Weekly China Trademark News Updates

February 2, 2023

Major Points of the Draft China Trademark Law Amendments (2023)

China Trademark Law, enacted in 1982, has been amended four times (1993, 2001, 2013, and 2019). Yet there are still issues of bad faith trademark applications, redundant and repeated registrations, improper use and abuse of trademark rights, etc. in trademark practice. On 13 January 2023, less than four years after the 2019 amendment, the China National Intellectual Property Administration (CNIPA) released a new Draft Amendment to the Trademark Law (“Draft”) for public comment.

The Draft expands the current Trademark Law to 10 chapters and 101 articles, among which, there are 23 newly added articles, 6 new articles split from existing articles, 45 articles with substantive updates, and 27 articles basically remain unchanged.

In light of such drastic revisions, this newsletter is prepared with major points that we believe are most noteworthy.

I. Strengthen Measures to Crackdown on Bad Faith Trademarks

1. Clarify specific circumstances of bad faith trademarks

Article 22 of the Draft lists specific circumstances of bad faith marks, including: (1) applying for trademarks in bulk with no intent to use, which disrupts the order of trademark registration; (2) applying for trademarks using fraudulent or other improper means; (3) applying for trademarks that are detrimental to the interest of the country or of the public, or that have other significant unhealthy effects; (4) copying, imitating, or translating other’s well-known mark; (5) pre-emptively applying by the trademark owner’s agent, representative, or interested party; (6) pre-emptively applying for other’s trademarks by unfair means, which damages other’s existing prior rights or interests; and (7) other actions in bad faith.

The Draft clarifies that “applying with no intent to use, or filing applications in bulk,” and “applying using fraudulent or other improper means” could be used as absolute grounds for trademark refusals, oppositions, and invalidations. This has broadened the application scope of the Article 44 of Trademark Law 2019, which is mostly applicable only against registered trademarks in invalidation actions.

2. Add more restrictions on signs that can be used and registered as trademarks 

– those in violation of public order or morality (Article 14)
– those contrary to core socialist values, or detrimental to excellent Chinese traditional culture (Article 15)
– both domestic and foreign geographical names known to the public (Article 15)
– those consisting of only generic names, designs, model numbers or technical terms of the goods concerned can neither be registered as trademarks, nor acquired distinctiveness through use (Article 16)

The Trademark Law 2019 stipulates that “geographic names of administrative divisions above the county level or foreign geographic names known to the public shall not be used as trademarks.” On this basis, Draft further adds “domestic geographic names known to the public” into the scope of signs that are prohibited from using and registering as trademarks.

In addition, review of trademark distinctiveness is more stringent, that is, generic names, designs, model numbers or technical terms are prohibited from securing registration by obtaining distinctiveness through use.

3. Prohibit repeated registrations

Article 21 of the Draft clarifies that a trademark application shall not be identical to the applicant’s previous applications, registered trademarks, or trademarks that have been revoked, cancelled, or declared invalid within the prior year for the same kind of goods or services. The purpose is to regulate improper acts of trademark squatters such as repeated bad faith applications, and re-application for registration immediately after their squatted trademarks are invalidated or cancelled. And there are some exceptions for right holders who have legitimate need, such as: (1) due to production and operation needs, the trademark application bears minor modifications to the prior trademark which has been in actual use, and the applicant can illustrate the differences; (2) for reasons not attributable to the applicant, the prior registered trademark was not renewed; (3) due to the failure to timely submit trademark use statements, the prior registered trademark that has been in actual use was cancelled; (4) for reasons not attributable to the applicant, the prior registered trademark that has been in actual use was cancelled due to failure to provide evidence of use in response to a non-use cancellation; (5) the prior trademark was declared invalid due to conflicts with prior rights or interests of others, but the prior rights or interests in question no longer exist; (6) there are other legitimate reasons to justify repeated applications for trademark registration.

4. Establish transfer mechanism of bad faith trademarks in invalidation proceeding

Articles 45 to 47 of the Draft stipulate that not only may prior right holder request the CNIPA to declare a registered trademark invalid, but prior right holder may also request to transfer such registered bad faith trademark under his name. This amendment creates a new mechanism favorable to right holders whose marks were pre-emptively registered by squatters; it enables the right holder to obtain earlier registered trademarks while avoiding repeated applications and refusal reviews in line with its trademark enforcement actions.Meanwhile, the Draft sets limitations on transferring registered trademarks by the CNIPA, that is, if there are no other reasons to declare the registered trademark invalid, and the transfer is unlikely to lead to confusion or other adverse effects, the CNIPA shall approve the transfer of the registered trademark. Such limitations, however, lack necessary details for actual implementations. If these particular imitations are to be included in the final version of the amended Trademark Law, we expect the Trademark Implementation Regulations and relevant regulative documents would provide further details and clarifications.

