On August 30th, 2013 the Standing Committee of the National People’s Congress passed an amended version of the P.R.C. Trademark Law, the third time that the Trademark Law has been amended since its promulgation in 1982. The third amendment reflects ten years of effort since the amendment process began in 2003. This amendment expands the Trademark Law to 73 articles from the previous 64 and includes several important revisions. Details of the amendment are set forth below:
- The trademark registration system has been amended.
- The scope of elements acceptable for registerable trademarks has been expanded. The requirement of “visibility” has been removed and the law allows the registration of sound trademarks under certain circumstances.
- An application system for “one trademark, multiple classes” has been established – an applicant can file a single trademark in different classes using the same application form.
- An office action system has been created. If the Trademark Office finds that an explanation or an amendment of a trademark application is necessary during examination it may require the applicant to provide the same.
- The legitimacy of electronic applications has been affirmed. An application for a registered trademark as well as other relevant documentation can be submitted either in writing or electronically.
- The amendment sets time limits for various trademark examination and trial procedures.
The amendment introduces the statutory time limits for: (i) the preliminary examination of a new trademark application; (ii) the trial of a trademark opposition; (iii) the review of a trademark rejection; and (iv)the review of an invalidation petition, etc. The time limit for a preliminary examination of an application by the Trademark Office is 9 months and the time limit for trial of a trademark opposition is 12 months. The time limit for a review by the Trademark Review and Adjudication Board (“TRAB”) of a rejection or non-publication decision of the Trademark Office is 9 months. The time limit for a review of the Trademark Office’s rejection of registration based on an established oppostion is 12 months. Under special circumstances the foregoing time limits can be extended by 3 months and 6 months, respectively, upon the approval of the State Administration for Industry and Commerce.
- The trademark opposition system has been improved.
In the past, a trademark opposition was subject to both administrative trial/appeal and judicial trial/appeal and was likely to go through all four procedures before a final and binding judgment was granted. This system rendered affirmation of trademark rights frustrastingly complicated and time-consuming. Some illegal business operators intentionally filed bad-faith oppositions to delay the grant of registered trademark rights by their competitors, thereby placing these trademark rights in limbo for quite some time. The third amendment reorganizes the trademark opposition system as follows:
- Where the grounds for filing an opposition are infringing the prior rights, the opponent is restricted to prior rights owners and materially-interested parties, rather than “any person” thereby considerably narrowing the scope of the parties that may file an opposition. This reform should help curb bad-faith oppositions.
Where the grounds for filing an opposition are unregisterability, prohibited use or lack of distinctiveness of the trademark per se, anyone is entitled to file an opposition.
- The opposition procedure has been simplified.
When an opposition is refused and the trademark is approved after the opposition procedure, the Trademark Office will directly issue the Trademark Registration Certificate. The decision of approval will not be subject to any further judicial review. Thereafter, the only recourse for opponents will be to apply to the TRAB for invalidatation of registered trademarks. This should reduce abuse of the opposition procedure as a means of delaying registration, a ploy often deployed by commercial rivals of the trademark owner.
- The protection of unregistered trademarks has been improved.
- The amendment provides that an application for trademark registration and the use of a trademark shall comply with the principles of honesty and credibility. This principle will help regulate the use of trademarks, prevent and eliminate counterfeiting and trademark squatting.
- If an applicant knows of the prior use of an unregistered trademark by another party and illegally attempts to register the trademark, the application shall be rejected.
The amended Trademark Law provides, “If registration is sought for a trademark that is identical or similar to a prior trademark used by another party for the same or similar goods and the applicant is involved with such other party in a contractual, business or other relationship besides the relationships provided in the previous paragraph (i.e. agency or representation), or if the pirate applicant knows of the existence of the prior trademark, such other party shall be entitled to oppose the registration.”
- The system of prior use rights for non-registered trademarks is confirmed.
The amended Trademark Law provides that “If, before the registrant applies for registration of a trademark that another party was using prior to the registrant, and the trademark possesses certain characteristics that are identical or similar to the registered trademark in respect of the same or similar goods/services, the registrant shall not be entitled to prohibit such other party from continuing to use such trademark within its original scope of use, but may demand that the other party add an appropriate distinctive elements to the trademark.” In our opinion, to protect the interests of trademark registrants, this above language should not be construed too widely — instead, “prior use” should be limited to the commercial use of goods in the same or similar goods, not includingm mere use in advertising.
