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POLICY EXPLANATION: Highlights of the New PRC Trademark Law 2013
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he Standing Committee of the National People's Congress (NPC), China's top legislature in August 2013 adopted an amendment to the China Trademark Law (“CTL”) which introduces some significant changes to current CTL and is intended to better protect trademark rights.  The amendment will come into effect on May 1, 2014. CTL was enacted in 1982 and amendments were made twice respectively in 1993 and 2001.

Although the amendment still suffers from a number of deficiencies, it aims to improve the efficiency of the complex trademark prosecution procedures, prevent malicious registration of trademarks, beef up enforcement mechanisms in response to bad faith trademark squatters  and significantly raises the compensation ceiling for trademark infringement to CNY 3 million (about USD 500,000), six times the previous limit. Scope of registrable marks is now expanded to include sound. The amendment also offers more protection for well-known trademarks.

 

1. Scope of Registrable Marks Expanded 

To be in line with international practice, Article 8 of the amended CTL expands the scope of protection of non-conventional trademarks by adding sounds to the list of elements considered registrable as a trademark. Under the current law, sounds are not recognized as a registrable element, whilst colours are registrable only as a combination. This creates more opportunities for brand owners to better protect their proprietary rights  and have their trademarks of sound overseas also legally registered in China. This may attract a wave of new filings from both China and those countries where sound mark has already been allowed. However, the final enacted amendment fails to extend protection to cover scents and moving images  as the China Trademark Office once considered in an earlier draft amendment. Obviously, these new territories can be a challenge for trademark administration authorities that have always preferred to be cautious and take small steps rather than risking blunders. It will be interesting to see what the examination criteria for sound mark will be.

NPC’s third draft deleted the provision of single colour trademark registration due to concerns that allowing single colours to be registered as trademarks may cause colour monopoly and confusion.

 

2. Streamlined registration and administration procedure

The new amendment for the first time ever sets a statutory time-limit for trademark examinations  by both the Chinese Trademark Office (”TMO”) and the Trademark Review and Adjudication Board (“TRAB“).

Under the amendment, the period for the initial examination for trademark applications shall be no longer than nine months; The period for raising oppositions after the publication of the trademark is three months; The timeframe for investigation and verification shall be no longer than nine months; The time period for the TRAB in reviewing the decisions on rejection an application or refusal of publication rendered by the TMO shall be no longer than six months; and lastly the period for reviewing the opposition case where the TMO finds the opposition is tenable shall be no longer than nine months.

The TMO has already allowed electronic filings for several years through a trial pilot program. However, this practice is now officially adopted into the revised CTL and will better facilitate brand owners to more efficiently complete trademark filing.

The amended CTL now also simplifies the registration procedure  by allowing an applicant to submit one application for a trademark in multiple classes. The current practice only allows the filing of one trademark in one class and additional trademark applications are required for additional classes which in practice can be time-consuming and burdensome. The amendment hopefully will prove to be much more efficient for both TMO and trademark applicants.

All of these changes will provide more conveniences and benefits to trademark applicants and brand owners.

 

3. Bad Faith Opposition Procedure

One of the major missions of the amended CTL is to address the issue of potential bad faith opposition filings  and the associated burden of having to defend unnecessary opposition proceedings. This is of particular use to international brand owners and bona fide trademark registrants. However, it might prove to be a double edged sword in practice.

The amended CTL imposes a limitation on the standing required for initiating opposition proceedings, limiting the right to oppose only to those who “own prior rights” or who are an “interested party”. Under the current law, anyone can initiate opposition proceedings. However, the exact scope of what constitutes “prior rights” and an “interested party” will be an issue that needs to be further clarified in the future. This change may reduce the number of opposition cases and help alleviate the bad faith opposition filing as it makes it even harder for oppositions. Nonetheless, it might also backfire since brand owners have to demonstrate prior registered rights or why they are an interested party.

The amended CTL further streamlines the opposition process by eliminating the right of appeal currently available to an opponent, to the TRAB. An opposing party’s only recourse afterwards is through a new procedure– “invalidation”.  The opponent will no longer be able to delay the prosecution process by filing appeals to the TRAB and the court. Conversely, however, the right of the applicant to appeal against an unfavourable opposition decision has remained intact. This would mean that marks that should not be registered will remain on the register and would need to be invalidated, during which time the mark owner can enforce their rights. This will increase and arguably encourage bad faith trademark squatting and counterfeiting. This issue has to be addressed in future when implementing regulations or judicial interpretations.

 

4. Trademark Squatting Protection of Good Faith Mark Holders

As many foreign companies can attest, trademark squatting (bad faith trademark registration) is a rampant problem in China. The amended CTL is widely anticipated to be able to more effectively deter the prevalence of squatting.

Specifically, Article 7 says that “The principle of honest and trustworthy shall be applied when using trademark filing for registration”. This provision, being broad and vague in nature might prove to be an all-embracing tool to crack down on trademark squatting because it will be able to cover grounds where those bad faith registrations cannot be curbed by other specific provisions in CTL. Of course, it would be even more preferable to define bad faith with specificity, and so as to facilitate action against any egregious cases of trademark piracy. Further, Article 15 prohibits dealers, distributors, agencies, and those who have business contacts or relationships with the brand owners to register the same or similar trademark on same or similar goods. Trademark agencies are not allowed to accept entrustment if they know, or should know that their clients are conducting a malicious registration or infringing upon others’ trademark rights; Thirdly, Article 64 prevents the awarding of damages if the registered mark at issue has not been used by the plaintiff. No compensation may be awarded to the trademark owner if the trademark has not been used in the past three years. This is useful for legitimate bona fide brand owners to fight against trademark squatters.

The amended CTL also mitigates trademark holders' responsibility in providing proof of infringement, requiring that infringers shall provide their account books or other materials for investigation. Otherwise, compensation amounts could be determined according to the amounts proposed by trademark holders. This could reduce litigation costs for trademark holders and increase the costs and penalties against infringers.

 

5. Damages

The revised CTL also introduces for the first time punitive damages  which will be 1 to 3 times of actual damages. In addition, more severe penalties will be imposed on those who repeated trademark infringement activities more than twice within five years. Lastly, CTL now increases the maximum statutory damage from CNY 0.5 million to CNY 3 million which will serve a deterrent against trademark infringement.  
 
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