New amendments to the China trademark law seek to improve the use and protection of trademarks by tackling anti-competitive behavior and simplifying some registration procedures. It also modernizes the existing law by expanding protections for the use of trademarks in e-commerce and on the internet. We look at some of the main proposed changes and discuss the impact they may have on China’s business environment.
The China National Intellectual Property Administration (CNIPA) has released amendments to China’s Trademark Law for public comment until February 27, 2023.
The amendments to the Trademark Law focus in large part on improving the use of trademarks, which includes tackling issues, such as “bad faith” trademark registration, trademark squatting, and trademark hoarding. The ultimate aim of the changes is to improve the consumer experience by strengthening the legitimacy of registered trademarks and improving the business environment by stamping out anti-competitive trademark practices.
Below we discuss a few of these changes and how they may help to optimize administrative resources and improve oversight and management of trademarks.
Adjusted scope of trademarks
The draft amendment has slightly adjusted the scope of the types of elements that can be legally registered as a trademark. Article 4 of the draft amendment maintains the basic definition of a trademark that is in the current Trademark Law, stating that a trademark refers to “symbols that can be used to identify and distinguish the source of goods or services”.
The draft amendment also maintains the same list of symbols that can be registered as a trademark, namely, text, graphics, letters, numbers, three-dimensional symbols, color combinations, and sounds, as well as combinations of the aforementioned elements. However, it also adds the item “other elements”, which, according to some legal experts, loosens the scope of permissible elements and possibly gives unusual types of elements, such as smells or flavors, a stronger legal basis to be registered as trademarks.
Ban on repeat applications and limits on the number of trademarks per owner
Article 14 of the new draft amendment stipulates that, unless otherwise specified, the same applicant can only register one identical trademark for the same commodity or service. It also further clarifies (in Article 21) the specific circumstances under which repeat registration is prohibited.
Specifically, a person cannot apply to register a trademark (for the same commodity or service) that is the same as one that they have previously applied for or registered, or if it has been canceled, revoked, or declared invalid within one year of the date of the registration.
The article also clarifies the exceptions for duplicate applications, which are:
- Due to the needs of production and operation, minor improvements are made on the basis of the actual use of the previous trademark;
- Failure to renew the earlier trademark due to reasons not attributable to the applicant;
- The earlier registered trademark was canceled due to failure to submit the trademark use instructions in time, but the earlier trademark has been actually used;
- Due to reasons not attributable to the applicant, the earlier trademark was revoked due to failure to provide proof of use in the non-use revocation procedure for three consecutive years, but the earlier trademark has been actually used;
- The prior trademark is declared invalid due to conflict with the prior rights or interests of others, but the prior rights or interests no longer exist; and
- Other valid reasons for repeating or reapplying for trademark registration.
According to an official explainer released along with the draft amendment, this amendment seeks to reign in illegal acts, such as malicious repeated application for registration of the original trademark and re-application for registration immediately after the expiration. This will help to strengthen the legitimacy of trademarks and reduce confusion for consumers that results from behavior, such as “relay registration”, in which a company or individual registers a trademark every three years in order to prevent it from being revoked due to non-use for three consecutive years (as per regulations in the Trademark Law).
Clarification of “bad faith” application of trademarks and associated penalties
Related to the regulations on repeat applications mentioned above, the new draft amendment also defines the concept of “malicious” or “bad faith” applications for the first time and stipulates penalties for such behavior.
Article 22 defines “bad faith” trademark registration as:
- Applying for a large number of trademark registrations without the purpose of use, thereby disrupting the order of trademark registration;
- Applying for trademark registration by deception or other improper means;
- Applying for registration of a trademark that is harmful to national interests, social public interests, or has other major adverse effects;
- Violating the provisions of Articles 18 [prohibiting the copy, imitation or translation of a well-known trademark], 19 [restricting agents or representatives from registering trademarks of the principal or represented person in their own name without authorization], and 23 [restricting pre–emptive registration of a trademark that already has a certain level of influence] of this Law, deliberately damaging the legal rights or interests of others or seeking illegitimate interests; or
- Applying for trademark registration in other malicious ways.
The new draft amendments also outline the penalties for violation of the provisions of Article 22. Under Article 67 of the draft amendments, engaging in any of the above behavior can result in a warning and a fine of up to RMB 50,000 (US$7,280). In serious cases, a fine of RMB 50,000 to RMB 250,000 (US$36,402) may be imposed. Any illegally gained income will also be confiscated.
