China’s New Trademark Law: Greater Protection, Higher Penalties and More Efficient Registration

The new Trademark Law was passed on August 30, 2013, to take effect on May 1, 2014, after nearly 10 years of revisions and several rounds of public comment. China’s Standing Committee of the National People’s Congress made a hearty attempt to outline ways to streamline trademark registration processing, afford greater protection for trademark owners and impose higher penalties as a way of deterring infringements.

The new law, which marks the third time the original Trademark Law first promulgated in 1982 has been amended (previous amendments 1993, 2001), has over 50 revisions, but the most significant changes are as follows:

1. The new law raised the compensation ceiling for a trademark infringement to US$500,000, which is six times the previous limit. This is significant as it aims to deter infringement byimposing heavy sanctions and sends a message to the world that China will not tolerate infringement of other brand owner’s trademark rights. Furthermore, in cases where the violators have acted in “bad faith”, treble damages are available, bringing the total maximum penalty to over US$1.5 million.

2. The new law inserted a provision that states trademark agencies and attorneys are not permitted to register trademarks on behalf of their clients if they know or should have known that their client is registering trademarks maliciously in total disregard of the rights of others or by doing so, is knowingly infringing on the trademark rights of others. Agencies violating this provision will face administrative fines and given a bad credit report which will be filed with industrial and commercial authorities limiting such agencies’ ability to appear before the China Trademark Office. In cases where the offense is considered serious, the agency that violated the law could have their businesses license suspended for a period of time or possibly revoked.

3. The new law also offers protection for renowned trademarks, giving owners the right to ban others from registering their trademarks or using similar designations. However, renowned trademark owners are prohibited from using their renowned status in advertising or promotion, thereby precluding owners from unjustly enriching their recognition. Imposing a fine of up to US$16,500 for violation of this provision is also written into law.

4. The law also changed provisions regarding the examination period of trademark related applications to streamline processing, such as filing, opposition, invalidation and revocation. For the first time, a multi-class application system will be put into place to speed up registration. Registration submissions now have preliminary approval deadlines of nine months from date of filing. Once this preliminary approval has been granted, oppositions can be filed for up to three months after the preliminary approval has been published in the official gazette. Opposition proceedings must then be completed within a year. Any possible invalidation proceedings must now be completed within nine months from the request date and can only be requested by prior right holders. With this new law, nearly all trademark reviews will be completed within 12 months as opposed to the timeline under the old law of nearly 30 months. This is a vast improvement of the system and will encourage more applications and instill greater confidence in foreign trademark owners of the new Chinese trademark system.

5. The new law grants greater authority and power to the courts to seek books and records of the infringer for purposes of determining compensation. A court order can be issued to the alleged infringer (once liability is determined), and if the infringer refuses to provide his books or provides misleading information, then the court may penalize the infringer by rejecting the evidence and determine the compensation based on the claims of the right holder. This change in the law should engender greater incentive to be open and forthright with respect to the production of books and records, as well as reduce court backups and litigation costs.

The amendments to the Trademark Law is generally viewed as positive and a right step towards bringing China’s antiquated trademark system into international standards. While still far from perfect, the new law enhances and clarifies many provisions and how the new provisions will be applied in practice remains to be seen. With over 8.17 million registered trademarks (and counting), China is home to the world’s largest number of registrations and with this, carries a daunting responsibility to administrate this massive registration system in a fairer and more efficient manner. Resources devoted to upgrading the law is a welcome first move, but more needs to be done on the implementation and enforcement level to increase trademark owner’s confidence in the Chinese system. Only when enforcement is accompanied hand in hand by upgrades to the law will China truly be a place where businesses can be assured of first class trademark protection.

Contributing Advisors