China amends trademark law: practical implications for brand owners

Intellectual Property and Technology News

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China’s eagerly anticipated amendments to its Trademark Law will come into force on May 1, 2014. This gives brand owners just a few months to come to grips with the practical implications of the new law.

 

KEY AMENDMENTS

 

No right of appeal for opponents

 

Under the existing law, if an opponent is unsuccessful in opposition proceedings before the Chinese Trade Mark Office (CTMO), it may appeal the decision to the Trademark Review and Adjudication Board (TRAB). However, under perhaps the most far-reaching amendment of the new law, an unsuccessful opponent will no longer be able to appeal the CTMO’s decision, but must file a cancellation action at the TRAB. The trademark applicant, on the other hand, will continue to have a right to appeal the CTMO’s decision to the TRAB.

 

An opponent’s right of appeal to the TRAB has in practice been of great importance to brand owners because the TRAB typically takes a more nuanced approach than the CTMO. Unfortunately, given the high workload of CTMO examiners, it is not uncommon for errors to be made, resulting in credible oppositions against pirate marks initially being refused.

 

The rationale behind the removal of an opponent’s right to appeal is to speed up the time frame from application to grant of a trademark. This will be welcomed by applicants who have filed an application in good faith. But the downside for victims of trademark piracy is that there may be an intermediary period in which the pirated mark is registered and can be enforced by the pirate against the brand owner.

 

The practical implication of this amendment is that opposition proceedings will become very much the first and last chance a brand owner has to defeat a trademark pirate – a challenging concept for many Western brand owners.

 

Only “interested parties” can oppose

 

Under the existing law, anyone can oppose the registration of a trademark. Lengthy opposition proceedings have made it possible for parties to file oppositions for strategic purposes, delaying an application to gain leverage over an applicant. However, under the new law, only the owner of a pre-existing right or an “interested” party can file an opposition. This is a positive amendment for applicants who have filed in good faith.

 

Principles of “honesty” and “good faith”

 

The new law introduces a requirement that has been long awaited by brand owners who have fallen victim to trademark piracy: all applications must follow principles of “honesty” and “good faith.” However, while clearly a step forward in addressing trademark piracy, this new requirement is not listed as a possible ground for opposition, and it is unclear whether the CTMO will be prepared, in practice, to reject a mark when evidence is included in an opposition which shows a mark has not been applied for in accordance with these principles.

 

Higher penalties against infringers

 

Under both the existing and new laws, damages are determined by reference to the actual losses suffered by the trademark owner. When it is not possible to calculate damages this way, they will be calculated on the basis of a reasonable royalty.

 

Where there is evidence of bad faith by the infringer, or other “serious circumstances” exist, damages can be trebled.

 

In addition, in an attempt to further decrease infringement, statutory damages of up to circa US$500,000 can be imposed – a six-fold increase over the current level of statutory damages.

 

Introducing multi-class applications and e-filing

 

The new law introduces the ability for applications to be made electronically and for applicants to file multi-class applications.

 

E-filing is undoubtedly a welcome change which, it is hoped, will increase the speed and efficiency of the prosecution process. Multi-class filings may, however, be a double-edged sword, and their success may depend on how strictly the “honesty” and “good faith” provisions are enforced. On the one hand, it will increase efficiency and reduce costs in managing a PRC trademark portfolio, making it easier and more cost effective for genuine brand owners to protect their brands. On the other hand, it opens up the possibility for trademark pirates to register more brands in more classes and at a reduced cost.

 

Streamlined time frame

 

Currently, prosecuting a “smooth” trademark application in the PRC takes at least 18 months. The new law imposes an array of tighter timing requirements. For instance, the CTMO must complete its examination within nine months, meaning that, provided no oppositions are filed within the three-month opposition period, a mark should proceed to registration in 12 months. Any appeal decision by the TRAB against a refusal by the CTMO to register a mark on either absolute or relative grounds must be given within nine months - historically, this has taken anywhere from 12 to 24 months.

 

While these strict time limits all look good on paper, it remains to be seen whether the focus on speed will have an adverse impact on the quality of the decisions.

 

WELCOME AMENDMENTS AND CHALLENGING ONES

 

In summary, the new law introduces a number of welcome amendments, with the most notable being the introduction of a requirement to file applications in “honesty” and “good faith.” Other amendments may prove challenging. Time will tell how this all works in practice for owners eager to protect their brands in the PRC.

 

We have also prepared a longer review of this topic - please read it here

For more information about IP issues in China, please contact:

 

Horace Lam

 

Edward Chatterton

 

 

MORE ABOUT HORACE LAM

DLA Piper appoints Horace Lam to head China IP practice

 

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