Amendment of the PRC Trademark Law

The protection of intellectual property in the People's Republic of China has long been one of the biggest challenges for the business of foreign companies. The reasons for this are complex and have both factual and legal elements. From a factual point of view, the increasing complexity of modern business in a more and more digitalised world as well as the frequently encountered creativity, professionalism and adaptability of the perpetrators should be mentioned above all. With regard to existing legal loopholes, the Chinese government is in a constant race against the perfidious ingenuity of potential perpetrators. Legislative reforms in all relevant areas (trademark law, patent law, copyright law, competition law, criminal law, civil procedure law, etc.) are always the starting point for a veritable flood of administrative regulations implementing the laws, judicial interpretations and targeted enforcement campaigns by competent authorities. This has led to tangible successes in the past. In the field of trademark law, two very recent decisions from Shanghai (link in Chinese) and Beijing (link in Chinese) can be cited as examples, in which the respective perpetrators were sentenced to fines in the millions and - in the case of the defendant in the Shanghai proceedings - to several years in prison.

Despite all government efforts, just under 10 percent of the companies surveyed in the current Business Confidence Survey 2022/2023 of the German Chamber of Commerce in China state that the infringement of intellectual property rights is one of their greatest operational challenges. 23 percent of the companies rate the legal protection of their intellectual property as insufficient. Inadequate legal protection is even more important from the perspective of companies in the chemical industry (44 percent) and in manufacturing (34 percent). The latest European Business in China Business Confidence Survey of the European Chamber of Commerce provides similar results, according to which a lack of intellectual property protection is even perceived as the number one regulatory hurdle by companies from the retail sector.

Against the background of this sentiment, this article would like to take a closer look at the recently initiated revision of the Trademark Law of the People's Republic of China, the first draft of which with extensive amendments was published by the China National Intellectual Property Administration ("CNIPA") on 13 January 2023 for public comments until 27 February. With regard to the following overview, however, it should be taken into account that the draft is only the first phase of the legislative process, which will presumably comprise two, possibly even three readings, and that our experience shows that the final revised Trademark Law is unlikely to enter into force before the end of 2023 or beginning of 2024.

The first important change concerns the protection of so-called ‘well-known trademarks’. These are marks that have achieved an outstanding degree of recognition in the relevant public and therefore enjoy protection under certain circumstances even without formal registration in China. Under the current law, unregistered well-known trademarks could only be used to oppose the registration of another trademark if the registration concerned identical or similar goods or services. The draft now also provides for corresponding protection for non-similar goods. The draft also explicitly states some already existing principles, such as the principle of case-by-case examination, and adds additional criteria for determining the reputation of a trademark, in particular information on the application/registration of the trademark in China and abroad as well as the value of the trademark. It is also clarified that the unauthorised, misleading use (and not only application/registration) of a well-known trade mark is also prohibited.

A new provision on the prohibition of repeated registrations has been inserted. Accordingly, a new application for trademarks for the same goods of identical trademarks already applied for or registered by the same applicant shall in principle be prohibited. This also applies to identical trademarks which have been cancelled, revoked or declared invalid within one year before the renewed application. Only in exceptional cases is re-registration permissible, namely when the applicant agrees to the cancellation of the earlier trademark or if one of six exhaustively listed grounds applies (for example, legitimate minor improvements to the earlier trademark).

Of high practical relevance are proposed amendments on the malicious filing of trademark applications. The last revision of the Trademark Law in 2019 could only partially remedy the various related problems. Therefore, CNIPA may have deemed it necessary to list the most common forms of malicious trademark applications not only in internal examination guidelines of the authorities, but also explicitly in the Trademark Law:

The above-mentioned prohibition is accompanied by newly introduced sanctions for infringements, which include fines of up to RMB 250,000, the confiscation of unlawfully obtained income as well as the possibility of suing for damages for infringed persons. According to the draft, the latter also applies to cases in which a person has suffered damages as a result of legal proceedings having been maliciously instituted against him or her for alleged trademark infringement.

Also very significant in practical terms is the proposed option to be able to transfer trademarks applied for in bad faith directly to the rightful trademark owner upon request in the event of a declaration of invalidity. This option is intended to make it easier for owners of well-known trademarks, principals or holders of prior rights to obtain registration of the trademark rights to which they are entitled in invalidation proceedings without having to go through the entire registration procedure, including required time limits and restrictions on re-application. CNIPA will, at the request of the interested third party for assignment, examine whether there are other (relative or absolute) grounds for invalidity against assignment, whether the assignment could be misleading or otherwise have an adverse effect. If this is not the case, CNIPA will grant the request for transfer. In its decision, CNIPA may determine immediate effectiveness or a transitional period during which any disposition of the trademark rights by the new owner is prohibited, except for dispositions necessary to maintain the effectiveness of the trademark (such as acts of use of the trademark to avoid cancellation or renewal applications).

In future, according to the draft, cancellation of a trademark should to be possible in 3 further cases in addition to three years of non-use and development into a so-called "generic trademark". These are:

The draft also introduces a new obligation for a periodic declaration on the status of trademark use by the trademark owner. Such a declaration must be filed with CNIPA within twelve months of the expiry of five years from the effective date of the trademark. Several trademarks of the same trademark owner may be combined in one declaration. If no declaration is received by CNIPA within the respective time limit, CNIPA will invite the trademark owner to make a declaration within a grace period of a further six months. If no declaration is received by the end of this second period or if a declaration submitted, even after the possibility of rectification, is not sufficient to convince CNIPA of the required trademark use, CNIPA will declare the trademark invalid.

This newly created obligation obviously pursues the legitimate purpose of actively involving trademark owners in the supervision of lawful trademark use. However, for trademark owners - especially those with a large number of registered trademarks - this increases the administrative burden and, above all, the risk of losing the rights to their own trademarks quite considerably.

In an effort to make the supervision and judicial and non-judicial settlement of disputes concerning rights to trademarks even more effective, CNIPA proposes further notable improvements in the draft. 

This includes, first of all, the possibility to settle disputes not only through administrative or judicial proceedings, but to have them decided by an independent arbitral tribunal by virtue of an arbitration agreement. This would open up another way for the parties to settle disputes quickly and would bring with it the familiar advantages of arbitration proceedings (speed, anonymity, greater control over the composition and proceedings before the arbitral tribunal), but at the same time disadvantages (higher costs, less procedural competence of arbitral tribunals compared to people’s courts).

In addition, the powers of the competent authorities to prosecute trademark infringements are extended. Evidence, documents, records, business correspondence, audio-visual material, electronic data and other materials related to alleged trademark infringements are included in the range of materials that may be inspected and copied by the authority. Evidence that is likely to be lost or difficult to obtain in the future may be registered in advance by the authority and kept for further use in the proceedings. Furthermore, according to the draft, the suspected trademark infringer's bank account may be searched and queried.

The people’s procuratorate are given the power to bring actions before the people's courts in the public interest if an infringement of the exclusive right to use a trademark also affects national or other public interests. This power is subject to the proviso that neither judicial nor administrative proceedings are conducted at the same time in the same matter.

Finally, the draft contains some additions that are intended to bring about a better interlocking and acceleration of procedures between administrative authorities, prosecution authorities and courts.