Increased Trademark Protection in the PRC?

REGISTRATION⁸

Under the amended Trademark Law any visually perceptible sign recognized as a likely trademark, including three-dimensional signs, may be registered. This would significantly expand the scope of trademark protection in the PRC. It remains to be seen which standards the Trademark Office will apply during respective registration procedures. As reported, the indication 'registered trademark' or ' â ', which is presently mandatory, shall become an optional right. Further, in line with the Paris Convention for the Protection of Industrial Property (Paris Convention), the new Trademark Law will likely permit objections to registration or use of a trademark by an unauthorized agent.

Article 3 TRIPs principally demands equal treatment of foreign and domestic persons. Nevertheless, at present, it seems that the special requirement for foreigners or foreign companies to involve an authorized trademark agent when dealing with the various Chinese authorities, will not be abolished. This requirement has existed from 1983 with, at that time, only two agents permitted to handle foreign applications.⁹ It is expected that priority rights will be granted (according to the standards set forth in Article 4 Paris Convention) in case of prior registrations abroad, as well as for trademarks first used on goods displayed in an international exhibition sponsored or recognized by the Chinese government. In both cases, the trademark owner could enjoy a priority registration period of six months. All decisions made by the Trademark Review and Adjudication Board shall, without exemption, be subject to a later challenge in the People's Courts. Training the involved judges at all levels and locations will be essential to ensure effective implementation of the system. The extent that the Trademark Review and Adjudication Provisions will remain in force is not clear at the moment. They refer to the Trademark Review and Adjudication Board as the 'final judgement authority' (Article 2). This would be contradictory to the amended Trademark Law.

WELL-KNOW MARKS

Under the old legal regime governing "well-known" marks in the PRC, a formal registration is required as a constitutive element for protection. This was not always applied in practice and should not have been applied at all after the PRC acceded to the Paris Convention¹⁰. A Notice issued by the State Administration for Industry and Commerce as late as April 2000 continued to uphold and refine this system, although it openly acknowledged certain implementation problems. Besides a "normal" registration, further supporting information is required, including the sales volume and sales regions of the goods on which the mark is used in the PRC and abroad, major economic figures (annual output, sales volume, profits and market share), advertisements, and earliest time of use. No application for a foreign mark to be registered as 'well-known' has been approved to date. Only later in 2000, a People's Court in Beijing recognized several foreign marks as being "well known" for the first time when deciding on internet domain name disputes¹¹.

It is, however, expected that under the amended Trademark Law, the standards set forth under TRIPs will finally be applied in the PRC. That is, the present constitutive requirement of formal prior registration as 'well known' will be abolished. Such radical departure¹² from the present system would mean that a mark used for identical or similar goods and services violating the well-known, and in the PRC not registered mark of another party, faces the risk of cancellation and prohibition of use. The use of a mark for goods and services dissimilar to those for which the well-known mark is registered would, under stricter pre-conditions, face the same consequences. What remains to be seen is which standards the involved authorities and courts will apply when determining the "well-known" status of a mark, and whether the standards will be similar to internatiional standards and equally applied throughout the PRC.

ENFORCEMENT

The amended Trademark Law will, in several aspects, address the enforcement against trademark infringement and counterfeiting more strongly than it has done to date. This goes along with the present efforts of the PRC government attempting to control the widespread counterfeiting problem¹³, most recently addressed in the Joint Campaign to Crack Down on Criminal Activities Involving the Production and Sale of Counterfeit and Shoddy Goods, introduced by Vice Premier Wu Bangguo in October 2000.

Under the present Trademark Law, an infringement cannot be claimed unless the seller had positive or constructive knowledge that the sale infringed the exclusive use right of the trademark owner. In cases where the infringing goods passed a chain of wholesalers before entering the consumer market, these preconditions were often difficult to be proven. Reportedly, the Chinese legislator is now willing to qualify all sales of goods violating a trademark right as infringement. This would significantly increase the pressure on retailers and wholesalers to ensure that products purchased by them for re-sale bear proper trademarks. The amended Trademark Law is likely to provide that a seller who can prove (the burden of proof is shifted to the seller) to have sold goods obtained from a legal source in good faith will not be subject to compensation responsibilities. An important point in practice will be whether the legislator will decide to also qualify the offer to sell infringing goods in any form as 'infringement', as it was introduced in the amended PRC Patent Law (中华人民共和国专利法), effective as of August 1 2001.

