The Standing Committee of the National People’s Congress amended the Trademark Law on 23 April 2019. Although it seems to change few contents in this amendment, it grasps firmly three controversial focuses in practical operations, which are also the new highlights in future brand protection: (1) strict prohibition to register trademarks in bad faith for non-use purpose; (2) disposal method of trademark infringing commodities is changed; and (3) indemnity limit for trademark infringement is increased.
Registration of trademarks in bad faith for non-use purpose is strictly prohibited. Both articles 4 and 19 of the amended Trademark Law stipulate that registration of trademarks in bad faith for non-use purpose is strictly forbidden. Article 4 provides regulations mainly from the perspective of general subjects applying for trademark registration. It regulates a series of infringement acts including rush registration in bad faith in practice, bringing forward the regulation on malicious registration to the trademark application stage, which legally bestows the right to reject malicious trademark registration for the National Intellectual Property Administration. Article 9 is mainly used to regulate agencies and to crack down hard on applicants and/or agencies who obtain illegal profits by hoarding a large number of trademarks.
Amendments to articles 4 and 9 fill the issue in practice that a large number of trademark applications for “non-use purpose” can only be protected afterwards.
The Higher People’s Court of Beijing municipality issued the Guidelines of the Higher People’s Court of Beijing Municipality for Hearing Administrative Cases on Trademark Authorization and Determination the day after the amendment was adopted. The guidelines specify five situations for the vague “non-use purpose” determination in the amended articles:
- Apply for registration of trademarks which are the same as, or similar to, those having certain popularity or obvious features of different subjects with the circumstances being serious;
- Apply for registration of trademarks that are the same as, or similar to, those having certain popularity or obvious features of the same subject with the circumstances being serious;
- Apply for registration of trademarks that are the same as, or similar to, the business marks other than the trademarks of others, with the circumstances being serious;
- Apply for registration of trademarks that are the same as, or similar to, the names of places, scenic spots and architectures with certain popularity with the circumstances being serious; and
- Apply for registration of a large number of trademarks without proper reasons.
As an important component of an enterprise’s intangible assets, although the trademark is different from business goodwill, the infringement of trademark, in reality, is always one of the ways to have a connection with business goodwill. The purpose of rush registration of trademarks in bad faith for non-use purpose is to “take advantage of other enterprises’ popularity and business goodwill”, and only by preventing such behaviour can healthy business competition be formed.
An article of destroying tools used for infringing rights is added to expand the protection for the right holder. Currently in some industries such as the furniture and embossed home decoration industry, newly designed products of industry leading companies are liable to be counterfeited or copied once they are launched due to the industry structure of high design costs but low production costs.
In this case, although such enterprises fight against the infringements by legal means with the expectation of warning potential infringing parties by winning in critical cases, the effects are not satisfactory. The reason lies in the fact that the right holder usually finds the products with counterfeited registered trademarks only after such products are put into the market.
And the right holder can only take the corresponding measures to protect its legal rights against the discovered products infringing its trademark, but cannot prevent subsequent infringement acts from happening again, and the infringing parties can easily do such things again.
This amendment adds an article with respect to destroying the materials and tools used to make the products with counterfeited registered trademarks, punishing the infringing parties and protecting the enterprises’ interests to a larger extent. The right holder, with the relevant clues in hand, may request the court to destroy both the products with counterfeited trademarks and all the tools and materials used to produce such products, so as to maximize the infringing costs and restrict the infringing parties ability to produce products with counterfeited trademarks again.
Compared with merely protecting rights on the side of the whole counterfeiting chain having the only function of incomplete settlements, the newly added article gets to the root of the counterfeiting chain, which can more effectively prevent such infringement acts from happening again.
Indemnity limit for trademark infringement is increased. In addition to the above-mentioned two highlights, this amendment also increases significantly the upper limit of the indemnity for trademark infringement. For malicious infringement of the exclusive right to use trademarks, if the circumstances are serious, the amount of indemnity is increased from “one to three times” to “one to five times” and the upper limit of indemnity decided by the court is also increased from RMB3 million (US$433,000) to RMB5 million. The punishment intensity for the infringing parties is enhanced significantly.
Even though the costs for protecting rights are often higher than the infringement claims in the process of right protection, some enterprises still try their best to protect their legal rights to maintain their goodwill and brand images. Increase of the indemnity limit may better drive the right holder to protect these legal rights.
In conclusion, key changes made in this amendment are not high in number, and are in the various articles of the Trademark Law, but there are two major changes, with one to emphasize the “use” of trademark registration and the other to strengthen the protection for trademark right, and increase the indemnity limit. All these are new highlights helping enterprises to maintain their core values and establish brand protection.
Amanda Dong is a partner at Dentons