China Trademark Law Draft Amendment Shows Progress and Positive Changes

The China National Intellectual Property Administration (CNIPA) released the Draft Amendment to the PRC Trademark Law on January 13, 2023, marking the fifth revision since the law’s inception in 1983. This latest amendment aims to address long-standing issues such as bad faith filings, trademark hoarding, inefficient trademark protection procedures, and increased abuse of rights leading to malicious litigations. The legislation’s purpose is to support the “high-quality” development of the economy and society, as stated in Article 1.

The consultation period for public feedback on the Draft ends on February 27, 2023. If the Draft is finalized, it will have significant implications for brand protection and management in China. Some of the key changes proposed in the Draft include measures to combat bad faith filings, streamline trademark procedures, and prevent malicious litigation.

Combatting bad faith trademark filings

One significant addition to the Draft is Article 22, which covers different types of bad faith filings, including massive filings without intent to use, deceptive filings, and those that cause damage to public or state interests. Violations of Articles 18, 19, and 23 or any other bad faith behaviors can also be classified as bad faith filings. Moreover, the Draft includes a mandatory transfer system under which brand owners can retrieve their brands pre-empted by others through administrative proceedings.

The Draft also introduces a penalty system for bad faith filings. Applicants for bad faith filings may receive warnings or fines, ranging from less than RMB 50,000 to a maximum of RMB 250,000, and confiscation of any illegal gains. Civil compensation is also included in the Draft. Parties who suffer losses due to bad faith filings can file civil actions and claim compensation covering reasonable legal costs.

Finally, if a registered mark violates Articles 18, 19, or 23, the prior right owner can request the mark to be transferred back to their name in an invalidation action. The CNIPA may accept such requests if it finds them valid and decides that the transfer would not cause confusion or negative influence. If a transfer decision is made, it will become effective if the registrant does not file an appeal, and the applicant who requested the transfer will enjoy the trademark right upon publication of the transfer decision.

Strengthening use obligations and tackling trademark hoarding

The Draft has introduced a significant change regarding the requirement of use. In order to file a trademark application, the applicant must demonstrate actual use on the goods/services or a commitment to use (Article 5).

Trademark registrants are now required to submit a statement of use every five years after registration, proving the status of use or providing a legitimate reason for non-use within 12 months (Article 61). The authenticity of the statement will be spot-checked, and if found to be unauthentic, the registered mark will be cancelled. If the registrant fails to file the statement, they will receive a notice from CNIPA, and if no response is filed within six months, the mark will be deemed abandoned.

Under the Draft, trademark use through information networks, such as the Internet, is considered valid (Article 59). Additionally, a registered mark can now be cancelled based on non-use or if it misleads the public on product characteristics, causes harm to the public interest, or has a significant negative influence (Article 49).

Re-filing may no longer be a straightforward process, as an applicant may own only one registration for the same mark in respect of the same goods or services (Article 14). Repeated registration is prohibited, and an application cannot be the same as a prior application or registration owned by the same applicant or a prior mark that has been revoked, cancelled, or invalidated within one year (Article 21). Exceptions include situations where minor changes are made to a prior mark, the prior mark was not renewed for reasons not attributable to the applicant, or the prior mark has been cancelled due to the failure of filing a statement of use, but it has been in use (among others).

Streamlining the trademark procedure

The Draft proposes to simplify trademark procedures, potentially reducing the time it takes to register a trademark. Firstly, the opposition period will be shortened from three months to two months from the publication date (Article 36). Secondly, the review procedure for opposition proceedings will be eliminated. Currently, the opponent cannot file for review if the opposition is dismissed, but the opposed party is entitled to a review if the opposition is upheld. Under the Draft, no review procedure will be available to the opposed party, who may only file a court appeal if the opposition is upheld (Article 39).

For trademarks that violate Article 15, which prohibits signs that cannot be registered, the CNIPA can revoke the publication ex officio (Article 37).

In cases where the outcome of an administrative action depends on related cases, the CNIPA and Courts may exercise their discretion to suspend the examination or adjudication pending the related cases. The Draft allows the CNIPA to retain this discretion, but the Courts are required to adjudicate based on the status of the related cases at the time when the CNIPA’s decisions were made, unless it contravenes the principle of fairness. If circumstances have changed after the CNIPA’s decision was made, the Courts should not consider these changes in making rulings on the appealed decisions (Article 42).

Banning abuse of trademark right

The Draft aims to prevent the abuse of trademark rights and protect the legitimate rights of others. Except for state and public interests, the Draft prohibits the harm of other parties’ legitimate rights through the abuse of trademark rights. If a trademark violates this provision, the relevant parties can request the CNIPA to cancel it.

Under the current Trademark Law, a trademark owner cannot prevent others from using a similar mark on similar goods if the latter have already used it and gained certain influence before the former’s trademark application. The Draft further clarifies situations where a trademark owner cannot preclude others from using their mark, such as using one’s own name in good faith, describing the goods’ characteristics, or indicating the function, applicable object, or context of the product, unless it misleads the public.

The Draft also addresses malicious trademark litigation and allows for counterclaims if losses are caused to the other party. The amount of compensation shall include reasonable expenses paid to stop the litigation.

Aside from these amendments, the Draft also broadens the protection of well-known trademarks, refines articles related to trademark infringement, tightens requirements on trademark agencies, digitalizes the trademark industry, and emphasizes the national strategy on brand protection. The Draft expands the PRC Trademark Law to 10 chapters and 101 articles, indicating a significant change that may impact brand management and protection strategies in China.

We eagerly anticipate the finalization of the Draft and the following implementing regulations in the near future.

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