In the PRC, enforcement against infringers can be initiated both with the People's Courts and the local Administration for Industry and Commerce¹⁴. It can be expected that the powers of the People's Courts will be expanded under the amended Trademark Law, at least expressly permitting property preservation measures. Even then, foreign entities may still face severe bureaucratic hurdles, if, for instance, the submission of a power of attorney for the involved trademark attorney continues to require lengthy notarization and legalization procedures. Necessary amendments to the PRC Code of Civil Procedure and other legislation (for example Article 17 of the Trademark Review and Adjudication Provisions) are not immediately in sight. Other issues, such as the provisional preservation of evidence, provisional measures without hearing the other party and orders against the infringers to provide evidence, are not likely to be covered by the Trademark Law. It remains to be seen whether amendments to the Implementing Rules or other laws will fill these gaps.

It is doubtful whether the Trademark Law will contain important new rules expressly permitting the Administration for Industry and Commerce to also order the destruction of the materials and implements (for example, moulds and tools) used to create the infringing goods, as required by Articles 46 and 49 TRIPs.

COMPENSATION

An important tool for deterrence is the ordering of compensation against infringers, ensuring that the trademark owners are relieved of costs when enforcing their trademark rights. An improvement would be the expected right to choose between the compensation amount calculated on the basis of profits made by the infringer (usually difficult due to lack of documentation) and an amount calculated on the basis of losses incurred to the infringed party. The amended Trademark Law should also provide for compensation of "reasonable expenses" paid by the infringed party in pursuit of its rights. This would include the fees charged by lawyers and private investigators.

CONCLUSION

Further amendments to the Trademark Law and other laws, such as the PRC Criminal Law and the PRC Civil Procedure Law (中华人民共和国民事诉讼法), will be necessary to ensure full and forceful protection of trademark rights. Nevertheless, the presently discussed changes should significantly enhance the level of trademark protection in the PRC. Implementing the new regulations successfully in the near future will, however, be an even bigger challenge.¹⁵

ENDNOTES

1. The legislation process started in the first half of 1999 see China Online, June 2 1999, "First Draft of China's Revised Trademark Law Ready for Feedback."
2. China Law & Practice, 1993, April, p.42; see also comments on the draft by Joseph Simone "Draft Trademark Law offers encouragement" in China Law & Practice 1991, April,p.17. The test of the "Sixth Draft" can be found in China Law & Pracice 1991, September, p.36.
3. China Law & Practice 1988, February, p.53.
4. China Law & Practice 1995, September, p.5.
5. The PRC acceded to the International Classificaton of Goods and Services (the so-called "Nice Agreement") formallly in 1994.
6. See for instance Zhu Qiwen in China Daily, March 31 1999, "China's trademark law needs further revision."
7. Is was supplemented by a further agreement on June 17 1996 whilch focused on copyrights; see Douglas Clark, "Sino-US IPR accord still fails to clarify market access issues" in China Lwa & Practice, 1996, July / August, p. 54.
8. For a general overview on the registration procedures see Jeannie Smith / Tan Loke Khoon, 'Trademarks and Servicemarks" in Intellectual Propryt Protection in China, Asia Law & Practice Ltd., Hong Kong, 1995, p53 (58).
9. See Editor's Notes in China Law & Practice 1988, February, p.62 (63).
10. Key issues remained unclear and disputed among legal scholars. See Josepg Simone, "Well-known Trademark Provisions Still Leave Key Issues Unclear" in China Law & Practice, 1996, November, p.25; Zheng Chengsi in Intellectual Property Enforcement in China, Sweet & Mawwell Asia, 1997,p.112.
11. See Zhao Huanwin in China Daily, June 23 2000, "IKEA wins back domain name"; and Shao Zongwei, China Daily, November 22 2000, "Court ruling favours US firms in domain row" relating to the trademarks "Dupont" and "Tide".
12. See Lindsy Esler / Annie Tsoi, "How to Make your Trademarks Well-known" in China Lwa & Practice, 2000, July / August, p.29.
13. See China Online News, August 7 2000, "China uncovers 665 Cases involving violations of foreign trademarks in first half of 2000".
14. More and more, trademark owners also opt to address the local Technical Supervision Bureau (in case of prodct quality defects) and / or the Public Security Bureau (to initate criminal proceedings). Of rising importance is the involvement of special interest groups, for instance, the Quality Brands Protection Committee of the China Association of Enterprises with Foreign Investment (also known as China Anti Counterfeiting Coalition) or of national and regional foreign Chambers of Commerce and Embassies.
15. See also Charles Snyder in China Online News, March 8 2001, "China piracy problems persist, even though situation is improving, USTR report says" relating to the Annual Report to Congress on its Trade Agreements Program by United States Trade Representative Robert Zoellick issued on March 6 2001.