The Trademark Law of the People’s Republic of China was recently amended and went into effect on May 1, 2014, though in some cases it applies to violations that occurred prior to the effective date and continue after that time. The main amendments of the law cover trademark registration, opposition, and review, as well as infringement liability. While the current law rectifies some problems that arose under the previous law, significant issues remain and new issues are created. Ten key considerations are discussed below:
1. New Time Limits & Examiner’s Discretion
For the first time, the new law sets time limits for trademark examination, opposition, cancellation and review. Under the time limits, applicants can expect their applications to be processed more promptly by the Chinese Trademark Office (CTMO) or the Trademark Review and Adjudication Board (TRAB) but also to be subject to refusal perhaps more frequently and sometimes on seemingly unreasonable bases. Appropriate preliminary searches for applications will become even more important to applicants.
The new law requires examination much sooner than before—within 9 months of the filing date. Information distributed by the CTMO suggests that they will enforce the new time limit for examination. Under Chinese law, if the CTMO does not make decisions on time, the registrants may file administrative reconsideration applications in the TRAB within 60 days and receive a decision within 60 days thereafter.
However, the time limit for examination may increase refusal rates of trademark applications. In the past 9 years, the rate increased from approximately 22% to 33% while the examination period shrank from approximately 3 years to 10 months. Based on the correlation between the examination period and the rate of refusal, it appears that the rate of refusal under the new law may increase further.
In recent years, more complaints about decisions made by newly hired and trained examiners who lack experience have been received from Chinese trademark agents and attorneys. Under the current law, examiners can frequently refuse applications when they believe marks lack distinctiveness, are similar to other registered trademarks resulting in consumer confusion, or have a negative impact on society. Generally, the examiners have relatively broad discretion on refusal and may have the greatest discretion in deciding whether a mark has any negative impact on society. The standards for negative impact are relatively broad and subjective. A trademark application which contains a portion related to politics or religion or superstitious concepts is more likely to be refused on negative impact grounds. One possible way to avoid such refusal is to mix the potentially objectionable portion with other word portions or design features. If the CTMO refuses the application on this ground, the applicant may file an appeal application to the TRAB. In this appeal, an applicant may allege that customers would recognize the trademark in its entirety and not realize the existence of the objectionable portion.
The new trademark law also sets deadlines for trademark opposition, cancellation and review. Please see a simplified chart of these deadlines below:
|9 months from filing
|12 (+ 6) months from expiry of opposition period
|Non-use Trademark Cancellation
|9 (+3) months from filing
|9 (+3) months from filing
|Review of Trademark Refusal on Examination or Cancellation
|9 (+3) months from filing
|Review of Trademark Opposition (can only be filed by applicant)
|12 (+ 6) months from filing
Although the new trademark law is silent on this point, a trademark applicant whose application was blocked by a prior registration may file a review application with the TRAB and concurrently file a cancellation or invalidation application in the CTMO or TRAB respectively. Under Article 11(5) of the Implementing Regulations of the Trademark Law, trademark reviewers in the TRAB have discretion to decide whether to suspend the review procedure until the final decision on cancellation or invalidation is made if applicants request the suspension. As a practical matter, in view of the new time limits both for review applications and for cancellations or invalidations, it may be more difficult for reviewers in the TRAB to grant suspension when a cancellation or invalidation is not filed concurrently with the review application.
Even if the prior registration is removed before the review decision is made, the application may still be refused in review because Article 50 of the new law does not allow an application to be approved or registered within a year after an identical or similar mark was cancelled or invalidated. In practice, this may not always be strictly followed by the CTMO, TRAB and People’s Court, but it still provides them a legal basis to refuse applications. The article may not apply when the identical or similar mark was cancelled based on non-use. An applicant may also overcome a refusal decision made by the TRAB based on Article 50 by appealing the decision to the People’s Courts. If the one-year non-registration period has passed when the court makes judgment, the law may no longer prohibit registration. But the TRAB and People’s Courts still have discretion to decide whether or not these exceptions to Article 50 apply.
The risk of having a suspension during a trademark review is the suspension may substantially prolong the time of review and if the applicant does not ultimately win the registration, it may waste time allowing for the possibility that bad faith applicants may file intervening applications for identical or similar marks during review or subsequent proceeding.