Meanwhile, Article 83 allows for people or businesses that have been impacted by one of the “bad faith” registration behavior described above to file a lawsuit in a people’s court, if the illegal behavior causes a loss. The compensation must cover at least the reasonable expenses paid by the other party to stop the bad-faith application for trademark registration.
Moreover, if the illegal behavior damages national or public interest or causes major adverse effects, then the procuratorate can file a lawsuit in the people’s court.
Clarifying the concept of “bad faith” trademark registration and implementing penalties for violations goes a long way to improve the business environment in China as it protects companies and individuals from anti-competitive behavior and gives them recourse to get compensation. It also provides a much stronger legal basis for filing lawsuits and protecting trademarks, as many courts have previously had to defer to regulations outlined in China’s Anti-Unfair Competition Law in order to rule on trademark disputes over bad faith registrations.
Shortened time limit for trademark opposition
As per the current Trademark Law, a prior trademark rights holder or interested party is permitted to raise objections to a trademark registration within a given period, if they believe the registration violates certain provisions of the law. The new draft amendment shortens this objection period from three months to just two (Article 36).
In both the draft amendment and the current Trademark Law, in the event that an objection is raised within the permitted objection period, the relevant authorities are required to listen to the evidence brought forward by the complainant and the applicant and make a decision on whether or not to grant the trademark registration within 12 months of the expiration of the objection period.
However, in the current law, if the relevant department decides not to approve the registration and the applicant is dissatisfied with this outcome, they can request a review. The authorities will then have another 12 months to conduct a review and make another decision. If this review is unsuccessful in changing the outcome, the applicant can file a lawsuit with the people’s court.
Meanwhile, in the relevant article of the draft amendment (Article 39), the review procedure in the event of rejection has been removed, meaning that the applicant’s only recourse is to directly file a lawsuit.
According to the explainer released with the draft amendment, these changes have been made in order to improve efficiency and reduce costs of rights acquisition and protection for all parties. Removing the review procedure in the event of a decision not to register a trademark based on an objection will remove 12 months of administrative review time, while the shortening of the objection period will also allow people to obtain trademark rights faster.
New provisions on trademark revocation
In order to strengthen the “use” principle for trademarks, the new draft amendments propose three new scenarios in which the authorities have the right to revoke the registration of the trademark. The current trademark law already outlines a few scenarios in which a trademark can be revoked, and the new draft amendment adds a few more.
The first is in the context of the requirement for trademark holders to provide an explanation for the use of the trademark every five years, discussed above. In this process, the IP Administration Department of the State Council is required to conduct spot checks to verify the authenticity of the information that the applicant gives when explaining what the trademark is or will be used for. This department can also require the applicant to provide more information when necessary. If in this procedure it is found that the information or explanation provided is invalid, then the trademark can be revoked.
In addition to the above scenario, Article 49 of the draft amendments also outlines three more specific scenarios in which a trademark can be revoked. These are:
- The use of the registered trademark causes the relevant public to misunderstand the quality and other characteristics of the product or the place of origin;
- The registrants of collective trademarks and certification trademarks violate the provisions of Article 63 of this Law [which outlines illegal behavior for the registration of collective trademarks], and the circumstances are particularly serious; and
- The use of a registered trademark or the exercise of the right to exclusive use of a registered trademark seriously damages the public interest and causes major adverse effects.
Any entity can request that a trademark is revoked if any of the above scenarios are identified. However, the latter two are scenarios in which the IP Administrative Department of the State Council has the power to revoke a trademark directly, thus greatly expanding the power and obligations of the administrative authorities.
The main intent of these amendments is to reduce the number of trademarks that are either idle or being improperly used, which will be conducive to both strengthening consumer rights and creating a healthier business environment. However, more details on the review standards for determining whether a trademark use is invalid are still needed in order to implement these provisions effectively.
Higher commitment obligations for trademark owners
The draft amendments require trademark owners to prove the need to use a certain trademark more frequently in order to maintain ownership over it.
Article 5 of the draft amendments states that if an individual or entity wants to obtain the exclusive right to use a trademark for use or promised use on its goods or services, then they must apply for trademark registration with the Intellectual Property (IP) Administration of the State Council.
Meanwhile, Article 61 of the draft amendments requires trademark registrants to explain to the IP Administration Department of the State Council the use of the trademark on the approved goods or valid reasons for non-use every five years from the date of the initial approval of the trademark registration. This must be done within 12 months after the five-year period is up. The registrant can make a collective statement on the use of multiple trademarks. If an explanation is not provided within the 12-month time limit (and the subsequent six-month grace period), the trademark registration will be canceled.
