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, trademark owners should note that
certain provisions in the Draft reflect the realities of the way in which trademarks
are globally recognized and used, thereby adding efficiencies to the
prosecution process and enforcement of valuable brands in China.
Sound and Single-Color Marks Allowed
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.
The Arrival of E-Filing
Trademark owners longing for the
convenience of electronic filing will be pleased to learn that the Chinese
Trademark Office (CTMO) will prepare to begin accepting electronic trademark
applications. (Article 21) The proposed amendment suggests that trademark
applications can be sent electronically, but it is unclear if this submission
will take place via email or via an electronic submission vehicle, like the
USPTO's Trademark Electronic Application System (TEAS).
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.
Strengthened Protection for Foreign
and Famous Brands
One of the greatest challenges for
brand owners is the practice of trademark squatting - the act of registering
other parties' brand names for the purpose of extorting money from the
legitimate brand owner. If the brand owner does not acquiesce and purchase the
mark, the squatter can prohibit the brand owner from selling products bearing
the mark in China, manufacture products bearing the mark in China for export,
or introduce into the marketplace illegitimate goods bearing the brand owner's
mark. The Draft, while not eliminating this activity, does reflect that the
interests of foreign brand owners have been taken into consideration. Under
Article 34, the examiner may refuse registration on the basis of confusion with
a prior use in China mark, if said applicant is found to be familiar with a
mark as a result of a business relationship, contract, geographic relation, or
other relationship. This new change also applies to even those foreign senior
trademarks that have not acquired a certain level of fame in China.
The scope of the protection for the
owner of a famous trademark (a mark acquired certain level of fame) is expanded
as well. Under current practice, only well-known trademarks in China enjoy
broad, cross-class protection. The Draft proposes that registration may be
refused if a mark may cause confusion with a distinctive and famous registered
trademark that has been filed or registered in a different international class
of goods. (Article 34 proposal 2).
Eliminating Bad Faith Opposition and
There also are key procedural
changes for streamlining trademark opposition and invalidation proceedings.
Under the current law, anyone is eligible to oppose the registration of a mark
during the three-month publication period or request invalidation against a
registered mark based on relative invalid cause of action. This places an
unnecessary burden on the right owners who must defend against frivolous
oppositions. The proposed Draft only permits prior rights holders or interested
parties to file an opposition or request cancellation of the registration
within five years from the date of registration (Article 48). However, the
Draft still does not have a definition for "interested party," so it
is unclear whether this new limitation will result in a drop in the number of
opposition and invalidation proceedings filed with the CTMO.
Another significant change is that
the applicants will have 30 days to decide whether to appeal to the Trademark
Review and Adjudication Board (TRAB) the rejection decision to CTMO. This
doubles the current statutory time period of 15 days, viewed by many foreign
brand owners as unreasonable. (Article 58).
Raising Statutory Damages to
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.
The Draft retains some of the key
features from the 2009 version, including providing for the rejection of a mark
if its literal translation can be confused with a registered or unregistered
foreign brand. However, the adoption of substantive trademark examination is
not part of the new Draft. Relative examination remains the examination model.
This means clients must remain vigilant in monitoring the market and the
trademark register to prevent the registration of confusingly similar marks.
The comment period is from September
2 - October 8, 2011. Any entity or individual may submit a comment through
mail, email, or the Chinese government's online system (http://www.chinalaw.gov.cn).
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