New amendment of the trademark law

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​by Christina Gigler | published on June 25, 2019 | reading time approx. 4 minutes

 

On 23 April 2019, the Standing Committee of the National People's Congress passed the fourth amendment to the Trademark Law of the People’s Republic of China (hereinafter referred to as “TML”), which will be effective upon 1 November 2019.

 

 

  

Key changes to the trademark law

The new amendment of the TML offers new tools against IP infringement, which have been long-awaited by foreign as well as domestic companies and trademark owners.

 

 

Bad faith applications

The most ground-breaking change is probably the addition to Art. 4 para. 1 TML, which specifically states that an application for the registration of a bad faith trademark which is not for the purpose of use shall be rejected. Based on Art. 19 para. 3 TML, a trademark agency can take proactive measures already during the examination stage and shall not accept such bad faith trademarks if it knows or should have known that the trademark is not intended to be used.

 

Accordingly, a new ground for ex post opposition and invalidation have been added into Art. 33 and 44 TML. Any party (not only a holder of prior rights or an interested party) that is of the opinion that a trademark constitutes such infringement may raise objections to the China Trademark Office (hereinafter referred to as “CTMO) within three months from the date of the preliminary announcement of the trademark, which means a cause of action for unregistered trademark holders. In addition, a registered trademark shall be declared invalid by the CTMO if it constitutes a bad faith trademark.

 

Yet this is not enough – even the liability of the trademark agencies for facilitating bad faith trademark applications and registrations is strengthened. Whoever maliciously applies for trademark registration shall be subject to a warning, fine or other administrative punishment in light of circumstances.

 

Moreover, malicious trademark litigants shall be subject to the punishment imposed by the people's court. Although vaguely worded, this provision probably alludes to the existing practice that trademark squatters conduct proceedings against trademark owners in order to collect high royalties or to conclude lucrative settlements.

  

Higher amount of damages

According to the new Art. 63 para. 1 and 3 TML, the amount of direct damages for malicious infringement increases from “not less than one time but not more than three times …” to “not less than one time but not more than five times” the amount determined either according to the actual loss suffered by the right holder, or according to the profits gained by the infringer, or by reference to the multiples of the trademark royalties. In addition, also the amount of statutory damages rendered by the people`s court raises from “up to RMB three million” (about EUR 390.000) to “up to RMB five million” (about EUR 650.000). 

 

Destruction of counterfeit goods, materials and tools

Lastly, the revised TML addresses a controversial issue, which has been highly debated in the past. According to the new Art. 63 para. 4 TML, the people's court shall order the party concerned to destroy the goods as well as the materials and tools mainly used for manufacturing the goods carrying the counterfeited registered trademarks upon the request of the trademark owner; and no compensation shall be paid.

 

Furthermore, none of the goods carrying counterfeited trademarks may enter into the commercial channels after the sole removal of the counterfeited trademark.

 

This is in fact a significant change and improvement for victims of infringement, as under the previous law, goods found to be infringing or counterfeit could reenter the market if the infringing trademarks were removed from the goods, which led to continuing profits triggered by further sales of the products..

 

Still uncertain

Despite this positive development in itself, some uncertainties remain in the enforcement of the new provisions.

As the implementing rules for the new TML have not yet been published, some aspects regarding the interpretation and practical implementation of the new amendment remain unclear. For instance, with regards to fighting bad faith trademarks it is still uncertain if the two aspects mentioned in the new TML, namely “bad faith trademark” and “not for the purpose of use” are cumulative conditions or if “not for the purpose of use” is a mere example for a bad faith trademark.

  

Interestingly enough, the China National Intellectual Property Administration released the Provisions on Regulating the Application and Registration of Trademarks (hereinafter referred to as “Draft for Comments”) on 12 February 2019, which as well aim to provide concrete legal basis and standards to curb bad faith trademarks. In particular, Art. 3 of the Draft for Comments lists a number of acts which are regarded as “abnormal application for trademark registration”, number six of which reads “the application for trademark registration lacks a real intention to use the trademark, and there is no actual need to obtain the right to exclusive use of the trademark for a commodity or service”; whereby the relation between the new TML and the Draft for Comments is not quite clear. Nevertheless, if one uses the Draft for Comments as a point of comparison and interpretation, one could use, inter alia, the following further points mentioned in Art. 3 Draft for Comments as further examples of “bad faith”:
  • apply in advance for the registration of a trademark that has been used by others and has certain influence, and improperly seize the goodwill of others;
  • or applying for trademark registration repeatedly, obviously with improper purposes.

 

Furthermore, it is uncertain to what extent the CTMO will require evidence of bad faith or the intended use of the trademark, in particular what evidence will be required and how high the hurdle for sufficient evidence will be.

  

However, it can be assumed that trademark “hoarding” will most likely be regarded as bad faith trademark application/registration.

 

Conclusion

We will keep a close eye on further developments and hope that the implementing rules, which we expect to enter into force before the actual effective date of the new TML (1 November 2019) will bring some light into the darkness and clarify some of the still uncertain aspects mentioned above.

 

Nonetheless, one must also reckon with the fact that one is none the wiser even after the implementing rules have come into force, as they are often vaguely formulated or fragmentary. This means that it is often only the actual implementation of the new provisions by the local authorities that is important in practice, which only solidifies and consolidates after a certain adaptation period.
 

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