The China National Intellectual Property Administration (CNIPA)
kick-started 2023 by publishing its draft for the 5th amendment to
the Chinese Trademark Law (the “Draft Amendment”) on 13th January 2023. The proposed amendments, if implemented, would amount to an overhaul
of the Chinese Trademark Law, reflecting the CNIPA’s goal to combat bad faith
filings and trademark hoarding. While we welcome some of the proposed
amendments, for example the introduction of compulsory transfer of bad faith
trademarks and civil remedies against trademark squatters, some may affect
brand owners and hence impact brand protection and management strategies in
China. Notably, the Draft Amendment seeks to introduce a new requirement for statements
of use mirroring the US practice.
In this
article, we will analyse the key proposed changes which may have significant impact
on the trademark landscape in China and share our insights on how brand owners may
get prepared for the overhaul.
Compulsory Transfer Of Bad-Faith Trademarks
One of the revolutionary changes in the Draft Amendment is a new
mechanism for compulsory transfer of bad faith trademarks to the rightful
owners. For registrations that are (1) owned by agents or representatives of
rightful owners, or parties with a contractual or business relationship with
rightful owners, without authorization, (2) pre-emptive registrations of
rightful owners’ marks with certain reputation in Chinese Mainland, or (3)
copies, imitations or translations of well-known trademarks in Chinese
Mainland, rightful owners may apply for the registrations to be transferred to
them. If the reasons for transfer are justified, and there are no other reasons
for invalidating the registration and the transfer will unlikely cause public
confusion or have other adverse influence, the CNIPA shall order the transfer of
the registrations to the rightful owners. If the aforesaid conditions are not
met, the CNIPA will invalidate the registrations instead.
The
proposed transfer mechanism will become a powerful remedy to brand owners,
especially those who have yet secured trademark registrations in China. This may
spare the need for brand owners to file their own registrations, and eliminate
the uncertainty that the brand owners’ own applications cannot go through due
to other similar marks. The rightful owners may also benefit from the earlier
filing date of the transferred registrations. While it remains
to be seen how the CNIPA would exercise its power to order the transfer of
marks, we expect such compulsory transfer to be a procedure many rightful
owners can take advantage of.
Continued Effort In Curbing Bad Faith Filings
The Draft Amendment introduces a new article targeting bad faith
filings, under which the following, amongst others, will be considered as bad
faith:-
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1.filing large number of trademark applications without intention to use;
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2.obtaining trademark registrations by fraud or any other improper means;
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3.unauthorized registrations by agents, representatives of rightful owners,
or parties with a contractual or business relationship, pre-emptive
registrations for marks used by others with certain reputation, or copies, imitations or translations of well-known trademarks, with the deliberate
intention to damage others’ legitmate rights or interests or to the intention
to obtain improper benefits; and
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4. other malicious behaviors.
This is a codification of the current CNIPA’s examination practice against
bad faith filings, drawing references from the existing examination guidelines
and various administrative provisions. Bad faith is expressly indicated as a basis
for opposition and invalidation, and a violation of the article prohibiting bad faith would attract penalties and civil liabilities.
New Civil Remedies and Penalties To Combat Bad Faith Filings
Following
the trend of the Chinese Courts in recognizing bad faith filings as actionable
under the Anti-Unfair Competition Law and awarding compensations to brand
owners as seen in Brita GmbH v. Shanghai Kangdian Industrial Co., Ltd. (2020)
and Emerson Electric Co. v. Xiamen Anjier Water Angel Drinking Water
Equipment Co., Ltd and others (2021), the Draft Amendment introduces a new
civil remedy entitling brand owners to apply to the Chinese Courts requesting
for monetary compensations for loss caused by the bad faith filings, which
amount shall at least cover the reasonable expenses incurred for combating bad
faith filings. The Draft Amendment also specifies that bad faith applicants may
face fines up to RMB50,000 (~US$7,400) or a maximum fine of RMB250,000 (~
US$36,800) under serious circumstances. Any illegal gains shall also be
confiscated.
The new
civil remedies and enhanced administrative penalties would hopefully help deterring
bad faith squatters. Also, as the current law does not provide any cost award
for rightful brand owners in the event of successful opposition and
invalidation, this is an encouraging development allowing brand owners to recover
some of their expenses in combating bad faith filings via court proceedings.
New Statement Of Use Requirements – A Mixed Blessing?
Another major focus of the proposed amendments is to reinforce the
principle of obtaining registrations for use purposes. A new mechanism is
introduced which requires trademark registrants to voluntarily file statements
of use with the CNIPA within 12 months 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 filed within the aforesaid time limit, the CNIPA will issue
notices to registrants requiring them to submit statements of use within 6
months from the date of issue. The CNIPA will conduct random inspection of the
authenticity of the contents in the statement of use and may request further
evidence for review. If no statement is filed within the time limit or if the
statement of use is considered inauthentic, the registration will be cancelled.
This may be a mixed blessing to brand owners. This would likely help removing
idle trademarks filed by bad faith trademark hoarders who tend not to put their
marks into use. On the other hand, brand owners may also experience
difficulties in establishing use of their defensive registrations.
Clarifications on the extent of proof are to be expected, for instance whether
a mere statement may suffice or what may amount to sufficient evidence in
support, and to what extent evidence of a product can maintain use of similar
designated goods.
Given the potential new use requirements, we strongly recommend that brand
owners should regularly docket dated evidence of use of their marks on the
designated goods or services.
A Ban On Trademark Re-filings?
The Draft Amendment seeks to prohibit registrants
from re-filing marks identical to those of valid prior applications and
registrations or registrations surrendered, cancelled or invalidated within one
year of the filing date on identical goods/ services. Exceptions are available,
for example registrants’ agreement to surrender the earlier registrations,
minor amendments of trademarks for production and operation needs, or other
valid reasons for re-filings. This new provision is said to target trademark
filings with the intention to avoid the consequence of being removed by non-use
cancellation, opposition and invalidation.
While this helps address the phenomena of
squatters re-filing their marks, this may create problems to brand owners. An
example will be trademark re-filing in refusal reviews. There is currently no
formal procedural for suspension of trademark examination pending the
disposition of cited marks, and it is at the examiners’ discretion to suspend
the case. Examiners may refuse to suspend and treat cited marks as valid
despite the pending actions against the cited marks and render their decisions
on such a basis. Brand owners may have to refile their trademarks while waiting
for disposition of the cited marks. It is unclear whether this constitutes a
valid reason for re-filings and is allowed under the new regime.
To cope with the potential bar on re-filings,
it is recommended conducting trademark searches and taking actions against
potentially conflicting marks before trademark filing such that the potentially
conflicting marks could be removed before the conclusion of the refusal review
procedure, thus eliminating the need to re-file.
The Draft Amendment seeks to introduce significant changes to the
existing legal framework. On the bright side, new measures and remedies are
introduced to combat bad faith filings. While the legislative process may take
some time to complete and not all proposed amendments may finally be adopted, we
still recommend brand owners take the proposed amendments into consideration
when formulating brand protection and management strategies. We will keep you posted
on any further developments. If you have any questions or concerns on the Draft
Amendment, please let us know and we are happy to discuss.
© Vivien Chan & Co., Newsletter issue 02, February 2023
All Rights Reserved
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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.
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