On 1 September 2011, the Legislative Affairs Office of the State Council (SCLAO) released the third Draft of the Revised PRC Trademark Law for Public Comment (Draft).

As compared to the first two draft amendments released in June 2009 and March 2010, the third Draft backtracks towards the current law by removing a few pro-brand-owner provisions that had appeared in previous drafts. For example, the list of acts constituting trademark infringement set out in the third Draft is shorter than in the 2010 draft.

The following is a summary of the more significant draft revisions:

Amending the Trademark Definition

The Draft adds the element of sound as a registerable trademark. Noticeable omissions in this Draft, which were included in the 2010 draft, are the exclusion of scent and dynamic marks. Even though the earlier draft amendments signaled a possible extension of protection to cover scents and moving images as the China Trademark Office considers appropriate, such references are no longer included in the third Draft, most likely due to the difficulties in administering the registration of such non-conventional trademarks.

Time Limit for Appeals

The time to appeal a rejected trademark with the Trademark Review and Adjudication Board is increased from 15 to 30 days in the Draft. This change gives companies more time to collect evidence and prepare for a TRAB (Trademark Review and Adjudication Board) appeal.

Simplified Trademark Registration

The Draft allows for submission of trademark applications by electronic means, though the specific form and procedure of such e-filings remain unclear. This Draft recognizes that multi-class filings will be provided for under separate regulations to be issued by the administrative authorities.

Well-known Trademarks

While the Draft strengthens the notion of well-known trademarks, it does not elaborate on whether this will apply to foreign brand owners in China. Article 14 of the Draft recognizes for the first time in a national law that "famous marks", i.e. marks which have acquired a certain level of fame, may be recognized by local governments under local laws or regulations separately, thereby drawing a distinction with "well-known" marks that may be recognized under the national law and which enjoy cross-class protection.

However, by deferring to local laws and regulations in the recognition of famous marks, the third Draft will likely result in inconsistency among local government practice and cause concerns of local protectionism that may arise from locally recognized famous marks.

Increased Compensation

The Draft includes an increase of the maximum statutory damages from RMB 500,000 to RMB 1,000,000 in cases where it is not possible to determine the amount gained from the infringing business activities. On the other hand, the Draft introduces a requirement for trademark owners to provide evidence of prior use for a period of three years when seeking damages, thereby imposing an additional burden on trademark owners. The Draft also imposes heavier fines and penalties for those who infringe others' trademarks twice or more within a five-year period. It remains to be seen if these changes will be enough of a deterrent to infringers.

Trademark License Registration

The Draft retains the need to record trademark licenses with the CTMO. It does not include any penalties for failure to do so but adds a new paragraph that may have tricky practical implications: "[...] a licence that has not been recorded cannot be used against a third party with good faith." This is an issue that has been addressed by the Supreme People's Court under a judicial interpretation issued in 2002, though reiterating the position as part of a national law will provide higher certainty.

Despite some set-backs, the third Draft retains and builds on various novel features introduced in the earlier drafts which, once enacted, will certainly enhance the efficiency of trademark prosecution and enforcement process under the current regime.