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. Following the first amendment on February 22nd, 1993 and the second amendment on October 27th, 2001, 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:

  1. The trademark application and registration system has been amended.
  1. The scope of composition elements acceptable in trademark applications has been expanded.

The current Trademark Law requires that a trademark for which an application for registration is filed must be “visible”. The amended Trademark Law permits a new type of trademark registration — audio trademarks. Thus, “visibility” is no longer an essential element for trademark registration.
Article 8 of the amended Trademark Law provides that “any audio trademark that can distinguish the goods of a natural person, a legal entity or another organization from another’s goods can be registered as a trademark.

  1. An application system for “one trademark under several classes” has been established.

Under the current Trademark Law, an applicant can only file one registered trademark under one class using a single application form. Article 22 of the amended Trademark Law introduces the system of “one trademark under several classes” under which an applicant can register the same trademark under several classes using the same application form. This system can both reduce the cost of trademark rights owners who engage in business under several classes and greatly facilitate trademark administrative work.

  1. 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.

  1. 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.

  1. The amendment sets time limits for various trademark examination and trial procedures.

The overall period spent on examination for registration, review and adjudication often exceeds three years, which left the rights owner’s trademark in limbo for quite a long time. The amended Trademark Law stipulates time limits for various examination procedures during the trademark affirmation and authorization process, and thereby enhances predictability from the applicant’s perspective during the period before the trademark is authorized or affirmed.

The amendment provides the first 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 registration rejection; (iv) the review of a trademark rejection; and (v) the review of an invalidation declaration. The time limit for a preliminary examination is 9 months and the time limit for investigation and verification of a trademark objection is 12 months. The time limit for a review by the Trademark Review and Adjudication Board (“TRAB”) of a rejection and non-publication of a trademark application by the Trademark Office is 9 months. The time limit for a review of the Trademark Office’s rejection of registration based on an established objection is 12 months. Under special circumstances the foregoing two time limits can be extended by 3 months and 6 months, respectively, upon the approval of the State Administration for Industry and Commerce.

  1. 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 judgment was granted. This system rendered affirmation of trademark rights a complex and time-consuming affair. Some illegal business operators filed bad-faith oppositions to delay acquisition 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:

  1. Statutory grounds for trademark oppositions, including objective and subjective grounds, are clearly stipulated.

Article 33 of the amended Trademark Law provides for absolute and relative grounds for trademark oppositions.
Absolute grounds refers to violation of any of Articles 10~12 of the amended Trademark Law.
Relative grounds refers to violation of any of Articles 13.2 or13.3, Article 15, Article 16.1 or Articles 30~32 of the amended Trademark Law.

  1. The parties permitted to file a trademark opposition are distinguished based on the foregoing absolute and relative grounds.

Article 33 of the amended Trademark Law provides that if a trademark opposition is based on any of the absolute grounds, anyone must be entitled to file such an opposition with the Trademark Office. If the opposition is based on any of the relavite grounds, then only prior rights owners or interested parties can file the opposition with the Trademark Office. This mechanism is designed to solve the problem of abuse of the trademark opposition procedure.

  1. The opposition procedure has been simplified. If a trademark is approved after the opposition procedure, it must be directly registered and will not be subject to a judicial examination procedure.

The amended Trademark Law revokes the opposition review and adjudication procedure and provides in Article 35 that after the Trademark Office reviews and adjudicates the trademark opposition, it must directly issue a decision on whether or not the trademark may be registered.

  1. If the Trademark Office decides to register the trademark, it must directly issue a trademark registration certificate and publish the same. An opposing party that disagrees may file another petition with the Trademark Review and Adjudication Board for a declaration of invalidity.
  2. If the Trademark Office decides not to register a trademark and the applicant disagrees with the decision, the applicant may petition the Trademark Review and Adjudication Board for review and adjudication of the decision. An applicant that disagrees with the decision of the Board may file a lawsuit with the competent People’s Court.
  1. The protection of unregistered trademarks has been improved.
  1. 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, and it should prevent and eliminate counterfeiting and trademark squatting.
  2. If an applicant knows of the prior use of an unregistered trademark by another party and illegally attempts to register the trademark, the application will 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 excluding the relationships provided in the previous paragraph (i.e. agency or representation), or if the applicant knows of the existence of the prior trademark, such other party shall be entitled to veto the registration.” Such a provision will effectively curb bad-faith trademark squatting by suppliers and ordinary employees of the company and will further strengthen the protection of used but unregistered trademarks.

  1. 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 earlier than the registrant, and the trademark possesses certain characteristics that are identical or similar to the registered trademark on the same or similar goods, the registrant must 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 mark to the trademark.” In our opinion, to protect the interests of trademark registrants, this passage should not be construed too widely — instead, “prior use” should be limited to the commercial use of goods in the same or similar classes, not including use only in advertising.

  1. The recognition and protection system for well-known trademarks has been improved.
  1. The well-known trademark principle of recognition on a passive, case-by-case basis based on facts and needs has been clarified.

Items 1~4 of Article 14 of the amended Trademark Law provide that well-known trademarks should be recognized at the party’s request if it is a fact that must be determined in a trademark dispute.

During the examination for trademark registration or the investigation and handling of trademark cases by the Administration for Industry and Commerce, if a party claims rights based on Article 13 of the Trademark Law, the Trademark Office may condition the determination of whether or not the trademark is well-known based on the needs of the examination or handling process.

During the adjudication of a trademark dispute, if a party claims rights under Article 13 of the Trademark Law, the Trademark Review and Adjudication Board may determine whether or not the trademark is well-known.

During the trial of trademark-related civil or administrative cases, if a party claims rights under Article 13 of the Trademark Law, the People’s Court designated by the Supreme People’s Court may determine whether or not the trademark is well-known.

