Originally posted 2014-04-16 17:10:31.

By Sereine Brudent  |  amdlawgroup.com

Xingbake1May 1, 2014 will mark a new frontier of Trademark Law in the People’s Republic of China. This third amendment seeks to address and define numerous areas of Trademark Law in order to circumvent trademark infringement. Previously, trademark rights were granted on a “first-to-file” principal, which has been a major problem with established brand owners who want to expand into other markets but discover that someone else has already registered their trademark internationally.

This is a multi-million dollar issue that the owners at Apple are all too familiar with. In 2012 Apple settled a $60 million dollar lawsuit for legal rights to use the iPad trademark in China, which was previously registered to Shenzhen Proview Technology. This practice is known as “bad-faith trademark filing” or “trademark squatting”. Trademark squatting is when one party intentionally files a trademark application for a second party’s registered trademark in a country where the second party does not currently hold a trademark registration. They take advantage of the “first-to-file” trademark system (not to be confused with first-to-file patent systems) in that country.

The revised Trademark Law brings about significant changes in securing intellectual property rights in China. Below is an overview of some changes:

GOOD FAITH PRINCIPAL

The new law adds an article indicating trademark registration should operate by the principal of honesty and credibility. Trademark squatters will be rejected as long as the owner of the trademark has evidence proving that the trademark squatter obviously knows the trademark through its contractual, commercial or other relation with the trademark owner.

TRADEMARK AGENCY OBLIGATIONS AND RESPONSIBILITIES:

A. Must follow the principle of good faith, and have the obligation to keep confidential business secrets that it comes to know in the process of handling trademark matters on behalf of their clients;

B. Are obliged to explicitly advise their clients where the trademark may not be registrable according to the law;

C. Shall not agree to handle a trademark application where it knows or should know that the client’s application is an attempt to hijack another person’s trademark.

D. Are not allowed to register trademarks that are not within the scope of their services.

LIKELIHOOD OF CONFUSION:

Under the Revised Trademark Law, likelihood of confusion is for the first time regarded as one of the factors to be assessed when determining trademark infringement. Article 57.2 prohibits any party “without the consent of the owner of the registered trademark, to use a trademark that is similar to a registered trademark in relation to identical goods, or uses a trademark that is identical with or similar to a registered trademark in relation to similar goods, which can easily cause confusion.” This brings China in line with the international practice on determination of trademark infringement.

CALCULATION OF FINES FOR TRADEMARK INFRINGEMENT:

The revised Trademark Law has added provisions regarding punitive damages, providing that where the exclusive rights of trademarks have been infringed upon in bad faith, the amount of actual damages for such infringements can be up to three times the benefits gained by the infringer or the losses suffered by the rights holder.

The revised law also improves the maximum amount of statutory damage from RMB 500,000 to RMB 3 million, and specifies that statutory damage is applicable when the actual damage is difficult to determine.

The new law will better serve to crack down on infringements and ensure a fair market for Chinese and foreign trademark holders. On paper, it looks promising, but companies may still need to exercise caution as the amended Trademark Law still allows for problematic loopholes. More importantly, it is unclear whether incremental improvements to trademark practice will subdue the various bad-faith operators that are the source of significant frustration for brand owners in the People’s Republic of China.

References:

1. Ashley Benjamin, Will new Chinese law help in battle against trademark squatters?  Dehns, http://www.dehns.com/site/information/industry_news_and_articles/chinese_law_battle_against_trademark_squatters.html

2. Doug Young, More effort needed to evict trademark squatters, Global Times, http://123.103.23.109/NEWS/tabid/99/ID/824089/More-effort-needed-to-evict-trademark-squatters.aspx

3. Paolo Beconcini, What In-house managers should know when planning trademark enforcement strategies in China? http://www.mondaq.com/x/291254/Trademark/What+In+House+Managers+Should+Know+When+Planning+Trademark+Enforcement+Strategies+In+China

4. Picture source: http://www.enterthepanda.com/blog/2012/02/21/trademarks-in-china-how-hard-can-it-be/

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