Keen to burnish your brand in the China market? Bai Gang, Huang Hui and Paul Ranjard set the scene with all you need to know. Amendments to the Trademark Law and how it is enforced are key to understanding China’s system
After years of fumbling, adapting, learning and accumulating experience, especially since its reform and opening up, China is finally managing to set up a complete legal system for the protection of intellectual property (IP) rights.
In order to bring its legislation up to an international standard, China has participated in most of the international treaties on trademarks, including the Paris Convention for the Protection of Intellectual Property, the World Trade Organistion’s Agreement on Trade Related Aspects of Intellectual Property Rights (TRIPS), the Madrid Agreement Concerning the International Registration of Marks, etc.
EVOLUTION OF THE LEGAL SYSTEM
The Trademark Law is the backbone to the system, and needs to be construed with the Implementing Regulation of the Trademark Law, the Regulations for Recognition and Protection of Well Known Trademark, the Measures for the Implementation of the Madrid Agreement Concerning the International Registration of Marks, etc. Apart from these, the Supreme People’s Court (SPC) has issued several judicial interpretations on issues concerning the trial of trademark cases. The volume of trademark cases filed in China has increased, year after year.
Recently, China enacted the third revision of its Trademark Law, which entered into effect on 1 May 2014. This article, based on the new Trademark Law, addresses the major points on the registration and protection of a trademark in China.
THE MARK: PROTECTING OR CHALLENGING
The revised PRC Trademark Law removes the restriction of the word “visual” and gives an example of a non-visual sign: sounds. This word is followed by “etc.”, which implies that the door is theoretically open for other non-visual signs.
Prohibition of registration and use in bad faith
The law introduces “good faith” as a general principle in article 7.1: “The application for registration and the use of a trademark shall be made in good faith.” Article 15.2 provides a practical example of bad faith: “Where … the applicant has contractual or business contacts, or other relations other than (being the agent) with the prior trademark user, so that the applicant definitely knows the existence of this person’s trademark, if this person files opposition, the applied trademark shall not be registered.”
Time limits for CTMO and TRAB procedures
In order to shorten the registration process and the various trademark-related procedures before the China Trademark Office (CTMO) and the Trademark review and Adjudication Board (TRAB), the law introduces time limits, such as nine months for the examination of a trademark, nine months – plus a possible extension of three months – for the TRAB to review the decision, or 12 months – plus a possible extension of six months – for deciding on an opposition.
In order to limit the number of oppositions, the law provides that oppositions may only be raised by “a prior right owner or interested party” if based on relative grounds. However if an opposition is raised on absolute grounds, it may be raised by “any person”.
The main change introduced by the law is that when an opposition is rejected by the CTMO, the trademark is immediately approved for registration and the only recourse is to file an application to declare the trademark invalid with the TRAB. Before the recent revision, the opponent could appeal to the TRAB for revision of the decision: this is now not possible.
This is not without serious concern, in particular in view of the SPC opinions regarding the assessment of the similarity between two marks. According to the SPC, when assessing the similarity of two trademarks the judge should take into account the reputation of both trademarks: the “senior” registered trademark and the “junior” trademark.
Therefore, even though the junior trademark is subject to invalidation, it is allowed during the procedure to develop a reputation, which the judge will take into account in the decision.
Reputation gained overseas
Whether the reputation gained overseas can be considered to support an opposition is still not clear, as the law does not specify. In a 2005 case (Ferrero), the SPC admitted that reputation gained outside of China could support a case based on the reputation of a product (under the Anti-unfair Competition Law).
Well known trademark
For recognition of the well known status of a trademark, the law adds a condition: it may only be determined “where the recognition decision is a necessary fact of the case”. The reason behind this restriction needs to be clarified. It seems that well known trademarks should be recognised on a case-by-case basis and follow the “principle of passive protection”.
