Highlights of Amendments to the Chinese Trademark Law 

Introduction

On 23 April 2019, the 10th Session of the 13th Standing Committee of the National People’s Congress (NPC) passed the Amendments to the Chinese Trademark Law (the “Amendments”). This has been the forth amendment since the Chinese Trademark Law was first promulgated in 1983. The Amendments will come into effect from the 1st November 2019. The changes are aimed towards tackling trademark squatting practices and thereby improving the intellectual property protection regime in China.

This article provides a clarification of the detailed provisions in the amendments of the Chinese Trademark Law. 

Applications for trademark registration in bad faith without intent for use shall be refused

Under Article 4 of the Amendments a new addition explicitly provides that any trademark application shall be intended for use; applications which are filed in bad faith without intent to use the trademark in production and business operations shall be rejected. This is a significant progress compared to the current legislation as it empowers the China Trademark Office (“CTMO”) to reject trademark applications made in bad faith in the preliminary examination stage, whereas according to the current statutes trademarks which were registered in bad faith may only be challenged through objection and nullification procedures at a later stage. Such amendment means the “first-to-file” principle is compromised and the restrictions will be imposed from the beginning of trademark registration procedure.

On the 12th February, China’s National Intellectual Property Administration circulated the “Rules to Strengthen the Administration of Trademark Application Activities (Draft for Comments)” which was open for public consultation. The draft rules list eight categories of trademark applications which will be defined as an “abnormal application”. It shows China is going to follow a more heavy administrative approach to tackle trademark squatting by strengthening the regulation and guidance of trademark application and registration.

Opposition/nullification can be raised against trademark registration in bad faith without intent to use after application/registration

Under the current laws and regulations opposition against a trademark registration which has passed the preliminary review can be filed within the 3-month announcement period under the following circumstances: 

• Objection raised by prior rights holder/interested parties whose interest was damaged by the trademark registration; and
• Objection raised by any third party who finds the trademark violates the prohibition regulations. 

Article 33 of the Amendments grants any third party the right to raise opposition against trademarks on the grounds of Article 4 during the announcement period. 

As an extended approach, Article 44 further empowers any third party to file nullification application against the bad-faith registration of trademarks lacking the intentt to use after such trademarks have been successfully registered. 

Together with Article 4, Article 33 and 44 are intended to unify the current practice by establishing a solid legal basis for cracking down on trademark registrations that maliciously hype trademarks and seek improper profits by hoarding trademarks.

Trademark agency is forbidden to proceed with bad faith trademark applications

It is added under Article 19 that trademark agencies are forbidden to represent clients when they know, or ought to know, the trademark to be filed for registration by those clients falls under the circumstances prescribed in Article 4. 

The Amendments also add an additional paragraph at the end of Article 68 stipulating that when an application for trademark registration is filed by a trademark agency in bad faith, an administrative penalty such as a warning or fine shall be imposed; and if a trademark lawsuit is filed in bad faith by the trademark agency, the People’s Court shall impose a penalty accordingly. This addition reinforces the management on trademark registrations applied for in bad faith by increasing the liability and sanctions for trademark agencies.

Punishments for trademark infringement increases

Article 63 of the Trademark Law provides guidance to the people’s courts on the assessment of damages in cases involving trademark infringement. The Amendments introduce the following changes:

• An increase in the amount of punitive damages from treble damages to quintupled damages in circumstances involving bad faith or other “serious circumstances”;
• An increase in the amount of statutory damages of up to RMB 5 million in cases where it is difficult to conduct an actual damages calculation; and
• An additional paragraph was inserted under Article 63 which provides that the court can order the infringer to destroy the products with counterfeit registered trademarks, destroy the materials and tools used for the production of products with counterfeit registered trademarks without compensation. Goods with counterfeit registered trademarks shall not be allowed to enter commercial channels after the counterfeit registered trademarks are removed.

The ever-increasing penalties and disposition of counterfeit goods and tools are highly favored by those brand owners who usually suffer from significant losses arising from the infringement.

Conclusion

As a response to the ever-changing business environment, the Amendments send positive signals about the Chinese trademark legislation and practice by proclaiming the intent to increase infringement liabilities. Although ambiguity still exists with regards to how the applicants shall sufficiently prove their intent for use and how the actual disposition of infringing goods shall be implemented, it is expected that these subjects will be addressed in the amendments to the associated Implementation Rules of the Trademark Law which should follow the amendments to the Trademark Law. 

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