China’s legislature has approved amendments to three laws that will strengthen protections for intellectual property (IP) rights in the country. Revisions were made to the Trademark Law, Law Against Unfair Competition, and Administrative Licensing Law. These changes are crucial to the successful implementation of the new Foreign Investment Law that was passed at the end of the Two Sessions meeting in March, which in most years is China’s biggest political event. The law will come into effect on January 1, 2020.
Amendments to the Trademark Law come down heavily on trademark squatters and those found guilty of trademark infringement. The revised Trademark Law will come into effect on November 1, 2019.
The amended law will penalize “bad-faith trademark registrations without intent to use” (Article 4), also known as “trademark squatting”. The Trademark Office will be able to deny such bad-faith applications outright. Further, the onus will be on trademark agencies to refuse clients who file bad-faith applications. Accepting such clients will result in a warning or fine (Article 19). Article 44 of the amended law will invalidate all trademarks that have been registered in bad faith.
Heavier penalties in the amended Trademark Law:
- Authorizing quintuple damages for “malicious” trademark infringements and increasing the statutory limit for damages payout to RMB 5 million (US$741,180) from RMB 3 million (US$444,708) (Article 63);
- Allowing the courts to order destruction of articles with counterfeit registered marks and of tools and materials used to make such articles (Article 63); and
- Authorizing the courts to sanction the malicious filing of trademark lawsuits (Article 68).
Revisions to the Anti-Unfair Competition Law and the Administrative Licensing Law focus on strengthening trade secrets protections. These amendments have already taken effect.
Law Against Unfair Competition amendments:
- The definition of trade secrets will include all “trade information”, not just technical information and “business information”.
- Two new types of misappropriation have been added: acquiring trade secrets through “hacking” and “instigating, inducing, or assisting in” the breach of confidentiality to “acquire, disclose, use, or allow others to use” trade secrets (Article 9).
- All entities and individuals – not just “business operators” – are subject to the Law’s prohibitions on the misappropriation of trade secrets (Article 9).
- Provision of quintuple damages for malicious trade secret infringement introduced and the maximum statutory damages increased to RMB 5 million (US$741,180).
- The amendment reverses the burden of proof in civil trade secret suits when the plaintiff makes certain prima facie showings (Article 32).
Administrative Licensing Law amendments:
- Those involved in licensing proceedings are prohibited from disclosing an applicant’s “trade secrets, undisclosed information, or confidential business information” without the applicant’s consent or unless otherwise authorized by law (Article 5). Before an administrative agency discloses such information, it must allow the applicant to make an objection.
- No agency is allowed to make the grant of a license conditional on the transfer of the applicant’s technology (Article 31). The agency cannot directly or indirectly demand technology transfer in the course of implementing the license.