5. Increase penalties against bad faith trademarks

– Increase fines against bad faith registrations (Article 67)
– Civil compensations shall be ordered against bad faith trademark registrations that caused damages to others (Article 83)
– Bad faith trademark registrations that damage national interests, or social public interests, or cause major adverse effects, the Procuratorate shall, in accordance with the law, file a lawsuit in the Court against the bad faith trademark registrations (Article 83)

Articles 67 and 83 of the Draft provide a trinity of administrative, civil, and criminal punishment mechanism to effectively protect the legitimate rights and interests of right holders and crack down on bad faith squatting. A bad faith trademark application can be fined up to RMB250, 000 and any illegal gains shall be confiscated. If losses are caused to a specific entity, such entity may sue in a Court and request monetary compensation for the loss. If a bad faith trademark application damages national interests, social public interests or causes other major adverse effects, the Procuratorate may file a lawsuit.

III. Improve Trademark Examination Proceedings

1. Shorten the timeline for opposition

Article 36 of the Draft shortens the opposition period from three months to two months, which in turn shortens the time needed to obtain a trademark registration.

2. Cancel review of disapproval of trademark registration

Article 39 of the Draft cancels the review of disapproval of trademark registration. Where a trademark is disapproved in opposition, the applicant no longer has the right to appeal such decision with the CNIPA, but it may appeal to the Court. This amendment avoids the same dispute going through three proceedings (substantive examination, opposition, review of disapproval) all before the CNIPA, while still providing remedy for the applicant before the Court.

The Draft does not, however, amend the proceeding where an opposed trademark is approved for registration and where the opponent can file an invalidation with the CNIPA, then still have the remedy to appeal an unfavorable decision to the Court.

How can the two proceedings be harmonized in practice or whether consistency of review is applicable deserves further discussions.

3. Restrict the application of change of circumstances rule in court proceedings

Article 42 of the Draft stipulates that for court proceedings on refusal reviews, registration disapproval reviews, and invalidation actions, “If the status of the relevant trademarks change after a CNIPA decision is made, it shall not affect the trial of the decision by the Court, except when the principle of fairness is clearly violated.” According to the said amendment, change of circumstances shall not be applicable to administrative trademark litigations, except “when the principle of fairness is clearly violated.” However, the circumstances of “when the principle of fairness is clearly violated” remains unclear. Such amendment would greatly impact rights holders’ current practices of obtaining their own trademark registrations by removing prior obstacles via invalidations or cancellations.

III. Strengthen Trademark Use Requirements

1. Strengthen trademark use obligations

– Add use or intent to use requirement when applying new trademarks (Article 5)
– Establish regulations to require trademark owners voluntarily explain trademark use 5 years after registration (Article 61)

Article 5 and 61 of the Draft adds use or intent to use requirement when applying trademarks, and establishes regulations to require trademark owners to voluntarily explain trademark use 5 years after registration. Additionally, a random inspection system for explaining use and provisions for cancelling registered trademarks after random inspections is also added. This amendment will impose higher requirements on the use and maintenance of trademarks by trademark owners. Accordingly, defensive filings may face problems for providing evidence of use 5 years after registration. However, the Draft does not provide for specific review standards and implementing rules. According to the CNIPA statement on the Draft, “a simple and easy-to-implement method such as a use undertaking letter or a use description form is likely to be adopted.”

2. Regulate trademark use

For “unauthorized alteration of registered trademarks, name or address or the registrant and other items,” the Trademark Law 2019 only imposes liabilities “to make corrections within a time limit,” otherwise “the registered trademark shall be cancelled.” Article 64 of the Draft adds “a fine up to RMB100, 000” on top of the said provisions and imposes corresponding administrative and criminal liabilities and compensations for those infringing others’ trademark rights.

3. Broaden the applicable circumstances for cancellation

– Cancellation due to causing confusion among relevant public as to quality, source, or origin or other features of the goods by the use of a registered trademark, or seriously harming public interests and cause significant adverse effects by the use and exercise of exclusive rights of a registered trademark (Article 49)
– Cancellation due to untruthful statement of trademark use during random inspections (Article 61)
– Cancellation due to unauthorized alteration in the process of using the registered trademark (Article 64)

The Draft improves the cancellation system by adding more applicable circumstances and specifies that the CNIPA may cancel ex officio a registered trademark that damages public interests. Meanwhile, Article 49 adds a provision that cancellation “shall not damage the legitimate rights and interests of the trademark registrant or disrupt the order of trademark registration” in order to further regulate repeated three-year non-use cancellations or bad faith three-year non-use cancellations.

