages to RMB 3 million and re-adjusts the time limits within which the Trademark Office and Trademark Re-Examination Board (TRAB) must complete the trademark examination, opposition, cancellation, and appeals.
The other major changes include:
One of the benefits widely recognized in the amendment is allowing applicants to submit one application to register a mark in multiple classes. In addition, sound is a new subject matter for trademark registration.
Opposition and Registration
An opposition filer that wishes to cite grounds for opposition such as similarity and bad faith squatting must be a party that has pre-existing rights (including trademarks, trade names, design patents, copyrights, etc.) or an interested party.
Once an opposition decision is issued by the Trademark Office, it will take effect immediately. Should the opposing party be unsuccessful, it will have to file an invalidation action to continue the fight.
The amendment provides a new ground for brand owners to oppose 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 for registration.
The amendment states that the application for registration and usage of trademarks must be conducted in good faith. This new rule may be used as a general ground to deal with all sorts of bad faith activities in the future. However, whether or not this is indeed a viable approach will have to wait until judicial interpretations are issued.
（3）Timeline for Trademark Prosecution
A si A significant change is that the NPC has set out a timeline for the Trademark Office (TMO) and Trademark Re-Examination and Appeal Board (TRAB) to complete various key processes: examination of applications (9 months), re-examination (9 months), adjudication on opposition (12 months), opposition appeal (12 months), and invalidation (9 months). Some individual processes may be extended by 3 or 6 months subject to approval. The changes are intended to impose some limits on the duration of time required for completing the trademark prosecution procedures.
The AIC now has the power to seize and confiscate tools that are “predominantly” used for infringement.
The statutory fine is increased to RMB 250,000 if illegal revenue is less than RMB 50,000. In cases where illegal revenue exceeds RMB 50,000, local authorities may impose a fine up to five times the “illegal business revenue” against infringers.
The final amendments introduce punitive damages into the system. Detailed rules on how to determine willful infringement will be expected to come from future Implementing Regulations or judicial interpretations.
Interestingly, the final version further increases the cap on statutory damages to RMB 3 million (nearly USD 490,000). No minimum amount of statutory damages is provided.
A new defense related to damages has been introduced by the final amendment. A defendant may request that the trademark owners prove actual use of the trademark. Failure to prove actual use may result in a no damage award. This provision could arguably help to alleviate some of the pain in the case that a legitimate brand owner is sued by trademark squatters. As most squatters would not actually use the marks, this new provision will prevent them from obtaining meaningful monetary damages from legitimate trademark owners.
Rules about contributory liability against parties that facilitate trademark infringement have also been incorporated in to the amendment.
Other changes include the phrase “well-known mark” being banned for advertisement purposes. This is apparently to prevent the abusive use of “well-known mark” in business.
The final amendments arguably introduce some significant changes to the trademark practice in China. It is clear that China intends to improve the deterrence effect of enforcement by granting higher damages or imposing more penalties. The newly established punitive damages, increased cap for statutory damages, and related evidentiary rules in the Trademark Law are likely to also be endorsed in the upcoming Patent Law and Copyright Law amendments.
Changes made to the trademark prosecution process may force the TMO and TRAB to act within a more predictable timeline. However, several significant issues remain:
Bad Faith Trademark Applications
Foreign brand owners may be concerned about how the changes in opposition procedure will impact their fight against bad faith trademark squatters. The amended opposition procedure could make the situation risky as a squatted mark would become effective immediately and available to be used should a foreign brand owner lose the opposition action.
This may means squatters can then sue foreign brand owners for injunction right after an opposition decision in their favor. The newly added grounds for opposition, where the squatter has some “contractual,” business, or “other” relationship such that it must know the cited brand, is helpful, but the evidentiary burden may still be too high. This issue remains to be dealt with in future Implementing Regulations or judicial interpretations.
None of the rules in the final amendment address the controversial OEM (original equipment manufacturer) liability issues. For foreign brands that have been sourcing their manufacturing from China and suffer from trademark squatting problems there, no good news is available yet.
The Trademark Law Amendment does not address any issues specifically related to online counterfeiting such as whether or not online trading platforms will bear liability for blindly allowing sales of counterfeit goods by online vendors.
Hopefully, these unaddressed questions will be handled by the Implementing Regulations and the Supreme Court judicial interpretations. This new law has solved many problems but also brings with it a set of new issues.