On the other hand, the law introduces a very welcome prohibition concerning well known trademarks: “The manufacturer or operator is not allowed to use the ‘well known trademark’ expression on the commodities, the commodity packages, the containers, or in advertisements, exhibitions or other commercial activities”. This should discourage lots of applications and might facilitate, a little, the recognition of foreign trademarks, which used to account for around 1% of the well known trademarks recognised by the Chinese authorities.
Trademark licence recordal
Where a registered trademark is licensed, the licensor should record the trademark licence with the CTMO, and the trademark office will make publication. It is not compulsory, but if the licence is not recorded, it cannot be claimed against a third party of good faith. In this respect, the new law has clarified that the licence itself, and not the entire agreement, needs to be recorded.
ENFORCEMENT: WHERE AUTHORITIES STEP IN
The law aims to raise the level of penalties against infringers, with a special mention, for the first time, concerning repeat offenders.
Criminal procedure only applies in cases of counterfeiting, i.e. where the trademark is identical, or almost identical. In addition, a certain threshold needs to be reached (RMB50,000 [US$8,000] for one trademark or RMB30,000 if several trademarks are counterfeited). The procedure usually starts with an investigation and a raid conducted by the Public Security Bureau (police). Customs and the Administration for Industry and Commerce will also transfer cases to the Public Security Bureau for investigation when large quantities are involved.
After the first investigation by the police, the case is transferred to the People’s Procuratorate for public prosecution. All along, the trademark owner needs to be active and assist the police with all the necessary information gathered through its own prior investigation. It is then advisable to follow up the case before the People’s Procuratorate, and be present during the criminal hearing before the court.
Trademark holders can also directly initiate criminal proceedings before a court without the involvement of the public security organs (police) or the People’s Procuratorate. However, this direct procedure is extremely rare and, in any event, when the case is considered as presenting serious danger to public order and state interests, it should be initiated by the People’s Procuratorate.
The penalties for trademark crimes include fixed-term imprisonment of less than three years and/or a fine where conditions are “serious” or the sales are “large”, or imprisonment of three to seven years where the conditions are deemed “extremely serious” or the sales are “huge”.
In China, customs controls the flow of goods for the protection of IP rights, during both import and export. There are two ways to obtain protection – supply all relevant information in advance and ask customs to detain a suspicious shipment, or record one’s right with the General Administration of Customs in order to benefit from the ex officio actions of customs.
One of the most controversial issues is the situation of original equipment manufacturers, i.e. where the entire production of goods made in China is exported. In recent years, some jurisdictions have decided that with goods bearing a trademark that belongs to a third party in China, the fact that they are exported and therefore not sold on the Chinese market means there is no infringement committed in China.
If such decisions were to be confirmed – the SPC is preparing an analysis of this issue and is expected to deliver a decision in the near future, in the Petul case – customs might lose the power to protect IP rights on export.
THE COURTS: HOW THEY WORK
Special IP tribunals
Civil trademark disputes are heard at the first instance level by IP tribunals of the intermediate people’s courts, or in some jurisdictions by basic courts designated by the SPC. Administrative litigation – appeals from decisions made by the TRAB – is handled by the IP tribunal of the intermediate people’s court in Beijing.
The SPC is conducting research and will, in the near future, decide whether and how specialised IP courts could be set up with total jurisdiction over all IP rights matters.
Injunctions and pre-trial property preservation. An IP rights owner who can prove that failure to stop an infringement promptly would cause irreparable damage to his/her legitimate rights and interests may file, before instituting legal proceedings, an application with the people’s court to obtain an order for immediate cessation of the infringing activity. The IP rights owner may also apply for property preservation before filing a lawsuit, subject to paying a bond.
Pre-trial evidence preservation. Where the evidence risks being destroyed, or it would be impossible to obtain it later, the trademark registrant or any interested party may, before instituting legal proceedings, request the people’s court to take measures to preserve evidence.
