Eight things you need to know about the new Trademark Law

This enlargement of the trademark family may attract a lot of new filings from those countries where sound trademarks have already been registered. The China Trademark Office (CTMO) is expected to release the relevant examination procedure, which will be the next focus of public attention.

Unfortunately, the Revised Trademark Law failed to cover single colour trademark registration, which was under heated discussion during this revision process.

2) Procedure facilitation

Time-limit

This revision will be the first time in PRC Trademark Law history that a statutory time-limit has been set for trademark examinations by both the CTMO and Trademark Review and Adjudication Board (TRAB).

E-filing

The CTMO has been allowing electronic filings for several years through a trial pilot programme. However, this practice is now officially and explicitly written into the Revised Trademark Law.

Multi-class application

The Revised Trademark Law also simplifies the registration procedure by allowing an applicant to submit one application for a trademark in multiple classes. Current practice only allows the filing of one trademark in one class and additional trademark applications were required for additional classes.

Administrative Office actions

The proposed change to expand the use of office actions will offer trademark applicants an opportunity to present additional arguments or amendments to their application if required by the CTMO.

Renewal

A renewal application can be filed 12 months before expiration, compared with six months under the old law. The six month grace period will remain.

All these changes are favourable to trademark applicants. Moreover, this may have an effect on shaping a different strategy in trademark prosecution, which trademark practitioners should pay attention to.

3) Changes to the opposition procedure

The CTMO's opposition procedure was materially changed in the Revised Trademark Law. Firstly, it strictly limits the party that can file an opposition and the grounds for their opposition. In the past, any party could oppose any trademark on any grounds (i.e., absolute grounds or relative grounds), but the Revised Trademark Law only allows the owner of a prior right or an interested party to file an opposition on relative grounds before the trademark is registered. This change may reduce the number of opposition cases and help alleviate the bad faith opposition filing problem.

If an opposition claim is denied by the CTMO, the CTMO will allow immediate registration and the application will no longer be pending until it is resolved in the subsequent appellate procedure. An opposing party's only recourse for invalidating trademarks is through a new procedure – invalidation. As many international brand owners are generally the ones who file these oppositions, this change greatly affects the trademark strategy of overseas brand owners in China. If a brand owner loses their opposition filing, they can only attempt to invalidate the trademark and will face the disadvantageous situation of the bad faith applicant receiving registration approval. In the past, the bad faith applicant was unable to register the trademark until the situation was resolved, but under the Revised Trademark Law, the bad faith applicant will be allowed to use the trademark until it is invalidated.

In this regard, it is strongly recommended for overseas brand owners to focus on opposition first, instead of the previous practice of only getting serious at the review procedure or in court procedure.

4) Trademark owner protection

Confusion

The Revised Trademark Law introduces a confusion ground for the first time. Article 57.2 prohibits any party “without the consent of the owner of the registered trademark, to use a trademark that is similar to a registered trademark in relation to identical goods, or uses a trademark that is identical with or similar to a registered trademark in relation to similar goods, which can easily cause confusion”.

Although the principle of confusion has been used in practice for long time, this is the first time it has been written in the law. It will help the Administration for Industry and Commerce (AIC) or court to fairly decide trademark infringement cases when the trademarks are similar or the goods are similar based on customer confusion.

Damages calculation

The damage is the actual loss suffered by the trademark registrant, or the profit earned by the trademark infringer if the actual loss is hard to determine. Where the actual loss and infringer's profit are all hard to determine, the damages can be a multiple of what the courts consider to be a reasonable licence fee. Under the current law, the trademark registrant can choose its actual loss or infringer's profit.

The alleged infringer will be required to provide its financial books as evidence to show the profits earned, which was previously difficult for trademark owners to obtain. Failing to obtain these records meant that the only evidence the court would be able to use to calculate damages were based solely on the evidence that could be provided by the trademark owner.

Punitive damages

The Revised Trademark Law proposes punitive damages, which is the first time these have been introduced in China's IP laws. This is designed to punish severe trademark infringement on bad faith and the damages will be one to three times higher than normal damages.

Statutory damages

The Revised Trademark Law increases the cap on statutory damages from Rmb500,000 ($82,000)to Rmb3 million. This is a significant increase, which is one of the highest statutory damages seen in all IP legislation and will effectively restrain trademark infringement.

No compensation on non-use of a trademark

It is also worth mentioning that the Revised Trademark Law provides the possibility of no compensation to the trademark owner if the trademark owner cannot demonstrate its use of the trademark in the past three years and cannot prove any other loss suffered. For brand owners and trademark practitioners, they must pay attention to the collection of evidence of use in their routine work.

5) Right of prior use and fair use

The right of prior use is introduced in the Revised Trademark Law. A person or entity may continue to use its trademark even after an identical or similar trademark is registered in identical or similar goods and services, if it has used the trademark before the application date of the trademark and obtained a certain influence. However, the continued use is limited to the original scope and the trademark registrant may ask the prior user to attach alterations to its trademark to differentiate the goods or services provided by the two.

However, no definition of “original scope” or “influence” is mentioned in the Law. We may need to wait for the interpretations from the State Council, CTMO or court.

The Revised Trademark Law stipulates that the trademark registrant cannot prevent others from using the generic name, picture, model type of the goods, or descriptive features of the goods, or geographic name which are included in the registered trademark. Under the new law, using these elements is deemed as a fair use and does not constitute infringement of a trademark right.

