China’s Trademark Law Amendments Tighten Restrictions on Bad-Faith Filing

Published: May 15, 2019

For the past year, INTA has engaged with Chinese trademark policy makers through dialogues on bad-faith trademark applications and nontraditional marks. The Association has also regularly contributed to public comments on draft amendments to the China National Intellectual Property Administration (CNIPA) regulations, including tort law covering punitive damages awards, and strengthened use requirements for trademark applications.

Here, INTA presents an overview of recent changes to China’s Trademark Law:

The Standing Committee of the National People’s Congress on April 23, 2019 announced amendments to the Trademark Law of the People’s Republic of China (PRC Trademark Law). The amendments apply to six Articles of the 2013 PRC Trademark Law and will go into effect on November 1, 2019.

The timing for the release of these amendments was largely unexpected and did not follow the stakeholder consultation process that usually precedes amendments to major laws and regulations in the PRC. The PRC Trademark Law amendment was announced along with amendments to other major laws, including the Anti-Unfair Competition Law. It mainly addresses bad-faith trademark registrations, punitive and statutory damages for trademark infringers, and the disposition of infringing goods by the people’s courts.

Bad-Faith Registrations

The first paragraph of Article 4 of the 2013 PRC Trademark Law provides that “Natural persons, legal persons or other organizations that have a need to obtain exclusive rights to use a trademark for goods or services for production or business activities in the PRC shall apply to the PRC Trademark Office for registration of a trademark.”

In its latest amendment, the National People’s Congress drafters added a sentence to the end of this paragraph that reads as follows: “Applications for the registration of trademarks in bad faith that are not intended to be used should be rejected.”

The drafters of the amendment also cited Article 4 as a basis for opposing a third-party trademark (Article 33) and as a basis for invalidating a registered trademark (Article 44).

The idea that Article 4 should be the basis for rejecting trademarks that are filed in bad faith is not new. For at least the last two years, the CNIPA and the people’s courts have been citing Article 4 of the PRC Trademark Law as a basis for rejecting trademark applications and challenging the registration of trademarks in bad faith by apparent trademark hoarders.

The practice of invoking Article 4 as a basis for challenging marks filed in bad faith has been predominately confined to invalidation cases, and has not been widely accepted as a basis for challenging them in the opposition context. The revisions to Articles 4, 33, and 44 are intended to codify and expand current practice-establishing a solid legal basis for rejecting trademarks filed by trademark hoarders in bad faith and challenging them in the opposition and invalidation contexts as well.

One lingering issue is the possibility that the revised language of Article 4 could theoretically justify the approval of a third-party trademark filed in bad faith if an applicant can show that the mark was filed with intent to use. In addition, an applicant or registrant of a trademark filed in bad faith could also potentially defend an opposition or invalidation by demonstrating use in commerce. In other words, the language of revised Article 4 could possibly encourage bad-faith filers and trademark hoarders to license and make some use of the marks they file, or to file bogus evidence of use to ward off challenges at the registry.

This kind of potential misuse of Article 4 will most likely be addressed in subsequent implementing rules or CNIPA guidelines.

Article 7.1 of the guidelines provides that a trademark applicant must have a bona fide intention to use and that such an intention should be supported by “demonstrable evidence.” What might constitute “demonstrable evidence” is mostly left to the imagination, so uncertainty around this issue is likely to continue until further clarification is issued in the coming months.

Sanctions for Trademark Agencies That Assist with Bad-Faith Filings

Article 19 of the 2013 Trademark Law provides inter alia that a trademark agency should not accept representation of a trademark applicant client if it knows or should know that the application for registration of a trademark by its client violates a third party’s prior rights (in violation of Articles 15 and/or 32 of the Trademark Law). The 2019 amendment expands the scope of Article 19 to include violations of revised Article 4, thereby requiring that an agent refuse representation of a client if it knows or should know that the subject trademark is being filed in bad faith and without an intent to be used.