2. Dismissed Oppositions Can No Longer Be Appealed
Under both the current and previous law, if a trademark passes preliminary examination, the CTMO will publish it for a period of three months. During this period of time, the trademark may be opposed by a third party. The previous law allowed either party to appeal a decision on opposition to the TRAB and the TRAB’s decision could then be appealed in the People’s Courts. However, under the current law, if the CTMO dismisses the opposition, the opponent cannot appeal the decision to the TRAB and the trademark will be registered after the three-month publication period. The new procedure is designed to prevent delay in the registration procedure arising from bad faith oppositions.
3. Likelihood of Confusion
The new trademark law introduces likelihood of confusion as a standard for deciding trademark infringement. A similar concept of “likelihood of confusion” has existed in the Trademark Review and Examination Guidelines since 2005. The judicial branch had already accepted the standard of “likelihood of confusion” prior to the new law.
Traditionally, the CTMO and TRAB almost never considered “likelihood of confusion,” but entirely relied on classes and subclasses of goods and/or services to determine the similarity between them. However, a new trend has emerged in the TRAB in recent years. While the TRAB may not automatically consider similarity issues based on a likelihood of confusion, it may consider a likelihood of confusion when a registrant or an opponent can provide substantial evidence. In view of the new time limits imposed on examiners in the CTMO, whether they may consider a likelihood of confusion during examination is still unclear.
4. Division of Applications
The new law allows an applicant to divide his application within fifteen (15) days after the receipt of a partial refusal decision from the CTMO. Under the previous law, an applicant with a partially refused application could file a review application with the TRAB for the refused part. However, the whole application would be suspended and the part that had been approved by the CTMO would not be published until a final decision on review was made. The new law permits a registrant the option of dividing approved portions into a separate application that the CTMO will promptly publish. Under the new law, the applicant can file review applications for the refused parts without delaying publication and registration of the approved portions.
5. Statutory Damages
Under the new trademark law, where it is difficult to determine the losses suffered by the right holder, the profits an infringer has earned, or the fees of licensing a registered trademark, the People’s Court has discretion to grant compensation not in excess of 3,000,000 yuan. The previous ceiling was 500,000 yuan. Although some courts have apparently not yet implemented this new standard, they are expected to do so in the near future.
6. Bad Faith Infringement
Under the new law, where a court finds bad faith trademark infringement, the court can grant up to three times the normal damages of infringement. Although there is no statute or judicial interpretation which explains bad faith in trademark infringement, based on some cases published by the People’s Supreme Court, a court may consider whether an infringer knows or should have known the infringed trademark has been registered, whether the infringed trademark is a well-known mark, and whether the infringer has the intention to take a free ride from the infringed trademark. Chinese courts may consider all three factors, but no single factor is dispositive.
7. Secondary Liability on Internet Business Service Providers
For the first time, the new trademark law and new Implementing Regulations stipulate that intentionally providing Internet business services can be considered contributing to trademark infringement. Currently, some of the biggest online shopping websites in China, e.g., TaoBao, JD 360, have relatively long and complex procedures to remove infringing online products. The new rule may pressure those websites to propose more efficient and quicker procedures for handling online infringement. However, the implementation of this rule is still unknown.
8. Non-Use Affirmative Defense in Court
Article 64 of the new trademark law codifies and reaffirms the People’s Supreme Court’s opinion that a defendant in a trademark infringement suit may affirmatively defend itself by contending that the trademark registrant failed to use the registered mark in the past three years. To do so, the defendant does not have to file a cancellation action in the CTMO; rather, the defendant may allege non-use during the judicial proceeding, and the People’s Court may decide whether to accept the contention based on its own judgment. If the registrant fails to prove use, the defendant will not be liable for trademark infringement. However, the registration will not automatically be cancelled as a result, and a separate cancellation action could be instituted in the CTMO.
9. Trademark Translation or Transliteration
While the law was not altered in respect to translation or transliteration, the registration of non-Chinese language trademarks into Chinese characters still expands the scope of protections for registrants.
10. Sound Trademarks
For the first time, sound marks are allowed to be registered as trademarks. To register a sound mark, a registrant must submit a sound sample and a description in words. Additionally, if the sound can be illustrated on a musical staff, the specimen must include an image of the staff. Any trademark description must be consistent with the sample. The CTMO may publish a detailed guideline for sound trademark application in near future.
The new law brings many positive changes but leaves some practical questions yet to be answered. Non-Chinese trademark owners that are manufacturing or distributing goods or providing services in China or plan to do so, should consult with counsel on appropriate search and filing in China in conformity with the new law.
The authors wish to thank Qijun “David” Lu for his contributions to the research and editing of this article.
See also our article on China’s New Trademark Law: Key Considerations in Practical Law.