Key Changes to China Trademark Law and Practice

From 1 May 2014, the new China trademark law will commence operation. The new law differs in key aspects to the old law, and trademark registration practice will also differ greatly. This article looks at the key changes that all trademark lawyers and owners need to be aware of.
On August 30, 2013, the Standing Committee of the National People's Congress passed the third amendment to the Trademark Law of the PRC. It will become effective on May 1, 2014. The amended Trademark Law has 53 changes covering content from what can be registered as a trademark in China, the application and appeals procedures and deadlines, to trademark protection, and in this article, we highlight some of the more most important changes:
1. The registration of sounds as trademarks
One of the changes in the amended Trademark Law is that “sounds” will be allowed to be registered as trademarks in the PRC. This is consistent with China’s obligations under various IP related conventions and agreements. Since visibility is not a mandatory condition for any signs to be applied for trademark registration any more, as long as any sign, including sounds, are capable of distinguishing goods or services from those of other persons, then such signs can be registered as trademarks. It is estimated that the method of submitting application will be modified accordingly which may result in new obligation/burden to the sound mark applicant to submit or describe the sound sample since sound in not visual. For example, the Implementing Regulations of Trademark Law (draft) provides that the sound mark application shall use a stave divided into bars and showing the musical notes, and submit the same together with a written description and the corresponding sound sample.
As to other non-visual signs, such as scents, they still cannot be registered under the new regime because the relevant authority considers that scents being registered as trademark would be confusing to the Chinese public. As a member of TRIPS, China shall endeavor to give effect to the provisions thereof in legislation and administration. The definition of trademark in TRIPS is so board that even sounds or scents are capable of constituting a trademark. It is a progress that China does not require visibility as a mandatory condition for registration and allows sounds to be registered in the new Trademark Law. It is entirely possible that regulations could be passed in the future allowing scents and other non-visual signs to be registered as trademarks in China.
2. Simplified filing
The new amended law will allow multiclass filing of applications, as well as electronic filing. For applicant’s convenience, the Implementing Rules for Trademark Law (Draft) adds rule of “separation of application”, it means that an applicant may apply for separating the approved part of the application from the refused part thereof to Chinese Trademark Office (“CTO”) within 15 days after receipt of the Refusal Notice. Therefore a rejection for one class of a multiclass application does not necessarily mean that the entire multiclass application has to be rejected by CTO.
In addition, we also note that the new system will allow for office action reports to be issued by the CTO examiners, and for the applicants to then discuss reasons for overcoming any objections raised by the examiners – this was not possible under the old system, and any objection was issued in the form of a formal rejection, requiring appeals to the higher level of the CTO, even for simple objections that were easily overcome through discussion or clarification. Basically, it entitles CTO the right to ask applicant to explain or amend its application depending on necessity of the case. For example, if classification of an application is not right, or the expression of goods name is too wide, CTO will have right to ask the applicant to explain. Whether an applicant respond to such request from CTO shall not affect CTO to make decision in accordance with law. However, it is suggested that applicant fully make use of this opportunity to communicate with CTO upon request for avoidance of unfavorable results that could have been avoided through effective communication.
3. Time limit for examination and appeals
The amended Trademark Law specifies the time limit for the CTO and Trademark Review and Adjudication Board (TRAB) to review cases in an attempt to expedite the registration and review process. Further, timeframes for providing evidence to the CTO or TRAB have been varied downwards from three months in most cases to thirty days. For example, in the Implementing Rules for Trademark Law (Draft), it shortens the time limit from three months to thirty days for providing supplementary evidence and materials in opposition or reviewing proceeding in order to make sure CTO or TRAB finish the trademark review work within the stipulated time limit.
Although it is not the finalized version since the Implementing Rules is still in draft form, it needs to be pointed out that if this change is incorporated into the finalized version, then the strategy of providing evidence will be changed significantly. Currently, most applicants and agencies rely on the additional three months to prepare and collect evidence or materials, as well as notarization and consularisation of such evidence. If the new rules come into effect, foreign applicants in particular, will need to act with haste in order to meet evidence filing deadlines, which we understand will not be extendable under any circumstances.
4. Well-known trademark protection
The amended Trademark Law emphasizes that well-known marks must be recognized on a case-by-case basis and be protected only when the owner of the trademark thinks his rights have been infringed. It means that recognition of well-known marks cannot be brought up discretionally unless the owner of such mark considers his mark have been infringed in a specific case, and the result of such recognition will only be applied to the specific case. It also states that the CTO, TRAB and courts are the only three authorities that can recognize the well-known status of a mark in an infringement action.
