The Standing Committee of the National People’s Congress passed extensive revisions to the Trademark Law (see Draft Trademark Law in the Nov.-Dec., 2013, China Bulletin), which take effect from May 1, 2014, including changes to articles on:
- civil damages, increasing the cap on statutory damages (remarkably) 6 times over its current level to RMB 3 million ($490,000), prioritizing damage calculation methods, and introducing punitive damages up to 3 times actual or statutory damages (as applicable) for malicious or “serious” infringement;
- enforcement, raising the administrative penalty limit from 3 up to 5 times illegal earnings, fixing a RMB250,00 ($40,800) floor on the penalty cap for earnings under RMB50,000 ($8,160), and expanding the definition of equipment (used for infringing purposes) that administrative agency may seized;
- burden of proof, permitting a court to shift the burden of producing sales and production records to the infringer (who must comply or accept the claims and evidence of the plaintiff), but also requiring the plaintiff to prove use within the last 3 years as a condition to recovering monetary damages;
- good faith, expressly setting out the general principle of good faith (from Chinese civil law) to be applied to trademark applications (hopes are high this requirement may become independent grounds for action against squatters and other bad-faith registrants – see Draft Trademark Law and Trademark Squatting Developments in the Nov.-Dec., 2013, China Bulletin);
- confusion, adding an express “likelihood of confusion” standard for infringement involving similar marks or similar goods;
- agents, prohibiting an agent from filing to register a mark that he/she knows or should know is pirated, and, separately, expanding the prohibition against an agent in his/her own name registering the mark of a principal to include any registrant filing to register the mark of any rights owner if that registrant (whether agent or not) had a prior business, contractual or other relationship with the rights owner (and also knows of the existence of the rights owner’s mark);
- prior use, creating an express right to continue using a mark within the same scope if that mark has generated “a certain degree of fame” (see also Draft Trademark Law in Nov.-Dec., 2013, China Bulletin – this is a break with China’s first-to-file rule);
- well-known marks, encouraging recognition of so-called “famous” status in proceedings by codifying current practice for such marks (recognition available only in an administrative or court proceeding), and, separately, adding a fine for falsely claiming famous status;
- registrations, permitting multi-class filings and registration of sound marks;
- procedures, introducing statutory time limits for examinations by the Trademark Office (TO) and Trademark Review and Adjudication Board (TRAB), and expanding the period for renewal;
- oppositions, limiting the parties and grounds for filing oppositions, and ending appeals of TO decisions to the TRAB or courts (with concurrent suspension of the trademark during proceedings); and
- definitions, including “trademark use” (possibly impacting marks used on OEM exports – see Trademark Squatting Developments in the Nov.-Dec., 2013, China Bulletin), and “infringement” (expressly including contributory liability – help by others).
Not all the above changes to the Trademark Law are helpful. Removing the right to appeal adverse opposition decisions (no. 11 above), for example, means the registrant can begin using its mark immediately after the opposition is dismissed – the mark will not remain suspended during an appeal, which will no longer be available. This change will disadvantage U.S. companies opposing local trademark squatters. They can file for invalidation of the mark, but the mark will not be suspended during the proceeding.
Since the rights owner will have only one shot at prevailing in the opposition proceeding, careful attention should be paid to preparing and presenting supporting arguments and evidence for the filing.
Despite some shortcomings, the enhanced penalties and damage recovery, burden-shifting provision and other revisions included in the revised Trademark Law provide powerful new tools to control squatting and trademark infringements – provided that local administrative authorities and People’s Courts implement them fully (e.g., imposing maximum administrative penalties and granting punitive damages in civil suits for egregious behavior). The wording of some revisions is ambiguous or incomplete, allowing for substantial local discretion. Even if local authorities do not make full use of the revised provisions, however, the threat of them is likely to be a valuable lever to bring infringers to the bargaining table.
In addition, implementing regulations and a Supreme People’s Court interpretation are widely expected to be issued before the law’s May 1 effective date, providing helpful clarification and guidance.
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