  1. Using the word “well-known trademark” for commercial and advertising purposes is prohibited.

Unrestrained advertising of the trademark as “well-known” by the rights owner after its trademark is so recognized directly contradicts the original purpose for establishing the well-known trademark system. Such advertising will degrade the well-known trademark to an honorary title and may even be used for fraudulent purposes. For this reason, the amended Trademark Law provides in Article 14.5 that manufacturers and operators must not use the word “well-known trademark” on their goods, packaging or containers, or in commercial advertising, exhibitions or other commercial activities.

  1. Administrative penalties and judicial protection of the exclusive right to use a registered trademark are strengthened.
  1. The definition and presentation of the infringement of an exclusive right to use a registered trademark have been improved.
    1. Under the amended Trademark Law the current 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” is divided into two provisions.

The core principle for determining trademark infringement is the principle of likelihood of confusion. Among the four circumstances named in the current Trademark Law, “identical trademark + identical goods”, “identical trademark + similar goods”, “similar trademark + identical goods” and “similar trademark + similar goods”, only the most direct circumstance, “identical trademark + identical goods”, justifies a direct presumption of likelihood of confusion. To establish trademark infringement under any of the other three circumstances, the burden of proof is on the rights owner to prove the existence of the likelihood of confusion. Otherwise, even if the trademarks or goods are similar, no trademark infringement will be found because no confusion can be shown to have been caused.

For this reason, the amended Trademark Law revises the relevant provisions. It illustrates the foregoing legislative purpose in Article 57, which provides that “the following two acts must both be deemed infringement of the exclusive right to use a registered trademark: (1) without the consent of the trademark registrant, using a trademark that is identical to the registered trademark on identical goods; and (2) without the consent of the trademark registrant, using a trademark similar to the registered trademark on identical goods, or using a trademark identical or similar to the registered trademark on similar goods in a manner that may easily cause confusion.”

  1. A new type of trademark infringement has been introduced.

The amended Trademark Law assimilates the provision of the current Regulations for the Implementation of the Trademark Law and further provides in Article 57 that “where a person intentionally provides facilitation for the infringement of another party’s exclusive right to use a registered trademark, and assists the infringer in infringing the exclusive right to use the registered trademark, he shall be deemed to have infringed upon the exclusive right to use the registered trademark”.

  1. Punitive damages for trademark infringement are introduced and the penalties for repeated infringement have been enhanced.

The current Trademark Law does not provide punitive damages for intentional infringement, but instead adopts a compensation mechanism based on a “compensation equals losses” principle that cannot effectively regulate intentional infringement. The amended Trademark Law provides a system of punitive damages for intentional infringement. Article 63.1 provides that when the intentional infringement of the exclusive right to use a registered trademark is serious, the amount of compensation can be determined by the equivalent up to triple the amount of damages that are determined based on the foregoing methods. Such compensation must include reasonable expenses paid by the rights owner for curbing the infringement.

  1. 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. Article 63.3 of the amended Trademark Law provides that 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.

  1. 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.

  1. Administrative penalties for trademark infringement are set forth in detail.
    1. The methods for determining the amount of damages are provided.

Article 52 of the current Regulations for the Implementation of the Trademark Law only includes a simple and general provision on the penalty amounts for trademark infringement, specifically, the penalties for infringement of the exclusive right to use a registered trademark must be less than triple the amount of the illegal business revenue; and where the illegal business revenue cannot be ascertained, the penalties must be less than RMB100,000. Obviously such a provision can no longer satisfy the current need to eliminate trademark infringement. The amended Trademark Law sets forth illegal business revenue in the amount of RMB50,000 as the critical point and provides more detailed methods for determining the penalties.

Article 60.2 of the amended Trademark Law provides that when the Administration for Industry and Commerce handles a case and finds that infringement has occurred, it must order the infringer to immediately stop the infringement, and confiscate and destroy the infringing products as well as the main tools used for manufacturing the infringing products or for counterfeiting the registered trademark. Where the illegal business revenue amounts to RMB50,000 or more, a penalty of more than five times the business revenue may be imposed; and where the illegal business revenue is below RMB50,000, a penalty of no more than RMB250,000 may be imposed.

  1. A mechanism for enhanced penalties is introduced for repeated or serious infringement.

Since the current Trademark Law does not stipulate enhanced penalties for repeat or serious infringement, such infringement cannot be effectively curbed. The amended Trademark Law provides a mechanism for enhanced penalties for repeat or serious infringement.
Article 60.2 of the amended Trademark Law provides that “if an infringer commits trademark infringement twice or more within five years or if other aggravating circumstances apply, an enhanced penalty shall be imposed.”

  1. A standard of no compensation for an unused registered trademark is established.

The value of a trademark arises from its use. If the trademark is not used, no economic value is generated. In this circumstance, use by another party will not cause any economic loss to the trademark owner, and therefore the using party is not liable for compensation.

Based on the foregoing understanding, Article 64.1 of the amended Trademark Law provides that “Where the owner of the exclusive right to use a registered trademark claims compensation and the alleged infringer argues that the rights owner has not used the trademark, the People’s Court may demand that the rights owner provide evidence to prove actual use of the trademark during the past three years. If the rights owner can prove neither its actual use of the trademark during the past three years, nor other losses it suffered from infringement, the alleged infringer must not be liable for compensation.”

In addition to the foregoing revisions, the amended Trademark Law has also made improvements in other related systems, including: (i) establishing a trademark invalidation declaration system; (ii) canceling the concept of a registered trademark dispute ruling; (iii) regulating the act of trademark agency and enhancing the quality of trademark agency services; and (iv) requiring that a trademark license be filed before it can be used against a good-faith third party