Implementing Regulations to Trademark Law Offer Further Protection for Trademark Owners

Trademark Application and Examination

Amendments and Assignments of Pending Applications

Under the Implementing Regulations, it is now possible to amend the name and address of the applicant, change the trademark agent or narrow the specification of goods/services while a trademark application is still pending. Further, pending applications may be assigned to third parties. None of these procedures were permitted under the earlier Rules.

Consistent with recent Trademark Office policy, the new Regulations do not permit the amendment or deletion of trademark specimens any time after the filing date.

Partial Approvals

The Trademark Office may now grant preliminary approval for the registration of marks covering only a portion of the designated goods or services, while rejecting the application for the remaining goods or services. Previously, such partial approvals of trademark applications were only possible with respect to International Registrations extended to the PRC under the Madrid Agreement and Madrid Protocol.

Partial Opposition

Under the prior regime, where the Trademark Office decided that an opposition against an application was tenable, it would revoke its preliminary approval and reject the opposed trademark application in its entirety. Under the Implementing Regulations, the Trademark Office may now approve the registration of the mark, excluding that portion of the designated goods or services that is deemed to be in conflict with the prior rights of another or otherwise deemed objectionable. This should help trademark owners to reduce costs by eliminating the need to file additional trademark applications as a hedge against failure in application appeals or oppositions filed against their marks.

Joint Applications

The revised Trademark Law now provides for trademarks owned by more than one registrant. The Implementing Rules provide that where an application is filed for a jointly owned trademark, one of the applicants should be formally designated as “representative” . If such a designation is not provided, the applicant whose name appears first in the application documents will be deemed the representative by default.

The Implementing Regulations do not specify the consequences of being designated as representative for the jointly owned trademark, although presumably the party designated would be granted the power to speak on behalf of all joint owners.

Review and Adjudication

Partial Cancellation

Consistent with the above-mentioned provisions regarding partial approvals of trademark applications following oppositions, the Implementing Regulations give similar powers to the TRAB in the handling of cancellations.

Under the revised Trademark Law, cancellations may be filed on the basis of prior rights within five years of the registration of a mark.

Public Review and Adjudication

The Implementing Regulations provide that, upon a party's request or at the discretion of the TRAB itself, the TRAB may decide to “openly” review and adjudicate cases, i.e., to hold public hearings regarding disputes. In such cases, the TRAB is required to notify the parties in writing 15 days prior to the proposed hearing. The parties shall reply within the time limit specified in the notice. No adverse inference will be drawn if the respondent to the review and adjudication application fails to reply to the notice or attend the hearing.

Likewise, codifying earlier practice, the Implementing Regulations provide that respondents will not be prejudiced by their failure to respond in writing to any opposition or cancellation petition.

Appeal Period

Under the Trademark Law, a party that wishes to appeal a decision of the Trademark Office to the TRAB must do so within 15 days of its receipt of the Trademark Office's decision. The access to a 30-day extension available under the earlier Rules has been eliminated. Furthermore, under the new regulations, where a trademark agent is representing a party, the 15-day period runs from the date that the agent receives the decision (rather than the date of receipt by the party itself).

Filing of Supplementary Materials in Oppositions and Appeals

The prior Rules did not impose deadlines for the filing of supplemental arguments or evidence in trademark oppositions, cancellations or appeals. The Implementing Regulations fill this gap by imposing a three-month deadline on such filings. They specifically require that a party indicate in their initial arguments that supplemental evidence will be filed.

It remains unclear whether parties will be able to file supplemental arguments or evidence after the three-month deadline, although Trademark Office officials have recently suggested they may consider evidence that did not exist before the relevant deadline.

Control on Use of Trademarks

Trademark Licence Recordal

Under the prior Trademark Law, licences of registered trademarks to licensees located in the PRC were subject to recordal at two levels: with the Trademark Office in Beijing and with the Administration for Industry and Commerce (AIC) in the region in which the licensee was located. Under the new Implementing Regulations, applications for licence recordal need only be filed with the Trademark Office.

The penalties for failure to record a trademark licence under the prior Rules included imposition of fines up to Rmb10,000 (US$1,200) and, in serious cases, cancellation of the licensed trademark registration. Fortunately, the new Implementing Regulations no longer contain penalties for failure to record a trademark licence. It is still possible, however, that the Trademark Office will issue guidelines or regulations in the future which set out fines or other incentives to record licences in a timely manner.

Under regulations issued by the State Administration for Foreign Exchange, recordal is still required as a condition for the repatriation of royalties generated from licences of registered trademarks.

Non-use Cancellations

The new Implementing Regulations now permit the deletion of specified goods or services in response to the filing of petitions for cancellation of a trademark registration on the basis of non-use during a three-year period. Under prior practice, if a trademark owner could supply evidence of valid use of a mark in relation to just one of the goods or services covered by a trademark registration, the entire registration would be protected from either full or partial cancellation.

The Implementing Regulations also contain a minor change in the definition of “use” of a registered trademark. Use is now deemed to include use on goods, on packaging or containers, in trade documents or in advertising, publicity, exhibitions or “other commercial activities” (qi ta shang ye huo dong).

