1.
Proposed Overhaul of the PRC Trademark Law
The China National Intellectual Property Administration
(CNIPA) published its draft for the 5th amendment to
the Chinese Trademark Law in January 2023. The public consultation period ended
in February 2023. The proposed
amendments amount to an overhaul of the Chinese Trademark Law and reflect the
CNIPA’s goals to combat bad faith filings and trademark hoarding and streamline
examination practice. Notably, the CNIPA seeks to introduce a new mechanism for
compulsory transfer of bad faith trademarks to the rightful owners. This may
spare the need for brand owners to file their own registrations and eliminate
the uncertainty that their own applications cannot go through due to other
conflicting marks. The draft also introduces a new requirement for statements
of use which shall be submitted after the expiry of every 5 years from the date
of trademark registration. If no statement of use or legitimate reason for
non-use is submitted within the prescribed time limit, the registration will be
cancelled. Other noteworthy proposed amendments include new civil remedies and
enhanced administrative penalties against bad faith filings and restrictions on
trademark re-filings. Given the potential use requirements, brand owners should
regularly docket dated evidence of use of their marks on the registered goods and
services.
2. Intention to Use Requirements
for Bulk Trademark Filings
In
the 2019 amendment of the Trademark Law, the CNIPA amended Article 4 to curb
bad faith applications with no intention to use. We observe that the CNIPA has
been raising objections based on this article against applicants with bulk
trademark filings and large trademark portfolio, including legitimate
companies. Internally the CNIPA has adopted a scoring system to evaluate
applicants’ filing behaviour. Factors to be considered
include (i) the total number of trademarks in the register, (ii) the number of
classes covered by the trademarks, (iii) the number of assignments filed, (iv)
the number of bad faith filings, and (v) the applicant’s background. If
one’s score exceeds the threshold, which we understand is not a high one,
examination opinions will be issued against the applicants’ trademarks newly
filed within a certain period, requiring applicants to prove the use intention
of multiple trademarks. We have successfully overcome such objections by
demonstrating the origin of our clients’ marks, the use status or the intention
to use and the reasonableness of defensive filings.
3.
Expedited Examination of Post-Grant Applications
The CNIPA issued a notice in March
2023 announcing procedures for expediting the examination of applications for
change of name/address, assignment, renewal, license recordal, re-issuance of
registration certificates and surrender of registration, etc. Situations where
expedited examination are available include (i) registrants going public, (ii)
a need to commence administrative and judicial actions concerning trademark
infringement, (iii) examination of trademark rights in administrative
procedures and litigation cases; (iv) a need to record trademark registrations
with Chinese customs; (v) significant commercial activities (e.g. launching
products on e-commerce platforms); (vi) a need to pledge trademarks for
financing; and (vii) other circumstances. Applications should be supported by
evidence. No official fee will be charged for requesting expedited examination.
Examination of assignment applications currently take around 4-6 months to
conclude, while the rest may take around 1 to 2 months to conclude. We expect
that, if applications are approved for expedited examination, it may take half
of the usual time frame or even less to conclude.
4. Tightened
Examination of Consent Letters
The CNIPA has refused to accept
consent letters in refusal review procedure since 2021. While the Beijing High
People’s Court published a guideline in 2019 confirming that consent letters
may be accepted and there were cases where the Beijing Intellectual Property
Court and the Beijing Higher People’s Court accepted consent letters, we notice
that there is a change in attitude and that both courts have started to refuse
to accept consent letters. Both courts held that the Trademark Law intends not
only to protect the interests of the prior right owners but also to protect the
public from consumer confusion. The courts therefore consider that consent
letters alone are insufficient to show that there will be no actual consumer
confusion. In some cases, judges raised the issue on the absence of evidence
proving the authority of signatories of consent letters, and refused to accept
consent letters. Applicants are recommended to explore alternatives to overcome
cited marks, e.g., non-use cancellation actions and buyback. If cited marks are
owned by related companies, applicants may consider unifying the ownership or
having the related companies to file applications and grant licenses to
applicants. It is also advisable to conduct trademark clearance searches before
filing so that potentially conflicting marks can be identified for early
actions.
5. Successful
Unfair Competition Lawsuits against Squatters
Following the BRITA case
where the Shanghai Minhang District People’s Court ruled that a squatter’s
filing of bad faith applications and malicious administrative actions may
constitute acts of unfair competition, the Fujian Higher People’s Court in Emerson Electric Co. v. Xiamen Anjier Water Angel Drinking Water
Equipment Co., Ltd and others (the In-Sink-Erator case)
ruled that mere trademark squatting activities without any trademark
infringement activities violated Article 2 of the Anti-Unfair Competition Law,
which is a general provision which prohibits acts violating the bona fide
principle and business ethics. The Court awarded damages in the
amount of approximately USD250,000 to compensate the plaintiff’s loss and
damages. This is a highly encouraging development as it offers a new approach
against squatters, which allows brand
owners to recover some of their legal expenses from squatters. Indeed, in the
latest draft amendment to the PRC Trademark Law, a new civil remedy is
introduced entitling brand owners to apply to the Chinese Courts requesting for
monetary compensations for loss caused by the bad faith filings. With the wider
application of the Anti-Unfair Competition Law and the potential new civil
remedy in the Trademark Law, it is hoped that these would have a strong deterrent
effect on squatters.