This is also more in line with international trademark regulations and practices. It supplements and improves the trademark revocation procedures under the current trademark law, which is currently mostly conducted through “passive application”. If implemented, it will bring higher requirements and greater challenges for trademark registrants to use and maintain their trademarks.
Clarification on rights to prohibit trademark use
The draft amendments provide more clarification on the scenarios in which a trademark holder does or does not have the right to prohibit or restrict another entity from using their trademark.
Article 62 of the draft amendments states that the exclusive rights owner of a registered trademark does not have the right to prohibit others from using the trademark in certain ways that are consistent with commercial practices. These are:
- The use of one’s own name, designation, or address in good faith;
- Describing the type, nature, quality, function, use, weight, quantity, value, geographical origin, and other characteristics of the commodity, or using the place name contained in the registered trademark, the common name of the commodity, as well as graphics, model, technical term, or other signs related to this description; and
- Using the registered trademark only to indicate the purpose, applicable object or application scene of the product, except for where it may mislead the public. The owner of the exclusive right to use a registered trademark has no right to prohibit others from legitimate use of the shape of the product itself contained in the registered trademark of the three-dimensional mark, the shape of the product that is necessary to obtain technical effects, or the shape that makes the product have substantial value.
In addition, if an identical or similar trademark has been used by another person before the applicant applies for trademark registration, and the trademark has gained a certain level of influence prior to the registration for its use on similar goods, then the owner of the trademark is not permitted to prohibit the user from continuing to use the trademark in the way it was originally used. However, they can request the previous user to add another element to distinguish the trademarks.
The main purpose of this amendment is to prevent exclusive rights holders from abusing their trademark rights to prevent other people from engaging in normal and permissible business activities with the trademark.
This provision distinguishes between the “primary meaning” and “secondary meaning” of the trademark. A person who registers a trademark that has already been used by another person (who is using it in the “primary meaning”), only has exclusive rights over the trademark for the scope of use that it was registered for (the “secondary meaning”). They therefore have no right to prohibit the person from using the trademark within the scope of the primary meaning. This improves healthy competition between businesses as it prevents behavior, such as trademark squatting of another business or person’s name.
E-commerce and online trademark included in scope of use
A significant change in the draft amendments is the addition of regulations on the use of trademarks for e-commerce and on the internet for the first time.
Article 57 of the current trademark law lists seven actions that are considered an infringement of the exclusive rights of the trademark holder. The draft amendments add another item to the list (Article 72 of the draft amendments) stating that it is considered an infringement of the exclusive rights of the trademark holder to “use, without the permission of the trademark registrant, a sign that is identical or similar to another’s registered trademark in e-commerce related to the same commodity or similar commodities, thereby misleading the public”.
In the past, when handling cases of trademark infringement online, legal practitioners had to consider the circumstances of the individual case and the damage caused to assess whether or not the behavior is considered a violation. With this addition, cases of online trademark infringement will have a much stronger legal basis to prove a violation has occurred.
The draft amendments have also added the use of trademarks “through the internet or other information networks” to the scope of what is considered the “use” of a trademark under the law. This further underscores the fact that online trademark activity carries the same legal liabilities as those that happen offline.
These amendments will go a long way to get China’s trademark legislation up to speed with China’s rapidly developing digital environment. They also provide space for the inclusion of trademarks for new types of technology and new online application scenarios within the scope of legal protections in the future.
How will the amendments help improve China’s business environment?
The draft amendments to the Trademark Law make concerted attempts to improve China’s business environment and improve the strength of trademarks to make the system more trustworthy for consumers. This includes tackling anti-competitive and monopolistic practices, such as repeat registrations, trademark hoarding, and other bad-faith registration activities.
In addition, it also lowers certain administrative barriers, such as shortening the review periods for objections to trademark registrations, which could help to accelerate registration procedures and reduce administrative burdens. The expansion of law enforcement powers may also help to tackle trademark violations and enable the authorities to better pursue complaints of trademark infringement by companies, thus strengthening the enforcement of the trademark regulations.
These are all positive steps toward improving the ease of business in China and fostering a fairer and more competitive business environment.
China Briefing is written and produced by Dezan Shira & Associates. The practice assists foreign investors into China and has done so since 1992 through offices in Beijing, Tianjin, Dalian, Qingdao, Shanghai, Hangzhou, Ningbo, Suzhou, Guangzhou, Dongguan, Zhongshan, Shenzhen, and Hong Kong. Please contact the firm for assistance in China at firstname.lastname@example.org.
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