In addition, the Draft also expands the scope of cancellation ex officio. The CNIPA may cancel a registered trademark ex officio if an improper use of trademark right seriously damages the public interest and causes major adverse effects. If a trademark registrant alters the registered trademark without authorization in the process of using such registered trademark and fails to make correction within a time limit, that registered trademark shall be cancelled. The CNIPA shall conduct random inspections on a trademark registrant’s statement of the use of the trademark, and if necessary, require the trademark registrant to supplement relevant evidence. Where such statement is found to be untrue, the registered trademark shall be cancelled.

4. Clarify the applicable circumstances and the beginning and end of trademark registration “isolation” period

Article 50 of the Draft stipulates that, within one year from the date when a registered trademark is published as canceled or expired, any application for a trademark that is identical or similar to the said mark shall not be approved.

Regarding this one-year “isolation” period, which aims to avoid market confusion, the Draft improves the applicable circumstances by deleting the current provision of applying the isolation after a registered trademark is invalidated, and only retains applicability after a registered trademark is cancelled or expired.

In practice, prior right holders usually file a trademark application while filing an invalidation against a squatted trademark. If the one-year isolation is applicable to such squatted registration, it will lead to prior right holders’ repeatedly filing new trademark applications or incur new trademark disputes. This amendment, in comparison, is closer to the legislative intent in assuring that prior right holder’s trademark application will be approved timely.

IV. Strengthen Trademark Protection

1. Strengthen well-known mark protection

Article 10 of the Draft amends the current expression of “recognition of a well-known mark” into “confirmation of well-known status of a trademark,” which helps to weaken the administrative tint in the well-known mark affirmation. The amendment further specifies that the protection shall follow the principle of case-to-case confirmation, passive protection, and need-basis confirmation, and provides that the scope of protection of a well-known trademark shall be appropriate to the trademark’s distinctive features and reputation.

Meanwhile, Article 18 extends the scope of protection to circumstance that “is likely to cause the relevant public to believe that a trademark is closely connected with a well-known trademark, thus diminishing the distinctive features of that well-known trademark, or disparaging or improperly free-riding on the market reputation of the well-known trademark.”

2. Improve trademark infringement damage calculation method 

The order of calculating trademark infringement damages in the Trademark Law 2019 is actual loss of the right holder, infringer’s infringement profits, and reasonable multiples of royalties. In judicial practice, however, said damage calculation order is not the basis for calculating infringement profit when rights holder cannot prove its loss after exhausting his burden of proof. Therefore, Article 77 of the Draft lists right holder’s actual loss or infringer’s infringing profits as the first priority in damages calculation methods, which more streamlined with legal practice. Moreover, the Draft clarifies that damages should include right holder’s reasonable costs.

3. Introduce public interest trademark infringement lawsuit

Article 78 of the Draft introduces public interest trademark infringement lawsuit, where the infringement of trademark rights harms national interests or social public interests, and the trademark owner or interested parties does not file a lawsuit, and the department responsible for trademark enforcement does not deal with the infringement, the Procuratorial may file a lawsuit before the Court.

V. Clarify Administrative Power Boundaries 

1. Introduce a principled provision where trademark rights shall not be abused to damage national interests, social public interests, or the legitimate rights and interests of others

Article 9 of the Draft stipulates that the principle of good faith shall be upheld in the application for trademark registration and in the exercise of trademark rights. Trademark owners shall not abuse trademark rights to the detriment of national interests, public interests, or the legitimate rights and interests of others.

2. Improve descriptive use regulations and add fair use scenarios

Article 62 of the Draft introduces trademark fair use that includes (1) using one’s name and address in good faith; (2) for the purpose of indicating the kind, nature, quality, functions, purposes, weight, quantity, value, geographic origin or other features of the goods, using the geographical name, generic name, graphics, models, technical terms or other symbols relating to such indication of goods; (3) using its registered trademark for the sole purpose of indicating the purpose of use, target or scenario of use of goods, except where such use misleads the public.

3. Introduce malicious lawsuit compensation system

The Trademark Law 2019 sets a regulatory path for malicious lawsuit to be imposed of a sanction by the Court, which provides a legal basis against trademark right abuse. Article 84 of the Draft further stipulates a compensation system for malicious lawsuit. Where a malicious trademark lawsuit causes losses to others, compensation shall be ordered. The amount of compensation shall at least include the reasonable costs paid by the other party in responding to the malicious trademark lawsuit.

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