Amendments mean trademark protection enters a new era

The year 2013 can be said to have been a year of change in the protection of trademarks in China. The Third Plenum of the 18th Chinese Communist Party Central Committee proposed that “the application and protection of intellectual property is to be strengthened, and the establishment of special intellectual property courts is to be explored”. The Supreme People’s Court, through its publication of model cases, reiterated that it would intensify the protection of intellectual property; and the Standing Committee of the National People’s Congress adopted the Bill for Amending the Trademark Law for the Third Time, and amended the complementary Implementing Regulations for the Trademark Law and the Rules for the Review and Adjudication of Trademarks.

Enhanced protection

In recent years, cases of the pre-emptive registration of trademarks in bad faith have cropped up repeatedly. The purpose of such pre-emptive registration is to seek gains by virtue of pre-emptively registering another’s trademark, a typical violation of the principle of good faith.

Before the amendment, although the Trademark Law prohibited the pre-emptive registration of trademarks by agents and representatives, the definition of “agents” and “representatives” was excessively narrow and infringers could easily circumvent this prohibition.

Therefore, the amended version adds the good faith provision, “if someone is well aware of another’s trademark through a contractual, business or other such relationship, but nevertheless proceeds to preemptively register the same, and if a third party that has made prior use thereof files an objection with the Trademark Office in respect of the pre-emptive registration by the applicant, the Trademark Office may directly refuse registration in accordance with the law”. This will help in cracking down on pre-emptive registrations where the infringer was well aware of the other’s trademark as a result of economic dealings, etc.

Before the implementation of the amended version, once a trademark was pre-emptively registered, the pirate registrant secured exclusive rights to it and the party whose trademark was pre-emptively registered would, if it used the same, face the risk of being sued to cease using it. As cessation of use would usually cause the party whose trademark was preemptively registered large economic losses, they typically had to buy the pirated trademark at an exorbitantly high price. In this regard, the amended version specifies that the prior user of a trademark has the right to continue using the trademark within the original scope, thereby removing the pirate registrant’s chip for coercing the prior user into making unfair payments for damages.

Finally, with respect to situations where a pirate registrant institutes a legal action to demand that the party whose trademark has been preemptively registered pay damages for infringement, the amended version provides that, where damages are claimed, evidence of actual use during the last three years needs to be provided at the request of the defendant. This provision obviates the possibility of a pirate registrant that has no real intent to use the trademark obtaining damages.

Increase in damages for infringement. The issue of losses incurred by trademark rights holders in protecting their rights often outweighing their gains has become increasingly severe in recent years, seriously impacting rights holders’ willingness to protect their interests. Accordingly, the amended version has intensified the damages for trademark infringement.

For example, the amended version brings punitive damages into Chinese trademark law for the first time, specifying that, “in the case of the malicious infringement of the exclusive right to use a trademark where the circumstances are serious, the measure of damages may be determined at not less than the amount and not more than three times the amount of the losses incurred by the rights holder as a result of the infringement, the benefit derived by the infringer from the infringement or the royalties payable by a registered user”. Additionally, the amended version increases the statutory limit for damages from RMB500,000 (US$81,000) to RMB3 million.

The amended version also lightens the burden of proof on the rights holder in respect of the measure of damages. The amended version provides that where the rights holder has used its best efforts to adduce evidence, and the books and information relating to the infringement are mainly in the possession of the infringer, the court may order the infringer to produce the same. If the infringer refuses to do so, or provides fraudulent books or information, the court may determine the measure of damages for infringement based on the evidence given by the rights holder.

Restrictions on the use of the term “well known trademark”. The amended version adds a provision that prohibits producers and business operators from using the words “well known trademark” in the publicity for their goods or services, which will be conducive to returning the well known trademark system to its original legislative intent.

Limitation of review period. In the past, there has been no designated time limit for trademark case reviews. Taking trademark oppositions as an example, case reviews generally required 1.5 years, and in some cases up to two years. The recent amendments expressly specify that the time limit for reviews of cases without a counterparty – e.g. trademark registration applications and rejection re-examination cases – is nine months. The time limit for reviews of cases with counterparties, such as oppositions, invalidations, opposition reviews, etc., is 12 months.

Strengthening of preservation and penalty measures. The Supreme People’s Court, through its publication of model cases, has promoted active and prudent application of pre-trial and mid-trial interim preservation measures, offering rights holders timely and effective protection. Some figures in the most recent work report of the Supreme People’s Procuratorate reveal that criminal crackdowns in trademark-related cases have markedly intensified, and that such crackdowns on criminal infringement of intellectual property will continue to be a trend.

Outside scope of trademark law

The effective implementation of the above-mentioned legal systems and judicial policies are issues that we need to be concerned about in future. The lead author believes that resolution of this issue requires relevant authorities to issue complementary judicial interpretations, administrative statutes, etc., and to engage in profound judicial reforms that tackle the issues of judicial independence, local protectionism, imbalances in the professional qualifications of judges, etc.