The Chinese government is seeking to create a more favourable climate for investment and innovation by tightening its trademark legislation to help rights holders act against counterfeiters and trademark squatters.
The revision of China’s 1982 Trademark Act was announced on 2 April 2018, leaving room for public consultation. On 23 April, the Standing Committee of the National People's Congress of the People's Republic of China approved the fourth revision of this law, the new provisions of which will take effect on 1 November this year.
What is changing?
China’s Trademark Act was last updated in 2013 (third revision). It sought to strengthen trademark rights for overseas companies by protecting well-known trademarks from bad faith applications. This latest revision goes one step further by introducing barriers to ‘fraudulent’ or ‘malicious’ filings, such as trademark squatting; in other words, trademarks that are not used, but have been filed in order to block third parties from marketing their products or services under that brand name in the country.
Trademark squatting is a major problem for brand owners in China, as the country employs a ‘first to file’ system, granting trademark protection to those who are first register a brand name, irrespective of whether they have used or, indeed, plan to use the mark.
As of 1 November, brand owners will be able to oppose future trademark applications and invalidate existing Chinese trademark filings on the basis that they are fraudulent or malicious, representing a major step forward for trademark rights in the region.
Administrative penalties will also apply to any company that is found to be filing such trademarks, including warnings and fines. The maximum amount of damages that can be awarded by the courts has also increased to RMB 5 million; although, it’s worth noting that the courts favour the destruction of counterfeit or infringing products over financial compensation in most instances. This is to prevent the introduction to the market of any such products or materials used for their manufacture.
We will wait to see whether this latest revision provides the tools that brand owners need to effectively act against trademark squatting.