On April 23, 2019, the 10th Session of the 13th Standing Committee of the National People’s Congress approved the amendments to the PRC Trademark Law (“Trademark Law”). The amendments to the Trademark Law, being at the center of trade negotiations between China and the United States, is directed as much to the US administration as it is to the larger international community. The amendments are China's latest answer to the international community's common grievances of trademark protections in China caused by trademark squatting and effective enforcement. The key provisions of the amendments, which will become effective on November 1, 2019, are summarized below.
Crackdown on Trademark Squatters
The amended Trademark Law comes down heavily on trademark squatters who stock up trademarks without the intent to use for business operations. The following are the key provisions:
Escalate the Importance of Intent to Use
The amended Trademark Law unprecedentedly codifies intent to use into the law. In accordance with the amendments, all trademarks must be filed with an intent to use for business operations. A trademark application would be rejected outright when lacking the intent of use. ANY party, instead of only interested parties, may petition to remove a registered or published trademark by filing an opposition or invalidation, if such mark lacks an intent to use. It is, however, unclear how the authorities would expect applicants to prove the intent to use, which may be the subject of amendments to the associated Implementation Rules of the Trademark Law, typically amended following the amendments to the Trademark Law.
Penalties against Bad Faith Filing
There are no express penalties against bad faith filings under the current Trademark Law. The amended Trademark Law imposes such penalties. In serious circumstances, administrative penalties by warning or fines would be imposed on trademark squatters; trademark agencies would also bear the onus to refuse clients who intend to file applications in bad faith, and would be subject to warning or fines for accepting such clients.
Punishments against Malicious Lawsuits
In accordance with the amended Trademark Law, malicious filings of trademark lawsuits would be sanctioned by the courts. This amendment introduces punishments and deterrence to those manipulating or attempting to manipulate litigious rights in bad faith, particularly those who obtained trademark registrations in bad faith.
Harsher penalties to Trademark Infringers
Aggravated Liabilities to Infringement
The amended Trademark Law increases the statutory damages from RMB3 million to 5 million. For serious cases involving malicious infringement, punitive damages are increased up to 5 times of the actual damages, compared to 3 times under the current Trademark Law.
Absolute Combat to Infringing Products
The amended Trademark Law also straightens out the disposal of counterfeiting goods. At the request of the trademark rights owner, courts should direct to order the destruction of products bearing counterfeit trademarks as well as materials and tools mainly used to manufacture such products, and prohibit such materials and tools from entering into commercial channels except in certain special circumstances. According to the amendments, counterfeit products should be perpetually banned from flowing back into the market, even with the removal of the counterfeit marks. Trademark infringers would not be compensated for the above punishments.
The aforesaid amendments, particularly the amendments proclaiming the intent to use and increasing infringement liabilities, are encouraging changes in significant favor of brand owners. They positively signify China is yet again prepared to take serious and targeted measures to respond to the ever-changing business environment and support the continuous growth of international economy. Whilst the practical effects of the amendments remain to be seen, we are cautiously optimistic that the amendments would deliver the desired outcomes.