In addition to updating the language of Article 19, the new amendment revises the language of Article 68 of the 2013 Trademark Law. Article 68 sets out a range of administrative sanctions and fines that can be levied against trademark agencies and individual trademark agents for engaging in certain acts, and the new amendment adds reference to a violation of Article 4 to the list of acts subject to administrative sanction. The amendment also adds an additional paragraph to the end of Article 68 that reads as follows: “Where an application for trademark registration is filed in bad faith, an administrative penalty such as a warning or fine shall be imposed according to the circumstances; and if a trademark lawsuit is filed in bad faith, the People’s Court shall impose a penalty according to law.”

The fact that this language was included in Article 68 of the Trademark Law suggests that the referenced administrative and court-imposed penalties would apply only to trademark agents and not to the applicant or registrant of a trademark filed in bad faith. There is, however, evidence to suggest that the intention of the drafters was also to introduce the possibility of administrative sanction for the applicants or registrants of trademarks filed in bad faith. This view was recently supported in statements made by Zhang Gang, Deputy Director of CNIPA on April 28, 2019. There will, however, continue to be some uncertainty on this issue until additional clarification is issued in the form of implementing regulations or CNIPA guidelines in due course.

Statutory and Punitive Damages, and the Disposition of Infringing Goods

Article 63 of the 2013 Trademark Law provides guidance to the people’s courts on the assessment of damages in cases involving trademark infringement. The recent Trademark Law revision introduces the following amendments:

  • An increase in the amount of punitive damages from treble damages to quintupled damages in circumstances involving bad faith or other “serious circumstances”;
  • An increase in the amount of statutory damages of up to RMB 5 million (about US $743,000) in cases where it is difficult to conduct an actual damages calculation; and
  • The addition of additional paragraphs to Article 63 that read as follows:

    When a People’s Court hears a trademark dispute case, at the request of the rights holder and except for special circumstances, the court shall order the infringer to destroy the products with counterfeit registered trademarks, destroy the materials and tools used for the production of products with counterfeit registered trademarks without compensation, or in special circumstances, order the infringer to prohibit the materials and tools from entering commercial channels without compensation.

    Goods with counterfeit registered trademarks shall not be allowed to enter commercial channels after the counterfeit registered trademarks are removed.

While these are indeed welcome revisions, the people’s courts rarely issue punitive damages, so it is uncertain as to whether the increased punitive damages will have a real impact on infringers or otherwise change the status quo.

Moreover, brand owners and stakeholders will require additional clarification to fully appreciate the “special circumstances” in which infringing goods and the materials and tools of infringement might otherwise enter commercial channels. Such clarification may indeed be forthcoming in new implementing regulations.

What Next?

As suggested above, the recent revisions to the PRC Trademark Law introduce some positive changes, but additional clarification will be required before brand owners and practitioners will be able to fully appreciate the practical impact of these developments. It is likely that additional clarification on the new Trademark Law amendments will be issued in the form of implementing regulations and/or CNIPA guidelines in the next few months. The INTA Trademark Office Practices Committee and the Bad-Faith Task Force will be following developments closely and will provide updates as they arise to INTA members.

In the coming years, INTA looks to play a leading role in shaping further Chinese Trademark Law amendments, and subsequent regulations and interpretation to the new law. The Association will continue advocating for stronger provisions and enforcement against bad-faith trademark registrations, and setting the framework for higher quality examination.

INTA’s China Representative Office based in Shanghai represents the Association’s 235 members in China. Working in collaboration with staff at INTA’s headquarters in New York City, the China Representative Office leads the Association’s policy, membership, marketing, and communications initiatives in these jurisdictions. To learn more about INTA’s activities in China, please contact INTA’s China Representative, Monica Su at [email protected] or Vicky Dai at [email protected].

Although every effort has been made to verify the accuracy of items in the INTA Bulletin, readers are urged to check independently on matters of specific concern or interest.

© 2019 International Trademark Association