Until recently, the Trademark Office and TRAB regarded non-commercial advertisements of the details of registered trademark owned by foreigners as sufficient to prevent cancellation of a registration based on allegations of non-use. The new definition of “use” in the Implementing Regulations does not appear on its face to require a change in this policy. However, officials with the Trademark Office have recently suggested that they have changed their policies incidental to the amendment of the Trademark Law, and consequently, the Trademark Office has recently issued decisions refusing to protect trademark registrations from cancellation based solely on the trademark owner's evidence of non-commercial advertising of a mark in a local publication.

To protect unused marks from cancellation, it now appears necessary to either commence normal trade in goods bearing the relevant marks, or alternatively to place new advertisements in Chinese publications that have a stronger commercial character.

Ultimately, Beijing courts will likely be called upon to confirm the level and character of advertising or other types of use of marks that are sufficient to prevent cancellation of a registered trademark. The Trademark Office and TRAB initially deal with decisions in non-use cancellations, but appeals of TRAB decisions can now be pursued through administrative courts in Beijing, pursuant to the amended Trademark Law.

Registrations Held by Defunct Parties

The Implementing Regulations include a new provision that provides for cancellation of trademark registrations held by parties that have either died or been “terminated” . Petitions for cancellation may now be filed where no efforts to transfer a registration have been made within one year after the death or termination of the trademark owner.

This new provision should provide a useful weapon for dealing with small pirates in China that shut down their operations without undergoing normal liquidation procedures. But it remains unclear at present exactly what sort of evidence the Trademark Office and TRAB will require as evidence of the termination of a local company.

Well-known Marks

Determination of Well-known Marks

The new Implementing Regulations confirm that trademark owners pursuing oppositions and cancellations may seek formal recognition of their marks as “well-known” (chi ming), thereby aiding in attempts to block others from registering similar marks covering dissimilar goods or services. The new regulations make clear that determinations on well-known status will be made on a case-by-case basis.

The Trademark Office and TRAB are now drafting guidelines to clarify the standards for achieving well-known status. These guidelines should be issued in the near future and they are expected to replace 1995 regulations issued by the Trademark Office.

It remains unclear for now whether applications filed under the 1995 regulations that are still pending will continue to be examined. Arguably, they should, provided that there are still oppositions, cancellations or other disputes pending in China for which well-known status would be relevant.

It also remains unclear for the time being whether recognition of well-known status in one particular dispute before the Trademark Office or TRAB can be used as evidence in other disputes, either involving the Trademark Office or judicial authorities. Indeed, under prosecution guidelines issued by the Ministry of Public Security and Supreme People's Procuratorate in April 2001, judicial authorities are encouraged to pursue criminal investigations into trademark counterfeiting cases involving any well-known mark. Thus, achievement of well-known status in the course of an opposition or cancellation may ultimately prove useful in the course of anti-counterfeiting work.

Rectification of Enterprise Names

The Implementing Regulations provide that where a third party registers a well-known mark as part of its enterprise name (i.e., a company name) and use of the name may give rise to confusion or be misleading to the public, it can apply for cancellation of the enterprise name.

Presumably, owners of trademarks that are not recognized as well-known will only be able to pursue trade name infringers on the basis of China's Anti-unfair Competition Law.

Infringement

The revised Implementing Regulations strengthen the powers of administrative enforcers to impose penalties for trademark infringement.2

Fines

The Implementing Regulations significantly increase the maximum fines that may be imposed against infringers to three times the infringer's “illegal business amount” (turnover). The regulations also provide for discretionary fines up to Rmb100,000 (around US$12,000) in cases where “it is impossible to ascertain the illegal business amount” . Under the prior Rules, the corresponding maximum fine was fixed at a maximum of 50% of the illegal turnover or five times the infringer's illegal profits.

The new regulations do not set out more detailed guidelines for the imposition of fines, including minimum fines that may be imposed in the case of repeat offenders or infringers dealing in counterfeits. Likewise, the new regulations do not include an updated definition of “illegal business amount” . Under a policy document issued by the Trademark Office in 1994, the term was defined at length, but in practice it has been interpreted conservatively by local AICs and limited in most cases to the value of the product that the infringer declares. Industry associations are now pressing the Trademark Office to issue new guidelines that will set out standards for the imposition of minimum fines and for a more realistic definition of “illegal business amounts” .

Legitimate Use of Generic or Descriptive Terms

The new regulations specify that if a registered mark includes a generic name, device, model number or other descriptive elements, the registrant of the mark will not be able to claim infringement by other parties that use such elements.

Footnotes

1 For full text of the revised trademark law, see China Law & Practice, December 2001/January 2002, 15(10), pp. 75-89.

2 They do not, however, contain provisions relating to criminal enforcement against counterfeiters. For a review of recent developments in criminal enforcement under the Criminal Code, see Joseph Simone, “Anti-Counterfeiting in the PRC: Update on Criminal, Civil and Administrative Enforcement,” China Law & Practice, May 2002, 16(4), pp. 22-28.