- The principle of “case-by-case determination and passive protection” applicable to well-known trademarks is writteen into the law.
The amended Trademark Law provides that “in administrative procedures such as trademark registration, review and adjudication, and administrative as well as civil litigation proceedings involving trademark disputes, a well-known trademark shall be, at the party’s request, deemed to be at issue to be addressed in the corresponding trademark case.”
- Administrative penalties and judicial protection of the exclusive right to use a registered trademark are strengthened.
- The constitution of infringement of the registered trademarks has been clarified.
Specifically, the restrictive condition “which use may easily cause confusion” has been added to the original provision “if without the consent of the trademark registrant a party uses a trademark that is similar to the registered trademark on the same goods or uses a trademark that is identical or similar to the registered trademark on similar goods”. In addition, the amended Trademark Law assimilates the provision of the current Regulations for the Implementation of the Trademark Law and further provides “intentionally provide facilitation of the infringement of another party’s exclusive right to use a registered trademark, and assist the infringer in infringing the exclusive right to use a registered trademark”.
- Punitive damages for trademark infringement are introduced and the penalties for repeated infringement have been enhanced.
The amended Trademark Law provides a system of punitive damages for intentional infringement. It provides that when the intentional infringement of the exclusive right to use a registered trademark is serious, the amount of compensation can be determined based on the actual losses to the rights owner, the profits gained by the infringer or triple the amount of the trademark license fees.
- Statutory damages for trademark infringement have been increased.
Statutory damages under the current Trademark Law range from RMB10,000 to RMB500,000. In order to strengthen anti-infringement efforts and effectively protect the legitimate rights and interests of the rights owners, the amended Trademark Law raises the ceiling to RMB3,000,000. When neither the rights owner’s actual losses, the infringer’s gains nor the license fee can be ascertained, the People’s Court will award compensation of no more than RMB3,000,000 based on the totality of the circumstances.
- The burden of proof on the rights owner is adequately lowered.
In trademark-related judicial practice it is generally difficult for a rights owner to produce evidence that is directly relevant to the amount of compensation that the rights owner claims. For this purpose, the amended Trademark Law introduces a mechanism similar to the “discovery procedure” in the United States; specifically, “When the People’s Court determines the amount of compensation, if the rights owner has exerted best efforts to produce evidence and the relevant accounting books and materials in connection with the infringement are mainly under the control of the infringer, the court may demand that the infringer provide such accounting books and materials. If the infringer refuses to provide them or provides false accounting books and materials, the court may determine the compensation amount with reference to the evidence asserted and produced by the rights owner.” Such a provision to some extent lightens the burden of proof on the trademark rights owner by holding the rights owner harmless from any adverse legal consequences arising from its failure to produce evidence.
- Administrative penalties for trademark infringement are set forth in detail.
The amended Trademark Law provides that “the administrative authorities for industry and commerce may impose a fine for infringement of the exclusive right to use a registered trademark. If the illegal business revenue reaches RMB 50,000 or more, a fine of no more than 20% of the illegal business revenue can be imposed. If the illegal business revenue is less than RMB50,000, a fine of less than RMB10,000 may be imposed. If the infringer commits trademark infringement twice or more within five years or if other aggravating circumstances apply, an enhanced penalty shall be imposed.” These provisions detail the standard for administrative trademark infringement penalties and facilitate practical enforcement measures.
- The principle of no compensation for an unused registered trademark is established.
The amended Trademark Law provides that where the trademark registrant claims compensation and the alleged infringer argues that the registrant fails to use the trademark, the People’s Court may demand that the registrant provide evidence to prove its actual use of the trademark during the past three years. If the registrant can prove neither its actual use of the trademark during the past three years, nor other losses it suffered from infringement, the alleged infringer shall not be liable for compensation.
Improvements in other related systems include: (i) establishing a trademark invalidation declaration system; (ii) canceling the concept of a registered trademark disputes proceedings; (iii) regulating the act of trademark agency and enhancing the quality of trademark agency services; and (iv) requiring that a trademark license be recorded with the Trademark Office before it can be used against a good-faith third party.