Plaintiff’s burden of proof
The new law prescribes in article 63.2 that the judge may order the defendant to submit elements of evidence, such as account books, that are in his or her possession and “… where the infringer refuses to provide such information or provides false information, the people’s court may determine the amount of compensation at its discretion by taking into account the claims and the evidence submitted by the infringed”.
Expert witness and survey evidence
The revised Civil Procedure Law introduces the concept of “person with expertise” in article 79, which provides that upon request of a party, the people’s court may notify a “person with expertise” – commonly called as an “expert”, an “expert assessor”, or a “judicial expert” – to appear in court and offer an opinion regarding an “identification opinion” issued by an “identifier”, or regarding a technical issue.
In a recent guideline, the Beijing Higher People’s Court provides that in order to bring evidence of likelihood of confusion between two marks, both parties may submit survey reports concerning their position in the market.
Damages and compensation
The new Trademark Law increases the financial compensation for trademark infringement by specifying, in article 63, the calculation standards for civil compensation in trademark infringement cases. Article 63 is a three-part system:
- The calculation methods are in the following order:
• the actual damages that the right holder has suffered from the infringement;
• the profit that the infringer has earned through the infringement;
• a reasonable multiple of the royalty that the infringed registered trademark might have earned – a welcome provision.
- When the circumstances are serious, an amount of compensation not more than three times but not less than the amount calculated by the preceding approaches; and
- A statutory damage, when no calculation is possible, with a maximum of RMB3 million.
Strengthen the obligation to use
The new law adds to the definition of use a reference to distinguishing the origin of the commodities as per article 48: “affixing trademarks to commodities, commodity packages or containers, as well as commodity exchange documents or using trademarks in advertisements, exhibitions and other commercial activities to distinguish the origin of the commodities”.
Consequences of non-use
Revocation. If a trademark is not used for “three consecutive years without proper reason, any entity or individual may file an application with the Trademark Office for the revocation of the registered trademark”.
No Compensation. If the trademark owner cannot prove having used the trademark within the last three years “the accused infringer shall not be held liable for compensation”.
Bai Gang is the founding partner of Wan Hui Da, where Huang Hui is a senior partner and Paul Ranjard is of counsel. The authors can be contacted at [email protected]
India’s massive market beckons for your marque, but read what Pravin Anand, Binny Kalra and Kirti Balasubramanian have to say before you take the plunge. Familiarity with the system, the law and how it is enforced is a definite advantage
The Indian legal system comes under frequent criticism for various reasons – systemic delays being among the top reasons, followed by corruption in enforcement bodies and the lower judiciary. Delays particularly haunt those foreign entities that have not until recently had India on their map.
An outstanding aspect of India’s legal system is that it affords the same protective rights to citizens and domestic legal entities as it does to foreign individuals or legal entities under its IP laws.
EVOLUTION OF THE LEGAL SYSTEM
Indian courts have incorporated the principle of trans-border reputation in trademark law jurisprudence and granted countless foreign trademark right owners wide protection for their brands, often in the absence of even a trademark registration in India, and frequently without use of the trademark in the Indian market. Indian courts have protected these trademarks on broad principles of equity and the desirability of upholding good business ethics under the law of torts.
There are adequate opportunities in India’s legal system to remedy an incorrect decision or wrongly laid down law. The writ jurisdiction of the courts under the constitution is a powerful tool for any person to seek an effective remedy against acts of arbitrariness, inaction and/or negligence on the part of government authorities, and this has come to the aid of many foreign entities with a grievance against the authorities established under IP laws.
The primary legislation on trademarks in India is the Trade Marks Act 1999, along with the Trade Mark Rules 2002, which contain the rules and procedures for the implementation of the substantive law. There are other statutes that are relevant for trademarks and their application, such as the Intellectual Property Rights (Imported Goods) Enforcement Rules 2007, under the Customs Act 1962, which provides for the enforcement of trademark rights by customs authorities.