6) Well-known trademarks

There has been controversy in recent years regarding the use of well-known trademarks in large advertising campaigns and publications in China, which has encouraged Chinese companies to apply for well-known trademarks in a chaotic manner. Many local trademark owners are running after a title of well-known trademark for business promotion purposes. In order to stop this trend, the Supreme People's Court, CTMO and TRAB have enacted very strict rules for granting well-known status.

In the Revised Trademark Law, it is stated that the term well-known trademark should not be used on goods, packages or containers of goods, or in advertising, exhibition or any other business activities, and violation of the non-publicity clause is subject to injunctions and monetary penalties. This change, we assume, will reduce the volume of applications and the rules for granting well-known status might get back to normal.

7) Conflict between trademark and trade name

The Revised Trademark Law makes it clear that the PRC Anti-unfair Competition Law (中华人民共和国反不正当竞争法) will be applied if any company uses a registered trademark or a well-known unregistered trademark as its trade name and causes public confusion.

8) Obligations on trademark agencies

The Revised Trademark Law introduces for very specific obligations on trademark agencies. Besides the duty of confidentiality, it requires trademark agencies to notify applicants where the trademark could not be registered and requires the trademark agencies to refuse work from an applicant if the agency knows or should know the application is infringing a third party's prior right or the application is filed in bad faith. In practice, there are many trademark agencies helping their clients to seek unfaithful trademark registrations. The Law seems to make a straightforward move to restrict the bad faith filings in some way, but it also seems to put a heavy and unreasonable burden on the trademark agencies.

Ambiguity remains

For the first time in law, the principle of honest and good faith has been introduced in Article 7 of the Revised Trademark Law. The principle was once mentioned in the 1995 version of the Implementing Regulations, but removed in the 2002 version. Article 7 will certainly play a positive role in guiding the trademark practice to be honest and in good faith. However, it has caused a certain ambiguity over whether it should be applied as a direct legal ground for proceedings such as opposition and invalidation.

We believe that Article 7 cannot be applied as a direct legal ground because the legal grounds for filing these proceedings are close-ended and Article 7 is not listed. For example, Article 33 is clear that only a prior right holder and interested party can file an opposition based on Articles 13.2, 13.3, 15, 16.1, 30, 31 and 32. Article 45 is clear that prior right holders or an interested party can invalidate a registered trademark based on Article 13.2, 13.3, 15, 16.1, 30, 31, 32 within five years. Article 7 is not explicitly written in the two clauses. Also, the Revised Trademark Law does not provide any explanation on whether there are some other legal grounds parties can adopt in filing opposition or invalidation proceedings. In this regard, it might be impossible to cite Article 7 as a direct legal ground for these proceedings.

The TRAB echoed this opinion in one of its latest announcements, when the Board stated that “although this provision cannot be cited as a direct ground in dealing with trademark cases, it is able to play a guiding role for trademark parties to be honest and trustworthy, and use and registered trademark in a correct way. In specific cases, the trademark authorities shall correctly grasp the true legislative intent of this rule, and reasonably determine the trial standards.”

In practice, the CTMO also refused to accept the principle of honest and good faith in the PRC General Principles of the Civil Law (中华人民共和国民法通则), as well as other legal grounds in the PRC Anti-unfair Competition Law (中华人民共和国反不正当竞争法) and the PRC Contract Law (中华人民共和国合同法). The CTMO only relies on the limited grounds listed in the Revised Trademark Law. Similar to what was stated by the TRAB, the CTMO believes that “the general principles such as the principle of honest and good faith have already been reflected in limited grounds listed in the Trademark Law, and therefore the CTMO will not accept other legal grounds.”

However, we tend to disagree with the CTMO and TRAB on this as sometimes it is difficult to find a specific clause in these limited clauses to stop an obvious unfaithful trademark squatter. For example, one case we assisted on was to oppose a Chinese individual who filed a trademark, which is identical to a famous UK fashion company in the same category. The Chinese individual stated on its website that its products are from a UK fashion company. However, as the UK fashion company cannot prove that its trademark is a well-known trademark in China and cannot seek well-known trademark protection, it cannot stop this unfaithful registration in the opposition procedure, even if the trademark applicant is obviously unfaithful.

Therefore, we believe that Article 7 will cause trademark owners difficulty in fighting against trademark squatters in such an ambiguous arrangement. We believe an ideal way of solving this problem is to put Article 7 as a catch-all clause for legal proceedings such as opposition and invalidation as a direct legal ground. However, as we stated above, it seems that the legislators and administrator still do not want to do so. We will see what will happen in the future cases whether they will change their views.

Waiting for the Implementing Regulations

There are many issues that need to be further clarified. We will expect the State Council to release the Trademark Law Implementing Regulations before the effective date of the Revised Trademark Law. The CTMO will release certain notices from time to time or the Supreme People's Court may release a judicial interpretation, which might set out more detailed rules on certain issues.

For example, it might focus on the guidance of registering a sound trademark, further rulings on the trademark review period (circumstances leading to suspension of the period, the change of amendment or evidence exchange period), definitions of severe trademark infringement and multiple trademark infringement and the management of trademark agencies. Moreover, it will be very interesting to see what will happen on the violation of the clause prohibiting well-known trademark advertisement.

Ding Xianjie and Yao Di, King & Wood Mallesons, Shanghai