Enhanced Brand Protection Under China's New Trademark Law

On May 1, 2014, China’s highly anticipated amendments to its trademark laws went into effect. After decades of international criticism over the lack of enforcement and protection measures, China’s newly amended trademark laws seek to deter trademark hijacking through stronger enforcement measures and provisions aimed at removing bad faith registrations. Some of the new amendments to China’s trademark laws may immediately impact businesses selling products in China and should be carefully reviewed.

CHANGES TO USE OF THE “WELL-KNOWN MARK” DESIGNATION

Historically, a party could place a “well-known mark” designation on its products, packaging and marketing materials to identify its mark as having achieved a certain level of notoriety, continued use, or enforceability against infringers. Trademark hijackers, however, often used this designation on counterfeit goods to infringe the rights of brand owners or would file fraudulent proceedings to obtain “well-known mark” status for the brands of others. Under the new laws, legitimate trademark owners can still achieve “well-known mark” status through the filing of proceedings with the China Trademark Office, Trademark Review and Adjudication Board, or certain People’s Courts. Starting May 1, 2014, however, manufacturers and dealers can no longer use the “well-known mark” designation on the brand owner’s goods, packaging or marketing materials unless such materials were first used before May 1, 2014. Use of the “well-known mark” designation after May 1, 2014 on products, packaging and marketing materials could result in fines up to RMB 100,000 (approximately $16,000).

LICENSES MUST BE RECORDED WITHIN THREE MONTHS

While Chinese trademark laws previously required trademark owners to record trademark licenses with the China Trademark Office within three months of signing, there were no real consequences for failing to timely record. As a result, many businesses chose not to record their licenses in a timely fashion. Under the new laws, the China Trademark Office will not process untimely applications to record licenses. Thus, although a license will remain valid even if it was not timely recorded, the licensee will not be able to use the license to assert rights against third parties acting in good faith.

TRADEMARK APPLICATIONS MUST BE FILED IN “GOOD FAITH”

Overall, most of the amendments to China’s trademark laws are designed to attack trademark hijacking practices, starting with provisions aimed at thwarting the filing of fraudulent trademark applications. Because China is a first to file jurisdiction, bad faith trademark applications have been all too common. The new laws require that all trademark applications be filed in “good faith.” This good faith provision is intended to be a catch-all that can regulate misconduct not specifically identified in the laws. To provide some teeth to this notion of good faith, the new laws prohibit the acceptance of trademark applications that infringe upon the prior existing rights of others. Similarly, the new laws prohibit the filing of any trademark application with the intent to register a mark used by another that has gained notoriety.

The new laws may also provide additional comfort to brand owners seeking to fend off trademark hijacking by business partners, such as distributors or manufacturers. A trademark application will be rejected if the application consists of a mark that is identical or similar to an unregistered mark that has been previously used by a party with which the applicant has a contractual, business or any other relationship and whose prior use of the mark is therefore known to the applicant.

STRONGER PENALTIES FOR INFRINGEMENT

Attempting to deter infringers and provide additional ammunition for brand owners, the new amendments significantly increase the penalties for infringement. Civil penalties are now specifically articulated in the new laws, providing that damages will be determined in the following manner: (1) actual losses caused by the infringement; or (2) if actual losses cannot be determined, the benefits acquired by the infringer; or (3) if the first two are difficult to assess, a reasonable royalty. The damages award will also include any expenses paid by the trademark owner for stopping the infringement. If the calculation of such damages is too difficult to assess, statutory damages for infringement have been increased up to RMB 3,000,000 (approximately $480,000)—which is six times greater than the previous RMB 500,000 (approximately $80,000). Additionally, criminal fines for illegal gains arising from improper use or registration of a mark can be assessed, and such fines may be multiplied if the infringer is a repeat offender.

STREAMLINED REGISTRATION PROCESS

The new amendments to China’s trademark laws also attempt to streamline the entire trademark registration process. For example, beginning May 1, 2014, multi-class applications are now permissible, giving trademark applicants the ability to file one application covering various goods and services rather than having to file separate applications for each class of goods or services. The new amendments also instituted deadlines upon which the China Trademark Office must review applications (nine months) and oppositions (twelve months). Additionally, submissions to the China Trademark Office may now be made through a new electronic filing system.

While the May 1, 2014 amendments to China’s trademark laws will have an immediate impact on the manner in which brand owners do business in China, it may be quite some time before the full impact of the amendments on trademark hijacking will be seen. Consequently, brand owners will need to continue vigilantly protecting their trademarks in China and carefully monitor their trademark portfolios to ensure compliance and enforceability under China’s newly amended trademark laws.

Related topics: Intellectual Property, Retail, Technology