It has long been a complaint of companies doing business, or wanting to do business, in China that Chinese trademark law does not do enough to protect the rights of brand owners.
Legislative amendments were recently passed in China that are intended to strengthen protection for brand owners, discourage trademark infringement and unfair competition, extend protection to non-traditional marks, and streamline registration and opposition processes.
Highlights of the changes that will come into effect on May 1, 2014, are as follows:
1) Harsher Penalties for Infringers
Infringers will face increased fines based on revenue from the illegal use of a trademark. Repeat infringers will face heavier fines.
Maximum statutory damages have also been increased from 500,000 yuan (approximately C$84,000) to 3,000,000 yuan (approximately C$500,000). The maximum compensation can be tripled if it is determined that the infringement was committed in bad faith. The definition of “bad faith” must still be clarified.
Another welcome change is that infringing companies can be forced to disclose sales records for the assessment of damages. If the infringer refuses, damages can be awarded based on the claims of the trademark owner.
2) Good Faith Provisions
The new law contains a provision that trademark applications must be used and registered in good faith.
The amendments provide a means for trademark owners to oppose the registration of identical or similar marks by distributors, manufacturers, or others with whom they have a prior relationship.
The new law also places obligations on trademark agents to act in good faith, e.g. by not handling a trademark application when the agent is aware that the client is acting in bad faith or infringing another party’s rights.
3) Multiclass applications are permitted
Applicants will no longer need to file separate applications for each international class of goods and services. We are hopeful that this will mean reduced costs for our clients who have goods and services in a variety of classes.
4) Trademark Examination Timelines
Timelines have been set out to shorten the registration process. Under the new law, the timeline for the initial examination of an application is nine months.
5) More Limited Right to Oppose
Oppositions based on relative grounds, including confusion with a prior right, may only be filed by the owner of the pre-existing right or an interested party. Prior to the changes, anyone could oppose on relative grounds.
6) Removal of the Opponent’s Right to Appeal Registration
If the opposition is decided in favour of the applicant, the mark will proceed directly to registration with no opportunity for the opponent to appeal. The opponent may file an invalidation action post-registration. However, the opponent would be at risk of infringing the applicant’s trademark until a decision to invalidate the registration is rendered.
This change was presumably meant to restrict vexatious oppositions, but has been criticized for ostensibly favouring bad faith applicants. As a result of this change, opponents will need to place greater emphasis on putting their best case forward at the opposition stage.
7) Registration of Sound Marks
Under the new law, sound marks are now eligible for registration.
8) Well-known Trademarks
The amendments clarify how and when a trademark will be recognized by authorities as a well-known trademark and prohibits the use of the term “well-known trademark” on products, packaging and advertising.
Overall, the changes appear to move China’s trademark law in the right direction, although the full impact of the law will depend on how it is applied in practice.