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
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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.