Five important changes to the revised draft Trademark Law of the People’s Republic of China (‘Draft’).
Issued on 13 January 2023 by the China National Intellectual Property Administration (‘CNIPA’), the amended draft Trademark Law strengthens trademark protection. Specifically, addressing trademark squatting and well-known trademarks.
In China, trademarks are registered according to the ‘first to file’ rule rather than the ‘first to use principle’. Therefore, a trademark registered aboard is often exposed to malicious filing in China – often referred trademark squatting. Trademark squatting is the act of registering existing trademarks of others in China across numerous classes in anticipation of being able to sell the trademark to the legitimate trademark owner, who is dependent on such trademark to conduct business in China.
The Draft is the 5th Amendment of the Trademark Law paves significant changes to tackle bad faith trademark registrations. Adding that such conduct hinders business needs and disrupts the market order. For companies, the Draft introduces new legal tools to challenge long-withstanding trademark protection issues, namely the loopholes within the registration process, that are vulnerable to trademark infringement.
We round up five main changes that strengthen trademark protection for companies doing business in China.
Defined Scope of Malicious Filing
Prior to the Draft, malicious filing was defined as filing without intent of use. Whilst the Draft sets out clearer circumstances and defines malicious filing as the following:
- Mass filing without the intent of use;
- Deceptive filing or other informal means;
- Filing which results in damages to state interests, public interests or other significant negative influence;
- Filing well-known trademarks;
- Pre-emptive registration by agents and representatives;
- Deliberately damaging the prior rights (company name which has registered and obtained influence), benefits or seeking unlawful profits;
- Other bad faith behaviors.
For the first time, fines are stipulated for malicious filing. Penalties vary from warnings to a minimum fine of 50, 000 RMB. If the violation is deemed serious, a maximum fine of 250,000 RMB can be imposed, and illegal gains confiscated.
Equally, parties affected by malicious filings and suffer losses can pursue civil actions and claim compensation for the occurred legal costs to cease malicious filings.
Increased Grounds for Cancellation
Currently, registered trademarks can be disputed if the trademark has not been used for three consecutive years. In the Draft, cancellation of a registered trademark can be applied if one of the following circumstances applies:
- misleads the public on product characteristics – such as quality or place of origin;
- harms the public interests;
- any significant negative influence.
Mandatory Transfer
A prior right owner can request a trademark to be transferred back under the following circumstances:
- if the registered mark violates a well-known trademark;
- if the registered mark is a pre-emptive registration from agents or representatives;
- if the registered mark deliberately damages prior rights (company name which has registered and obtained influence).
CNIPA approval is based on whether the transfer causes confusion or negative influence, though the CNIPA may decide to directly invalidate the mark.
Scope of Well-known Trademarks Expanded
In the past, well-known trademarks were determined on their notoriety and reputation within China. Though increasingly, the courts have considered general public knowledge. This is to align with technological advances that has increase brand visibility – especially companies who have yet to enter the China market. In the Draft, well-known trademarks are considered on the following factors:
- degree of awareness from the relevant public;
- duration of the use;
- duration, extent, and geographical scope of any advertising;
- records of trademark protected as a well-known trademark;
- other factors concerning the well-known status of the trademarks.
Equally, the protection of well-known marks is expanded to unregistered marks under the Draft. Specifically, the Draft forbids the “use and registration” of reproductions, imitations, or translations of such marks that would result in the following:
- mislead consumers to associate a certain degree of connection between the mark and the well-known mark; and
- results in sufficient dilution of the distinctiveness or damage the reputation of the unregistered well-known mark.
Statement of Use
Trademark registrants will be required to submit statement of use. After each 5 years from the trademark is registered, the registrant is required within 12 months file a statement with the CNIPA. The statement shall provide the status of use or any legitimate reason for non-use. The statement can be verified on the spot for authenticity and the registered mark will be cancelled if the statement is found forged.
Conclusion
The Draft forms part of the national policy’s commitment to strengthen intellectual property protection in China. And plays a significant role in adapting China’s economy from high-speed growth to high-quality development.
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