India completed its accession to the Madrid Protocol in July 2013, a move that is expected to greatly benefit brand owners and attract higher trademark filings in India through a simplified, consolidated application. India is also a signatory to the World Trade Organistion’s Agreement on Trade Related Aspects of Intellectual Property Rights (TRIPS) and a longstanding member country of several World Intellectual Property Organisation-administered treaties.
THE MARK: PROTECTING OR CHALLENGING
Words, logos, three-dimensional shapes, textures, colours and sounds are all capable of being protected as trademarks in India. For instance, the shapes of Gorbatschow Vodka bottles, Ferrero Rocher chocolates, the red sole signatures of Christian Louboutin footwear, the shape of the Zippo cigarette lighter and the Louis Vuitton “Epi” leather design were all found to meet the standards of distinctiveness under Indian trademark law, and recognised as trademarks.
Unregistered marks are entitled to protection under the tort of passing off. Passing off has also been statutorily recognised under section 27(2) of the Trade Marks Act. Passing off is established through evidence of reputation and goodwill; priority in use and adoption form the criteria for ownership. A large number of foreign unregistered marks that have a trans-border reputation in India have been protected by Indian courts.
Timeline of registration procedures
A registration process without objections from the Trade Marks Registry and opposition from any third parties can take 12-15 months for the stages of filing, examination, hearing, advertisement, and issuance of certificate. The procedure involves the following steps:
- Filing of application, where the applicant indicates its intention to register a mark for a specific class of goods or services;
- Examination – the examiner issues a report containing objections under grounds of absolute and relative refusal, if any, which can be contested by the applicant within one month of issuance of the report;
- Publication – after all objections are satisfactorily cleared by the applicant, the mark proceeds to publication in the Trade Marks Journal within six months of a written reply or hearing of the applicant;
- Opposition – within four months of such publication, any person may oppose the registration of the mark on grounds laid down in the statute. The Trade Marks Registry takes up the opposition for hearing, depending on its roster and backlog of pending cases;
- Registration/rejection – if the opposition is dismissed or the mark is unopposed, it proceeds towards registration. Alternatively, the application is rejected upon a successful opposition;
- Rectification/cancellation – after grant, the mark can be challenged by an aggrieved party and/or cancelled by the registrar on the grounds of being wrongly granted or wrongly remaining on the register, or of non-use within a prescribed period under the statute.
All orders of the Registrar of Trade Marks are appealable to the Intellectual Property Appellate Board.
Obligations on use of a trademark
Section 47 of the Trade Marks Act provides for the removal of the trademark from the register of trademarks on the ground of continuous non-use of the mark for a period of five years from the date of the issuance of the registration certificate up to three months before the filing of an action for removal or rectification of the mark.
Ownership changes and rights transfers
Both registered and unregistered marks can be assigned and transmitted on the condition that they do not create multiple exclusive rights, and all such transactions are governed broadly by the Indian Contract Act and the Specific Relief Act. A registered trademark is assignable, with or without the goodwill, in respect of all or a part of the goods or services for which the mark is registered.
In India, a single object/good/service can be the subject matter of multiple forms of IP protection, subject to the following express exclusions for overlapping subject matter:
- The definition of design excludes trademarks and copyright in artistic works;
- If an object is a registered design or is mass produced, the copyright in the design is extinguished.
India has formulated a specific “.in” domain name dispute resolution policy, which enumerates the terms and conditions applying to disputes pertaining to “.in” and “.co.in” domain names. Indian courts have recognised and innovatively tackled issues of domain name trafficking, hyperlinking, meta-tagging, framing, phishing, etc., by the creative intersection of domain name policy and the law of trademarks.
The concept of trans-border or spillover reputation of foreign trademarks was recognised by Indian courts in the early stages of the development of Indian trademark law, as far back as the 1980s. The essence of the concept is captured in section 35 of the Trade Marks Act, and serves to highlight that brand goodwill and reputation are adequately recognised and protected.
