05 Aug 2019 in Newsletter
Major Amendments to China’s Trademark Law regarding Malicious Registration and Trademark Misuse
By Han-Mei Tso
Malicious trademark squatting and trademark misuse have been significant problems for foreign companies doing business in China. Likewise, even local Chinese companies are being forced into unnecessary litigation or licensing negotiation due to the threats from trademark squatters. However, the recent amendments to the Trademark Law of the People’s Republic of China (“the Amendments”) made by the Standing Committee of the National People’s Congress on April 23, 2019 enacted laws against “bad faith behaviors” involving trademarks. Specifically, the Amendments seek to address issues relating to malicious registration and litigation of trademarks, malicious trademark infringement, trademark counterfeiting, etc. The Amendments will take effect on November 1, 2019, and this article provides a brief introduction to the Amendments.
Turning to the content of the Amendments, the Amendments cover examination for trademark registrations, validation proceedings, and trademark litigation proceedings. The Amendments also provide the administrative sectors and courts with authority to curb and punish malicious registrations and misuse of trademark rights. Moreover, the penalties for malicious registration and malicious litigation apply not only to the applicants and right holders but also trademark agencies. Therefore, the Amendments provide a major deterrence to such bad faith conduct.
First, the Amendments add a provision to Article 4, Paragraph 1 of the Trademark Law, which states “[a] bad faith application for trademark registration for a purpose other than use shall be rejected.” This new addition seeks to prevent granting trademark rights in malicious applications from the beginning. However, it should be noted that this provision does not change the existing “acquisition by registration” system in China. In other words, the new law still does not require the applicant to provide proof of use for the trademark registration. Here, according to the new provision, two conditions are required to reject the malicious trademark application, i.e., “for a purpose other than use” and “bad faith.” Basically, these two conditions are tailored to regulate the common malicious squatting and hoarding of registered trademarks in China. Although what situations will constitute specific examples of these “bad faith applications” remain to be clarified by rules and regulations, it is to be expected that various types of malicious behavior associated with trademark applications will be covered.
Furthermore, Article 19, Paragraph 4 of the Trademark Law, which relates to situations where a trademark agency should not accept representations, is also being amended. Specifically, Article 4’s prohibition against bad faith applications has also been extended to trademark agencies. In other words, trademark agencies are required to comply with the professional self-discipline principle and should refuse to represent any applicant who attempts to file malicious registrations.
Similarly, the prohibited conduct in Article 4 and Article 19 has also been added to Articles 33 and 34. We note that Article 33 relates to the grounds for trademark opposition, and Article 44 relates to the grounds for trademark invalidation. As a result, even if a malicious trademark application is registered, any person can request cancellation within the three-month opposition period or file a petition for invalidation after the opposition period for being a malicious trademark registration. The newly added grounds for the opposition and invalidation include the situations where the trademark agency accepts the representation of a malicious trademark application as described in the amended Article 19. In other words, a trademark agency’s violation of Article 19 is also independent grounds for invalidating the malicious trademark registrations.
In addition to the above discussed provisions, the Amendments also include various punitive clauses. For example, Article 68 of the Trademark Law relates to the punishment for illegal conduct by trademark agencies, which now includes the malicious trademark registration as a type of illegal conduct. Moreover, a new paragraph is also added to this Article 68, which states “[f]or [a] bad faith application for trademark registration, the administrative punishment such as warning and fine, shall be imposed according to the circumstances of violation; and for bad faith trademark litigation, the people’s court shall impose punishment according to the law.” This paragraph is not limited to trademark agencies, but also extends to applicants as well as right holders who misuse the trademark rights maliciously. This paragraph also provides the corresponding administrative and judicial sectors with the authority to impose the penalties.
Further, the Amendments intend to strengthen protection of the trademark rights by: (1) enhancing the punitive damages for malicious infringement of trademark rights from one to three times to one to five times the damages award granted by a court; (2) raising the upper limit of the statutory damages for trademark infringement from three million RMB to five million RMB; and (3) allowing a court to order destruction of the products bearing counterfeit trademarks or prohibition of those products entering the market place.
Osha Liang Insights will closely monitor and provide timely reports with respect to implementation of the amended Trademark Law and its impact on the business environment as well as trademark practices in China.