China’s most recent revision to its Trademark Law gives better protection for trademarks in China. Penalties for infringers have been increased, and trademark owners have been given more protections against malicious trademark squatters. These and other changes are a welcome development for China’s intellectual property regime.

The new revisions, promulgated on 30 August 2013, are the end result of nearly ten years of effort and three rounds of public drafts. The PRC Trademark Law, first issued in 1982, has been previously revised in 1993 and 2001.

The Revision will take into effect on 1 May 2014.

Highlights of the revision

  1. A sound mark may be registered as a trademark. Currently, only visual marks may be registered as trademarks in China.
  2. Various time limits are set out for the review of trademark applications: 9 months for preliminary review of an application; 9 to 12 months for review of appeals in relation to a rejected application; 12 to 18 months for review of trademark oppositions; 12 to 18 months for review of appeals against the rejection of a trademark application in favour an opposition.
  3. Various procedural reforms have been introduced, including: trademark applications may be submitted in electronic form; and the Trademark Office may require further communication with applicants when reviewing applications.
  4. Well-known trademarks get better protection. If the use of an unregistered well-known trademark in an enterprise’s name misleads the public and constitutes unfair completion, then the enterprise shall be subject to penalties under the PRC Anti-Unfair Competition Law. (The same rule applies for the protection of registered trademarks.) Manufacturers and operators cannot include the wording “well-known trademark” on commodities, commodity packing or containers, or in advertising, exhibition or other commercial activities.
  5. The rules have tightened against malicious trademark squatting. In particular, a trademark squatter cannot register another’s trademark if he/she has become aware of the trademark through contracts, business dealings or other relationships. Trademark agents are also prohibited from acting if they become aware or should have become aware that a registration would be an act of malicious trademark squatting.
  6. Additional obligations are imposed on trademark agents. Trademark agents are specifically required to comply with the principle of honesty and good faith, and to keep confidential the trademark-owner’s secrets. Also, trademark agents may not apply to register their own trademarks, except for trademarks to be used in connection with their own services.
  7. Trademark infringers will be subject to greater penalties, and trademark owners will get better protection:
  • Penalties: an illegal operation with turnover of more than RMB50,000 may be subject to penalties equivalent to 5 times such turnover; an illegal operation with no turnover or with turnover of less than RMB50,000 may be subject to penalties of up to RMB250,000; heavier penalties are required if the infringer has infringed multiple times in the last five years, or if there are other serious circumstances;
  • Civil compensation: the amount of compensation may be determined with reference to the actual loss suffered by the trademark owner, the benefits obtained from infringement by the infringer or the trademark licence fee. If it is difficult to determine these amounts, then the court may grant compensation of up to RMB3,000,000 (which is six times of the current limit of RMB500,000). A court may order an infringer to provide their account books and related materials for the purpose of determining damages;
  • Punitive damages: punitive damages may be imposed in serious cases of malicious infringement.

Legislation on intellectual property rights in China has lagged behind the rapid development of the Chinese market. The Revision indicates Chinese government’s resolution to catch up with the market, and also provides a better legal framework for cracking down on trademark infringements. The changes are also likely to encourage more trademark applications, particularly for sound marks.

The revised law represents a significant step for the development of intellectual property rights in China. Looking forward, we can expect revised implementing rules of the Trademark Law to provide more detailed guidance on how the new law will operate from 1 May 2014.