Well known trademarks
When a mark is recognised as “well known” in India, it enjoys protection against deceptively similar or confusing marks that may be applied for across all classes of goods and services. The criteria for a mark to be recognised as well known by a court of law have been laid down in section 11(6) of the Trade Marks Act. The Trade Marks Registry provides a register of well known marks on its website.
ENFORCEMENT: WHERE AUTHORITIES STEP IN
There are no procedures where the Ministry of Commerce and Industry may take an action to fight against trademark infringement ex officio at the request of a trademark owner or an interested party. The Office of the Controller General of Patents, Designs and Trademarks comes under the purview of the Department of Industrial Policy and Promotion, within the Ministry of Commerce and Industry. However, infringement and passing off actions can only be instituted before law courts.
Falsifying a mark is an offence under section 103 of the Trade Marks Act, and a criminal action may be instituted against the infringer or counterfeiter. Criminal actions may be instituted in the following ways:
- Police complaint – after the complainant lodges a complaint, the police must obtain a clearance from the Registrar of Trade Marks. After clearance, the police may raid the premises of the infringer and seize goods, following procedures under the criminal code to finally convict the infringer;
- Complaint before a magistrate’s court – upon a complaint being entertained by the magistrate’s court, the judge may order search, seizure and/or investigation of the alleged infringer. Thereafter, charges are framed and the matter proceeds to trial for conviction of the infringer.
The Intellectual Property Rights (Imported Goods) Enforcement Rules were promulgated by the central government in 2007. Under these rules, a right holder can register its work, invention, trademark, etc., with the customs authorities and request that the authorities seize any goods deemed to be infringing. The authorities must ensure that the infringer is given sufficient notice to defend itself. Upon a determination that the goods detained or seized have infringed IP rights, the customs authority is authorised to destroy the goods.
THE COURTS: HOW THEY WORK
India’s courts are witnessing a significant rise in lawsuits for infringement of IP rights. India has four high courts with original side jurisdiction – namely Delhi, Mumbai, Kolkata and Madras – that can entertain infringement lawsuits in the first instance, in addition to district courts. On average, Delhi High Court handles 600-800 lawsuits a year, which is 70% of the IP-related litigation in India.
Special IP tribunals
Infringement actions are heard by general law courts and there are no special IP courts in India. The Intellectual Property Appellate Board, however, hears and decides appeals from the order or decision of the Registrar of Trade Marks, which until 2003 was under the jurisdiction of the high courts. The appellate board can also entertain rectification petitions seeking cancellation of trademarks.
Key functions of courts – such as case filing, allocation, registration, case workflow, orders and judgments – are now IT-enabled. Cause lists, case status, orders and judgments are available on the internet and accessible to litigants, advocates and the public. Delhi High Court has also begun digitising entire case records and documents for easy access by judges and litigants.
Fast track trials
Measures such as “fast track trials” and recording of evidence by way of videoconferencing are hallmarks of IP litigation at Delhi High Court. Fast track trials envisage completion of various stages of a suit within a prescribed period of time, which is fixed by the court. There have been instances where strict timelines have been ordered at the stage of admission of the suit in the very first hearing.
An innovative feature of fast track trials is the appointment of court commissioners, usually retired judges or other senior officers of the court, who are assigned the responsibility to record evidence within the prescribed period, which may be as short as three to six months. Recording of evidence by court commissioners allows parties to conduct the trial at their convenience, instead of relying on the roster of sitting judges for available dates.
Recording evidence via videoconferencing
Delhi High Court has also allowed recording of evidence – primarily the process of cross-examination – by videoconferencing. This is especially relevant and useful for foreign litigants and/or rights holders who are unable to travel to India to depose their evidence. The court has developed a robust set of guidelines to safeguard the interests of both litigating entities. In effect, a right holder today can reasonably expect its lawsuit to conclude within three years.
