China Trademark office held consultations for the adding amendments to the Trademark Law at the start of 2018. National and international experts received three months for submission of the fourth revision.

At this time China and the United States were vividly negotiating on various issues along with the defense of intellectual property.

Aforementioned events led to the part but quick Trademark Law revision, commencing on 1st November 2019.

The amendments are aimed at two significant points:

  • the trademark’s proliferation (among the relevant topics to reconsider;
  • compensatory remedies for violating entities, rated as blurry and inconclusive.

Trademarks proliferation

A significant amount from 7 billion trademarks registered yearly arising concern as they are applied and registered only to hoard and resell. Part of them is filed in bad faith.

The revision amends two articles of the Trademark Law:

  • Article 4 — the main principle stating the attributes of applicant for a trademark;
  • Article 7 — the good faith principle in an application for trademarks.

Trademark applicants

Article 4 declares that any person who wants to receive legal rights to use the trademark to sell goods or services is may file an application.  This statement could infer that the opportunity to create a trademark shall be granted only to applicants having no capital to provide their production. And yet it is not pinpointed anywhere in the law.

A long perspective State Council proposition from 20 April 2019 on adding the next extract to Article 4: “Any application for the registration of a trademark that is not intended for use shall be rejected.” raised new issues. The National People’s Congress members retorted addressing to the fact that it is usual for legal business to create defensive trademarks to:

  • protect their marks in classes of goods related to their core business;
  • prevent the dilution; or
  • avoid filing the difficult oppositions based on reputation.

Thereafter, the amendment to Article 49, stating the opportunity of the revocation of a trademark by any person with the Trademark Office after three consequent years of non-usage without relevant reason, was made.

As Article 49 charges no obligation to use the trademark first three years after registration, how can the lack of intention to use be a supporting point to refuse the application?

Bad faith

Taking aforementioned into account, the National People’s Congress implanted the ‘willful misconduct point, referring to the Article 7 principle, the new variant provides all that not-intentional bad faith applications shall not be submitted.

Hence, to refuse a trademark application two separate conditions will be needed:

  • Lack of intention to create the trademark by rights’ holder;
  • bad faith filing of documents.

The difficulties in assessment criteria of good or bad faith application caused widening of amends:

  • trademark agents amenability;
  • oppositions and invalidation procedures.

Trademark agents should refuse to be entrusted in knowledge or ought to know about violation by them Articles 15 and 32 and the revised Article 4 (Article 19.3).

Hereafter if the trademarks filed in willful default agent may be admonished or sentenced, if trademark procedures are executed with intentional breach of obligations, they may be sued (Article 68).

Any litigant can relegate oppositions on the belief of the violation of Articles 10, 11 (absolute grounds or refusal), Article 12 (3D trademarks), new Articles 4 and 9, due to amended Article 33. The reference to amended Articles 4 and 19.4 is also added for Article 44 (invalidation).

The following changes made to Article 68 concerning trademark agents seem absolutely excessive:

  • Article 68.1.3 made a reference to Article 4 turns to be excessive, as the new Article 19.3 already contains the new variant of Article 4;
  • New Article 68.4 imposes the obligation to pay for bad-faith registration and submission, without clear definition of the responsible:
  • if it concerns the agent then the earlier version of Article 68 already defines the penalty;
  • in case if it concerns the applicant then its location in the text seems irrelevant. Moreover, it has no legislative history due to the fact the State Council proposal was directed at the agent only.       

Retroactive effect

One more question remains open: will the new Article 4 be applicable to the registered trademark during the process of registration?

In theory, the new law should not cause retroactive effect, so the new Article 4 will not be applicable. But as the matter of fact, in 2001 significant trademarks were influenced by the Trademark Law. On the other hand, court already addressed previous Article 4 to sue bad-faith applicants and non-intention trademark use, which outlined in Article 7.1 of the new Beijing High Court guidelines, added two days after adoption of the new law.

Trademark enforcement

The sum of compensation for a serious act of infringement filed in bad faith referring to the law may be multiplied by three (Article 63). The extent of compensation can reach five times amount according to the last revision. 

Statutory damages (up to Rmb3 million) are provided in case of difficulty of assessment of precise amount of harm or illegal revenue (Article 63). Statutory payments rose to Rmb5 million after the revision.

Moreover, counterfeit goods, equipment and raw products used for their production should be eliminated, except of particular cases. In case if equipment and raw products were not eliminated they cannot be used in business again.

Ultimately, the latest Article 63 deals with the aforementioned issue and clarifies that counterfeit goods are not capable of being used in work even if the trademark is currently discharged.

It is a promising enhancement, because this clarification fixes an omission in the third revision: besides the equipment, the court can order the materials used for the production of the counterfeit goods to be destroyed under procedural request of the rights holder.

But this reform contains restrictions:

  • it concerns registered trademarks only and excludes unregistered famous marks; • ‘counterfeiting’ concerns double-identity cases only (identity of the trademarks and the products), so it is narrower than Article 60, which covers all infringing goods (eg, similar marks on identical or similar goods). It is limited to “goods with a factitious registered trademark”, which excludes all other infringing commodities or any goods labeled by unregistered famous trademarks.

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