In order to further stress that well-known mark recognition is only to recognize the fact that such mark is known or familiar by relevant public other than issuing honor or guarantee from authorities, it stipulates that the wording ‘well-known trademark’ shall not be used on the products, packages or containers, or advertising promotion, exhibitions and other business activities. In case of violation of this provision, the local AIC department shall order rectification of said behavior and may impose a fine of RMB100, 000.
As to unregistered well-known trademarks, it states that “In case where another's registered trademark or unregistered well-known trademark is used as the trade name of an enterprise which misleads the public and constitutes unfair competition, such case shall be handled in accordance with the Anti-Unfair Competition Law of the People's Republic of China”.
5. Fines which can be imposed by administrative authorities
In the case of an administrative action for infringement, the administrative authorities (usually the AIC offices) are able to fine an infringer. The maximum fines have been increased:
a) If there are no illegal gains or the illegal gains less than RMB50,000, a fine of up to RMB250,000 may be imposed;
b) If the illegal gains are more than RMB50,000, a fine of up to five times of the illegal gains may be imposed;
c) A heavier penalty shall be imposed in case two or more trademark infringing activities occurs within five (5) years or other serious circumstances exist.
The new law specifies the standard of fines that may be imposed upon infringers by AIC bureau which is a good sign since “a fine of up to five times of the illegal gains” greatly increase the cost of trademark infringement and is deterrent to the infringers.
6. Calculation of the actual losses for trademark infringement
In case of compensation for infringement upon the exclusive right to use a trademark, the new law specifies methods of calculating actual losses and adds punitive compensation.
a) The amount of the actual losses shall be determined in order of “actual losses”, then “the proceeds obtained by the infringer from the infringement“, and “the multiples of the trademark utilization fee” ;
b) Punitive compensation is added for serious infringement upon the right of using a trademark in bad faith, the amount of compensation may be determined as one to three times the amount calculated by the abovementioned methods;
c) Court may decide the compensation referring to the claim of the right owner and the evidence provided thereby, provided that, the right owner has endeavored to produce evidence but the account books and materials relating to the infringing activities are in possession of the infringer who refuses or provides false materials against court’s order;
d) The compensation’s upper limit is lifted to RMB3,000,000 when it is difficult to determine the actual losses, the proceeds obtained by the infringer from the infringement or the registered trademark license fee by court.
It is worth of mentioning that punitive punishment is introduced in the Trademark Law for the first time and the upper limit of compensation decided by court is lifted to 3,000,000 Yuan. Such amendments will have positive effect on combating trademark infringement as well as protecting trademark owner’s interest. In addition, the burden of proof for right owner has also been reduced which will be good for improving the situation of low compensation due to heavy burden of proof in the past.
7. Exemption from compensation
Exemption from liable for compensating infringement of a registered trademark, including situations that a) the owner of the registered trademark has not used the registered trademark in the three years prior to the lawsuit nor suffered from other losses due to the infringing activities; or b) a party who unknowingly sells trademark infringing goods is able to prove he obtained those goods legally and provide information on the suppliers of the goods.
8. Prohibition on trademark hijacking
Except with forbidding hijacking by trademark agency, a new sub-Article is also added to prohibit hijack a prior used unregistered trademark by applicant who is aware of the existence of such trademark due to contractual, business or other relationships with the owner thereof.
9. Regulations on trademark agency
In order to improve protection of principal from violation by trademark agency, the Amendment adds seven obligations must be abide by the agency, such as informing, abiding by laws and regulations and so on. In case of violating relevant laws and obligations, trademark agency will be given punishing measurements adopted by AIC departments, CTO and TRAB as well as industry association.
The new law will come into effect in about a month. There are still many uncertainties are expected to be specified in Implementing Regulations by TRAB. We will follow up and keep updating the latest news.
ABOUT THE AUTHOR: Fei Dang
Fei Dang is an Associate in the MMLC Group in Beijing.
Copyright MMLC Group
Disclaimer: Every effort has been made to ensure the accuracy of this publication at the time it was written. It is not intended to provide legal advice or suggest a guaranteed outcome as individual situations will differ and the law may have changed since publication. Readers considering legal action should consult with an experienced lawyer to understand current laws and.how they may affect a case. For specific technical or legal advice on the information provided and related topics, please contact the author.

