After nearly 2 years of discussion and consultation, the latest version of the Third Draft Amendment to the Chinese Trademark Law was released for public comments by the Chinese State Council's Legislative Affairs Office on 2 September 2011. China's Trademark Law was enacted in 1982 and has been amended twice in 1993 and 2001 (when China joined the WTO). The latest amendments are intended to modernise China's trademark practice and to take account of global trends. In particular, the draft is focused on simplifying the trade mark procedures, preventing abusive use of the opposition process and enhancing the penalties against trademark infringement.
However, the latest draft has rejected a number of amendments proposed in the earlier versions. The key proposals are:
Expansion of protection for non-traditional marks
Under the existing law, protection is only available for trademarks that are visually perceptible and colour marks that consist of combinations of colours. The draft proposes to extend protection to permit sound and single colour marks. The previous draft amendment had proposed allowing applications for smell and motion marks as well but this has been dropped from the draft.
The draft proposes that the Chinese Trademark Office will begin accepting electronic trademark applications. In fact, the Trademark Office is already accepting electronic trademark applications from both local and foreign applicants. However, most applications from foreign applicants are rejected because the designated goods or services are not completely consistent with the terms appearing in the Chinese version of the International Classification Manual adopted by the Trademark Office. The latest proposal will, hopefully, be good news for foreign trademark owners who have found it difficult to use the existing system so far.
Under the existing law, separate applications must be filed if an applicant wishes registration in multiple international classes. In keeping with international trends, the draft law proposes to permit the filing of multi-class applications. It is hoped that this will result in a more streamlined procedure. However, the draft only gives the State Council the power to formulate rules relating to multi-class applications at a later stage, so there is no guarantee that this provision will be implemented soon.
Provision for arguments against proposed refusal
Under the current law, the Trademark Office is not obliged to notify the applicant before it rejects an application. Therefore, an applicant does not have an opportunity to remedy any deficiency in advance of the rejection. The applicant's only remedy is to file an application for review of the refusal with the Trademark Review and Adjudication Board. An appeal can take up to 1 year.
It is proposed to allow applicants to submit a response to the Examiner's intended refusal, based on deficiencies not related to the inherent distinctiveness or citations, within 30 days of receiving an “Examiner's Opinion”. The procedure should save time and cost in cases where the grounds for refusal can be easily overcome by remedying the deficiency at an early stage.
Also, the deadline for filing a review of refusal will be extended from 15 days to 30 days which should be welcomed, particularly by foreign applicants.
Additional absolute grounds
The draft proposes the introduction of additional absolute grounds for refusal of an application where a trademark is:
Enhanced protection for foreign marks
One of the most serious problems for foreign trademark owners is the appropriation of their mark by pirates who file trademark applications before the legitimate owners have commenced use, or have made any significant use, of their trademark in China. It is currently very difficult to challenge such applications where the owner cannot show that it has extensively used the mark in the classes applied for, or provide sufficient evidence to establish prior use and reputation of its marks in China.
The draft amendment will enhance protection for such trademark owners as it proposes that the examiner may refuse registration on the basis of confusion with a mark that has prior use in China, if the applicant is found to have been familiar with a mark as a result of a prior business relationship, contract, geographic relation, or other relationship. This will apply to foreign prior marks even if they have not acquired a certain level of fame in China.
The draft also provides that very distinctive trademarks with a “certain reputation” shall be entitled to cross-class protection against imitation marks. Currently, only “well-known” trademarks enjoy broad, cross-class protection.
Increased Statutory Damages
The proposal is to double the present maximum statutory damages from RMB 500,000 to 1,000,000. There will be an aggravated administrative penalty for a party found infringing twice within a five-year period. However, the amount of the aggravated penalty is not set out in the draft. Trademark owners should also note that in order to claim compensation, they will need to produce evidence of use of their mark for the previous three years. The draft does not set out the extent of the use required.
Change to trade mark opposition and cancellation procedure
Under the current Law, oppositions are filed with the Trademark Office. It is not uncommon for it to take more than 10 years to complete the entire appeal process and an opposition can be an expensive and time-consuming procedure. In an effort to simplify the system, the draft amendment proposes that oppositions will now be filed directly with the Trademark Review and Adjudication Board. As TRAB examiners are usually more experienced than those at the Trademark Office, it is hoped that this will streamline the system, as well as improving the quality of the decisions.
Also, the law currently allows anyone to oppose the registration of a mark, or to apply for cancellation of a registered mark. This can result in frivolous applications that place an unnecessary burden on legitimate trademark owners. The draft amendment proposes to permit only those parties with prior rights or “interested parties” to file an opposition or to request the cancellation of a registration. However, although there is no definition of “interested party,” it is hoped that this limitation will have some effect in reducing the number of frivolous opposition and cancellation proceedings.
The latest draft appears to be a step back from the last version. The proposed changes to enhance protection for foreign marks seem more to be codifying the current practice of the Trademark Office and the TRAB rather than substantially addressing the concerns of the international community. The proposed changes will undoubtedly benefit those foreign trademark owners whose marks are arguably not so well-known, or famous foreign brand owners who still cannot meet the requirements for well-known mark status in China. However, the Draft is still insufficient to tackle effectively “trademark squatters” in China, which is the key problem facing many foreign brands.