A look at draft amendments to the Trademark Law

By Zhang Xu, HFG

China is preparing to introduce the third revision to the PRC Trademark Law. According to the State Administration for Industry and Commerce (SAIC), the proposed amendments are intended to: (1) shorten and simplify the currently complicated and time-consuming process for trademark registrations;(2) prevent abuse of the trademark opposition procedure; (3)increase the severity of penalties for trademark infringement.

The draft for comment contains various noteworthy points. For example, it expands which “elements” of a mark can be registered. The “sound” element, therefore, may now be registered. In addition, the amended draft expands how “colours” can be registered, no longer limiting registration to a combination of colors.

In addition, the draft specifies that when applying to register a single trademark in different classes, only one application need be made (one trademark, multiple classes). This should reduce staff workload. The draft further proposes that if a registered trademark is to be used on goods other than the ones for which it has been registered, a separate application for registration needs to be filed. Finally, trademark applications may be filed electronically.

Zhang Xu, Partner, HFG
Zhang Xu

Review, opposition, and cancellation

The procedures for trademark reviews, oppositions and cancellations have also been revised.

Review procedure The proposed amendment states that: (1) before the Trademark Office grants preliminary approval, applicants may apply for a change in name, address and/or agent, remove one or more classifications for which they have applied, or transfer ownership of the mark. (2) In the course of the review, the Trademark Office may send a Review Opinion to the applicant, and the applicant may reply within 30 days. The opinion may address any part of the trademark application. There is no limit to the number of opinions that may be sent.

Proactive cancellation If, in the course of reviewing a trademark that has been preliminarily gazetted, the Trademark Office discovers that the registration of the mark violates the Trademark Law, or that the application is fraudulent or in violation of anti-unfair competition rules, it may cancel the gazetting on its own initiative.

Opposition procedure The draft specifies that an opposition re-examination procedure may be initiated only if the grounds are considered tenable and the Trademark Office has decided not to grant registration of the mark. When an opposition is refused, the Trademark Office will issue a registration certificate. Thereafter, the only recourse for opponents will be to apply to the Trademark Review and Adjudication Board (TRAB) for cancellation. This should reduce abuse of the opposition procedure as a means of delaying registration, a ploy often deployed by commercial rivals of the mark owner. The period for applying to the TRAB for a reexamination will be increased from 15 to 30 days.

Withholding of registration The main new proposals in the draft are: (1) When an application is made for a trademark for identical or similar goods, which trademark is identical or similar to anothers party’s trademark with prior use in the PRC, and the applicant, due to a contract, business dealings, geographical relationship or other relationship with the other party, is well aware of the existence of its trademark, registration shall not be granted. (2) If a trademark application copies another’s registered trademark that is relatively distinctive on non-identical or non-similar goods and has a significant influence, likely to result in confusion, registration shall not be granted.

These provisions may also serve as grounds for submitting a trademark opposition or cancellation application. This will hopefully help deter the longstanding problem of bad-faith preemptive registration of others’ non-registered marks and provide cross-class protection to marks that are distinctive and have significant influence.

Compared to the current Trademark Law, the amended draft provides greater flexibility and also specific protection against registrations of pirated trademarks. It is noteworthy that the change is likely also to increase the burden of proof for opponents and cancellation applicants, who will henceforth be required to prove the existence of a “contract, business dealings, geographical relationship or other relationship” between the pirate registrant and the opponent or cancellation applicant and also to show that the pirate registrant was well aware of the existence of the opponent’s or cancellation applicant’s trademark.

Identity of opponents the revised draft specifies that an opponent must be “the prior rights holder or a materially-interested party”, rather than “any person” as in the current Trademark Law.

Protection of trademark rights

Increased statutory damages Where it is impossible to quantify the losses of the rights holder or the benefits derived by the infringer, the maximum measure of damages is increased from RMB500,000 to RMB1 million. Infringers will also be required to compensate rights holders for reasonable expenses incurred by them in halting the infringement. In addition, where injured parties apply for damages, they will now be required to provide evidence of use of the registered mark over the previous three years.

Reasonable use of trademark rights Registrants will not be entitled to prevent others from legitimate use of certain content relating to their registered marks. The current law already allows use of the “generic name, depiction or model number of the product”, “the direct designation of the quality, main raw materials, functions, intended purpose, weight, quantity or other characteristics of the product”, and also its “place name”. To these the draft now adds “the form arising from the nature of the product itself”, “the form of the product required to achieve its technical effect” and “the form which gives the product its substantive value”.

Administrative protection The draft states that provisions relating to the “use of a well-known trademark as the trade name portion of an enterprise name shall fall under the jurisdiction of the Administration for Industry and Commerce at the provincial level or above”. It also states that “if trademark infringement occurs two or more times within a five-year period, a heavier penalty shall be imposed”.

‘Use’ of registered trademarks

Article 51 of the revised draft specifies that the concept of trademark ‘use’ should have “production or operation” as its objective, and that the criteria for determining use is whether it is “sufficient to cause the relevant public to believe that it is being used as a trademark”. This provision is important for assessing trademark non-use cancellations (ie, after three years), and underlines that use must not be for just nominal purposes or for the production of small quantities.

Zhang Xu is a founding partner at HFG

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