6. The Comeback of Shadow Companies
We observe that more and more
Chinese infringers are taking advantage of the loose company name examination
practice in Hong Kong and set up companies with English and Chinese names
incorporating or confusingly similar to trademarks of others, also known as
“shadow companies”, in Hong Kong. These shadow companies distribute infringing
goods under misleading company names in Mainland China, causing consumer
confusion, and even file bad faith trademark applications in Mainland China. We
regularly devise cross-border enforcement strategies to combat shadow
companies. Recently, we succeeded in stopping the use of a misleading company
name in Hong Kong and deregistration of the shadow company. We also successfully
removed their bad faith applications and have now commenced infringement
lawsuit against the mastermind. Brand owners are recommended to take early
actions against shadow companies so as to halt the use of misleading company
names. Company name complaints may be lodged to the Hong Kong Companies
Registry within 12 months after the registration date of the company name. It
is also worth noting that Hong Kong and Mainland China are two different
jurisdictions, and protection in one jurisdiction does not extend to the other.
It is thus important to secure trademark protection in both jurisdictions to facilitate
enforcement actions.
7. First-Ever NFT Infringement Lawsuit in China
In December 2022, Hangzhou
Intermediate People’s Court handed down a final judgment on the first-ever NFT
infringement lawsuit between Shenzhen Qicedie Cultural Creativity Co. Ltd. and Hangzhou
Yuanyuzhou Technology Co. Ltd. While this case does not concern
trademark infringement but copyright infringement, it sets an important
precedent for future lawsuits concerning NFTs and their trading platforms. The
Court affirmed that, given the features of NFT trading and the relevant laws, NFT
trading platform owners should exercise a higher duty of care and also set up
an effective intellectual property review mechanism to confirm the source of
the NFT artworks and the owner’s rights in the artworks. The Court also
affirmed that the mere takedown of the infringing NFT artwork from the platform
and removal of the NFT addresses are insufficient. The platform owner should
also send the infringing NFT artwork to a “black hole” (i.e. sending the token
to an address that no one can access). This case has not only confirmed the
higher-than-usual duty of care on NFT trading platforms but also the remedy of
destruction of an NFT by sending the token to an inaccessible address.
8. CNIPA Unveiling the Veil of the Mysterious Class
35
The CNIPA published “Guidelines
on the Application for and Use of Trademarks in Relation to Class 35 Services”
in December 2022, clarifying that services in Class 35 are services rendered
for the benefit of others. For instance, “advertising services” do not
refer to promotion of trademark owners’ own goods or services, which
shall be covered by the relevant goods and services classes, but the promotion
of other brand owners’ goods or services. The CNIPA also reiterates that sale
of goods is generally not considered as a service. Nonetheless, brand owners
are still recommended to file defensive registrations in Class 35. Should an infringer merely use a confusingly similar mark
on storefront but sell goods of others, say cosmetics, which do not bear the
same mark, such use may not constitute infringement in Class 3 but in Class 35.
Accordingly, a registration in Class 35 may come in handy. Further, filing your
own registration in Class 35 can also help prevent others from registering the
mark and legitimizing their use.
9. China’s Accession
to the Apostille Convention
China
officially acceded to the Convention of 5 October 1961 Abolishing the
Requirement of Legalisation for Foreign Public Documents, also known as the
“Apostille Convention”, on March 8, 2023. The Convention will come into effect
in China on November 7, 2023 and will simplify the authentication procedure on public
documents (which include judicial, official and notarised documents) by
replacing legalisation with apostille. Currently, when commencing lawsuits
before or lodging appeals to Chinese courts, claimants are required to provide
notarised and legalised powers of attorney, certificates of legal representative
and company documents proving their good standing and the signatory’s authority,
which may be time consuming. In fact, is it not uncommon for cases to be rejected
merely because claimants could not
produce notarized and legalized formality documents to the court’s satisfaction
within the prescribed time. It is hoped that, with the Accession to the
Apostille Convention, legalisation of such documents is no longer necessary. We
will wait and see how the Apostille Convention will be implemented in China.
10. Promotion of CNIPA to be
Directly Under the State Council
From March 2023, the CNIPA,
which was previously supervised by the State Administration for Market
Regulation (SAMR), has become an institution directly under the State Council.
The reorganisation aims to improve the management and protection of
intellectual property. While the SAMR will continue to handle administrative
actions, the CNIPA will provide professional guidance to SAMR. From our experience,
some AMR officers may be hesitant to handle cases involving intricate arguments
and only accept complaints involving clear-cut infringement. The CNIPA
previously published various guidelines for enforcement agencies to facilitate
their determination of trademark infringement and other violations of the
Trademark Law. Subject to further information on the future work relationship
between the CNIPA and the SAMR, we believe that, with the CNIPA’s guidance, the
effectiveness of administrative actions may be improved.
© Vivien Chan & Co., Newsletter issue 04, April 2023
All Rights Reserved
About Us
Vivien Chan & Co. is a full-service law practice with offices in Hong Kong (1985) and Beijing (1993). We are consistently recognized as a premier law firm for and in Greater China. With over 35 years of doing business in Greater China, our Hong Kong and China teams have an in-depth understanding and knowledge of the legal culture and market dynamics.
Our long established licensed law offices in Greater China have allowed us to develop deep local roots and an integrated global perspective necessary to help domestic businesses and multinational companies alike seamlessly manage even the most complex local and cross border transactions.
We have advised on some of the most significant acquisitions, arbitrations, real estate projects and intellectual property enforcement to date. This is particularly evident from our leading position in areas such as intellectual property, tax, employment, mergers & acquisitions and dispute resolution. Our ability to collaborate across practices and borders with ease allows us to bring the right team to every transaction, regardless of location.
