July 04, 2014

The third amendment to the People’s Republic of China (the “PRC”) Trademark Law (the “Amendment”) and corresponding implementing regulations came into effect 1 May 2014 and introduce a variety of effects to streamline trademark filing procedures, deter trademark hijacking, and widen the scope of trademark use in the PRC.

This CS Alert outlines key effects of the Amendment as understood in the early stage of implementation and is relevant to parties relying on trademarks registered in China.

Streamlined Procedures
Expedited Timeframe
New time-limits for Chinese Trademark Office (“CTMO”) and Trademark Review and Adjudication Board (“TRAB”) processing of trademark related matters have been implemented across the board. Examples include:

CTMO preliminary publication should occur within 9 months of submission of a trademark application

CTMO decision on an opposition application should occur within 12 months (plus a 6-month extension if allowed) of expiration of the preliminary publication period

TRAB decision on an invalidation application should occur within nine months (plus three month extension, if allowed) of a filing made on absolute grounds, and within 12 months (plus six month extension, if allowed) of a filing made on relative grounds.

TRAB review of an appeal against CTMO rejection should occur within nine months (plus a three month extension if allowed) of submission

Renewals of existing trademark registrations can now be accepted up to 12 months prior to the expiration date of the currently registered mark, extended from six months.

Office Actions
The CTMO may issue office actions (e.g., request to clarify or provide additional information) during the examination process, based on which applicants may amend their applications.

Multi-Class Applications
Multi-class applications allow for a mark to be filed in multiple classes using only one application. If the application for one class (of the multi class application) is blocked, then the applicant may apply to split the application which will allow for the unblocked class(es) to proceed unimpeded. As implementing this split is currently administratively burdensome, applicants should consider continuing with single-class filings at this time.

E-Filings
E-filings may increase the efficiency of the filing process; however, this process is subject to continued refinement.

Relative Grounds: Prior Rights Holders Only
While previously any member of the public could apply to oppose a trademark registration on relative grounds (for example, the registered trademark is similar to a previously registered trademark), this is now allowed for prior rights holders only; this is expected to reduce the volume of frivolous applications.

Higher Stakes for Opposition
If the CTMO rejects an application to oppose a trademark registration, the subject mark proceeds directly to registration: The unsuccessful opponent may not appeal the decision, and the only remaining recourse is for the opponent to apply for invalidation of the trademark registration through the TRAB. This change expedites the time period from registration application submission to successful registration, and may deter oppositions that are driven by a motivation to delay successful registration. However, conversely, it reduces the courses of action available to a legitimate trademark owner who is opposing a bad faith trademark registration, and increases the importance of the legitimate trademark owner collecting as much evidence as possible to oppose a trademark registration.

Cancellations Simplified
Cancellations Simplified Any entity may now apply to cancel a registered trademark that has become a generic name for its corresponding goods or services, or whose owner has not used such generic name for a period of three consecutive years without good reason. The CTMO may also cancel a registered mark on its own initiative if the owner fails to properly maintain the registration.

Sounds As Trademarks
Sound marks are now included as a registerable material.

Bad Faith Combating
Good Faith Provision
The Amendment expressly states that trademarks must be registered and used in good faith. Other than allowing for the authorities to now cite this stipulation as a general principle directly during adjudication, the practical outcomes of this addition are not yet clear.

Expanded Opposition Grounds
Trademark registration applications may be rejected if it can be shown that the applicant had knowledge, through a business relationship or any other relationship, that the trademark being registered is similar to a trademark already in use but not registered, and both trademarks cover the same or similar products/services. This specific ground for rejection previously only applied to cases where there was an agent-relationship (e.g., distributor registers a trademark before the client, and legitimate trademark owner, does); this expansion of criteria reduces the burden of proof on legitimate trademark owners to combat bad faith owners.

Increased Protection of Well-Known Marks
The Amendment prohibits the use of ‘well-known mark’ designations in advertisements or on products or packaging, in order to counter misuse of the “well-known mark” designation as an honorable title to mislead consumers into believing that goods/services branded with this trademark are publically held in high regard.

Facilitating Infringment
In a significant move to protect current mark owners, knowingly facilitating an infringement of another party’s registered mark now constitutes trademark infringement in itself. This is an important development and is expected to help counter online infringement via internet service providers.

Moreover, trademark agencies in particular are obligated to:

1. not support applications where it knows or should know that the applicant is acting in bad faith or infringing a third party’s rights;
2. only file trademark applications for its clients; and
3. adhere to the principles of honesty and integrity, and inform clients if the mark in question cannot be lawfully registered.
   

Continued Use by Prior User
A prior user of a trademark that is pre-emptively registered by another party may continue to use the trademark within its original scope, although it is similar or identical to the pre-emptively registered mark. The prior user may be subject to add distinguishable features to the trademark, if requested by the trademark owner.

Improved Judicial Protection
Increased Statutory Damages
The court may now award compensatory damages for trademark infringement of up to RMB 3,000,000, approximately six times the previous limit. Where illegal turnover for a business transaction is less than RMB 500,000, the Amendment increases imposable fines by the court from RMB 100,000 to RMB 250,000. Where illegal turnover exceeds RMB 50,000, the Amendment increases fines to up to five times the illegal turnover. The Amendment allows for heavier penalties regarding repeat offenders, defined as two or more offenses with the last five years.

Suspended AIC Enforcement
If a bad faith owner enforces its trademark rights through the Administration of Industry and Commerce (“AIC”) (e.g., by way of a raid), and the affected party brings a trademark infringement proceeding to the People’s Court, then the AIC may suspend its enforcement of the trademark rights subject to the AIC enforcement.

Trademark Use
‘Confusion’ Factor Reduced
The definition of use has been separated into two separate acts, only one of which is required to cause confusion to the consumer:

In the event of use of exactly the same trademark on the same products, confusion to the consumer need not be established.

In the event of use of a similar trademark on the same product or use of the same or a similar trademark on a similar product, confusion to the consumer must be established.

OEM Manufacturing
The Amendment has clarified and expanded the definition of trademark ‘use’; however, it still does not specifically address whether the ‘use’ of a trademark by an original equipment manufacturer (OEM) equates ‘use’ in terms of trademark infringement and liability. It remains to be seen whether Chinese trademarked goods designed for export fall within the scope of this ‘use.’

©2014 All content of this article is the property and copyright of China Solutions Inc and may not be reproduced in any format without prior express written permission. The content of this article is intended to provide a general guide to the subject matter and should not be treated as a substitute for specific advice concerning individual situations. Readers should seek legal advice before taking any action with respect to the matters discussed herein.

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