Certain IP statutes have given due recognition to the predicament of a right holder chasing after pirates. Section 62(2) of the Copyright Act 1957 and section 134(2) of the Trade Marks Act provide the right holder/plaintiff can institute the suit in the place where the plaintiff actually and voluntarily resides, carries on business, or works for gain. These provisions are especially crucial given the nature of counterfeiters, who invariably escape detection or flee upon the institution of an infringement action.
Quia timet jurisdiction
Courts in India may entertain suits based on the “reasonable apprehension of injury or harm” held by a right holder. As recently as November 2013, Delhi High Court held that the degree of apprehension necessary to grant a permanent injunction in a suit based on such apprehension can only be determined after a trial has been duly conducted in the matter.
In the meantime, in patent suits, where there is no presumption of validity and the defendants are yet to commence their infringing activity, a status quo order has been granted on numerous occasions. In trademark matters, Delhi High Court has passed numerous orders granting interim injunctions restraining any possible infringing activity of the defendants during the pendency of the suit.
Indian courts are poised to explore new paradigms of protection available under trademark law. As pirates get more creative, colours, shapes, celebrity rights and internet service provider liability regarding sponsored “adwords” have come under the scanner.
Damages and compensation
Damages awarded in India are usually compensatory, but can also be punitive or exemplary. The culture of awarding damages began to be seen in 2005, and now damages to the equivalent of up to US$100,000 have been awarded.
Indian courts are inclined to grant preliminary injunctions against alleged infringers or counterfeiters in lawsuits for infringement and/or passing off, upon being satisfied that there is a prima facie case, balance of convenience in favour of the plaintiff, and the likelihood of irreparable injury if such a relief was denied.
Anton Piller orders
These orders were first introduced in India in the context of piracy of broadcasts by unnamed cable operators, gradually including the rampant piracy of software and counterfeiting of luxury brand products, until the present, where courts issue commissions for search and seizure of infringing goods belonging to named and/or unnamed defendants for a variety of infringement actions.
Over the years, tangible successes have been achieved in the anti-counterfeiting campaigns of brands such as Louis Vuitton, Hermes, Chanel, Cartier, Microsoft, etc., leading to timely seizures of counterfeit goods and sending a strong message to the market, categorically indicating low tolerance of counterfeits.
John Doe orders
Popularised as Ashok Kumar orders in India, Indian courts have gradually come to pass interim injunctions against unnamed defendants in recognition of the rampant counterfeiting prevalent in the country. They have allowed right holders the flexibility to tackle even the covert infringers who would escape detection in the absence of such blanket protection.
Writs and other constitutional remedies
Orders of various governmental authorities under the Indian Intellectual Property Office can be challenged before a writ court seeking extraordinary remedies such as writs of mandamus and certiorari. The high courts in India, capable of entertaining such petitions, have over the years recognised the urgency and importance of IP to the business of the rights holder. Numerous writs filed by rights holders have yielded results, in that government authorities have been directed to remedy any arbitrary, unreasoned or capricious orders.
Alternative dispute resolution
Alternative dispute resolution (ADR) mechanisms such as mediation, conciliation, etc., have received statutory recognition under India’s Code of Civil Procedure 1908, under section 89 and order 10 rule 1, after the code underwent dramatic amendments in 2002. These provisions cast a duty on the court to encourage settlement between parties by means of ADR methods. In 2006, judges were trained and exposed to progressive models of early neutral evaluation, plea bargaining and mediation.
The Delhi High Court Mediation Centre is estimated to have a 70% success rate with a significant number of matters being referred to it daily. The experience of rights holders has been that as the courts’ awareness and expertise increase, defendants are increasingly unwilling to suffer damages or adverse decrees.
Pravin Anand is the managing partner of Anand and Anand, where Binny Kalra is a senior partner and Kirti Balasubramanian is an associate. The authors can be contacted at [email protected]