The Draft of the Trademark Law Third Amendment (Draft) was released for public comment by the Chinese State Council’s Legislative Affairs Office on September 2, 2011. While the vast majority of the clauses will not change, certain provisions in the Draft are well worth discussion.
Protection of well-known marks
Article 62 forbids the use of a well-known trademark by another party as its enterprise name. According to Article 62, if a well-known trademark is used by another party as the trade name of enterprise name, the owner of the well-known trademark may lodge a request to the administrative department of industry and commerce at provincial level or above to handle the case, and order the stop in use of such enterprise name or order the change in enterprise name registration. Compared with the current law, this article specifies the corresponding authorities responsible for handling the conflict between the well-known trademark and trade name; however, in light of the surprisingly high ratio of such dispute cases currently where many well-known trademark owners do not receive proper and efficient protection from the governmental authorities at various levels in China, it is suggested that a clearer provision should be introduced to compel the responsible authorities to react according to the law and regulation and to make proper decisions.
Sound and single-color marks allowed to register
Under the current law, trademark protection is only available for non-traditional trademarks that are visually perceptible and color marks that contain multiple colors. In the Draft, trademark eligibility is expanded to include protection for sound marks and single-color marks. (Article 8). As non-traditional trademarks become important mechanisms to distinguish the goods and services of brand owners, this signals a new opportunity for brand owners to seek protection in one the largest markets in the world.
Bad faith or good faith
A new Article 35 appears in this 2011 Draft empowering the Trademarks Office to withdraw the published approval to a trade mark application on the ground of non-compliance with the Trademark Law, deceit, or other unfair competition. It is possible that a “bad faith” application may be regarded as an unfair competition. If so, despite the deletion of “good faith principle” in Article 9, the new Article 35 may help to intervene against trademark pirates. It would be preferable to have additional clarity and guidelines on what “unfair competition” covers.
Anti-counterfeiting/infringement
a. Infringement acts – Another deletion again in Article 62(6) removes the stipulation of “provision of manufacturing tools, manufacturing technology or business operation facilities” as infringement acts. Does this effectively exclude landlords and retail and wholesale shopping malls? (INTA Comments, para. C1) This deletion seems to give rise to a complete turnaround of the position in the 2010 Draft. INTA should strongly advocate for reinstating the 2010 Draft version.
b. It is provided in the 1st paragraph of Article 67 of the Draft that the registered trade mark owner should first claim compensation to trademark infringement based on the actual loss during the infringing period. If such damage cannot be determined, then a claim based on illegal profit of the infringer during the infringing period can be claimed. However, since actual loss can be difficult to quantify, we recommend that these two heads of damage may be provided as an option for trade mark owners, and that they be permitted to select the more appropriate head of damage.
Multiple international classes in one application still unconfirmed
Previously, under Chinese Trademark Law, a separate trademark application was required if a party sought registration in multiple international classes. The Draft now contemplates the filing of multiple class trademark applications (Article 22). Brand owners are hopeful that this will lead to a more streamlined and efficient prosecution of marks that are broadly used in the marketplace on various goods.
Raising statutory damages to RMB
1,000,000 (
$159,000 USD)
The Draft doubles the present limit for maximum statutory damages from RMB 500,000 to 1,000,000 (currently about U.S. $159,000) (Article 67) to enhance trademark enforcement of owners. A party infringing twice within a five-year period will be subject to the aggravated penalty (Article 64). Notably, to be eligible for damages for trademark infringement, the brand owner must produce evidence of actual use of the mark for the previous three years. Brand owners who have defensively registered many variations of their trademarks should note this new requirement and endeavor to maintain, internally or with outside counsel, evidence of actual use. A definition of “actual use,” or any indication of what constitutes “actual use,” is not clearly addressed in the Draft.