The new draft Chinese Trademark Law: key amendment and
possible impact upon right holders

Feature By Liu Guizeng

China enacted its first Trademark Law in 1982, and amended it in 1993 and 2001, respectively. The Chinese government is now mulling over amending the law for a third time. Many view the changes as essential and they are likely to have a significant impact on rights holders and practitioners alike


The Chinese Trademark Law was enacted in 1982 and amended in 1993. The last amendment was made in 2001; however, this was primarily designed to meet the needs and requirements for China to enter the World Trade Organization (WTO). It did not address the emerging issues or developments in the market economy that had occurred since 1993. The need to deal with these changes has become even more pressing in the six years following Chinese accession to the WTO.


Changing times

In the past few years, the numbers of applications for trademark registration and opposition before the Trademark Office, and cases of review and adjudication of trademark matters before the Trademark Review and Adjudication Board (TRAB), have increased dramatically. The unprecedented jump in cases has resulted in a huge backlog at both the Trademark Office and the TRAB. The Trademark Office now handles nine different kinds of trademark-related application, including new applications for trademark registration, oppositions and recordal of assignments. The number of applications received by the Trademark Office each year doubled between 2001 and 2006, reaching a total of 996,000 in 2006. The number of applications for trademark review and adjudication before the TRAB rose from 6,214 in 2001 to 14,960 in 2006.

The increase in filings is one cause of the backlog; another is the over-complicated internal procedure for approving and re-affirming a trademark registration. An application for registration may first go through substantial examination and opposition procedures at the Trademark Office, then a review of the opposition at the TRAB and, finally, judicial review at two instances. The whole process can take over 10 years. Moreover, the Chinese government's approach to recruitment means that there are simply not enough examiners to handle the growth in filings.

The update to the law is also necessary to boost China's efforts to accede to the World Intellectual Property Office's Singapore Treaty on the Law of Trademarks (TLT). The country's integration into the global economic system makes it essential for China to harmonize its registration procedures as closely as possible with those in other jurisdictions. This would be best served by early accession to the TLT. However, the Trademark Law in its current guise is not fully in conformity with the provisions of the TLT. For example, there are no procedures for communicating with examiners before refusal; a single application for multiple classes is not acceptable; there are no remedies for interested parties that fail to meet the time limits; and it is not yet possible to file applications electronically.


The proposed changes

Change is long overdue and the proposed amendment to the Trademark Law will be welcomed by rights holders and practitioners. The government is hoping, among other things, to shorten the time period for examination; improve and perfect the procedures for determination of trademark rights; strengthen the enforcement of such rights; allow registration of geographical indications (GIs) and certain special sings; and harmonize the Trademark Law with the TLT.


Reducing the examination backlog

The draft amendment proposes the abolition of substantive examination on relative grounds. The Trademark Office currently performs examination on both absolute and relative grounds, and the time-consuming relative grounds procedure has been a key cause of the backlog. The removal of relative grounds examination will likely speed up the entire process by at least three months. However, it will also mean that the Trademark Office will need to facilitate public access to the register so that interested parties can conduct clearance searches, watch published marks and , where necessary, file opposition or cancellation actions.

In China, the Trademark Law allows any party to file an opposition against a published trademark based on any facts and grounds, as long as the opposition is filed within three months of publication in the official Trademark Gazette. As it stands, the opposition procedure is open to abuse by parties filing in bad faith. Under the proposal, only parties holding rights in a earlier trademark or GI will be allowed to bring an opposition. An application to cancel a mark that violates the law on absolute grounds, on the other hand, will remain open to any party.

Under the current system, there is no provision for division of an application. This is problematic when dealing with partial refusal. Partial refusal is allowed in China and such a decision can be appealed to the TRAB and, if necessary, the courts. However, during the appeal process, which can take up to four years or longer, the approved part of the application remains pending until the future of the refused part is resolved. With this issue in mind, the proposed amendment will allow the division of a partially refused application. The approved part can then be registered immediately


"The country's integration into the global economic system makes it essential for China to harmonize its registration procedures as closely as possible with those in other jurisdictions"

The draft proposal will also set a timeframe for the examination process. Examination must be completed within 12 months of the filing date of an application. As the Madrid Agreement requires the examination of international registrations to be performed within 12 months, the new provisions of the draft law now also make this timeframe mandatory for the examination of Chinese applications.


Simplification and streamlining

Under current practice the Trademark Office first performs an examination and then handles any opposition action should it arise. The TRAB hears appeals from the Trademark Office's decisions at both instances. The fact that the Trademark Office deals with both examination and opposition means that it has a very heavy workload, leading to delays. The new law proposes to move the opposition procedure from the control of the Trademark Office to the TRAB. Moreover, it stipulates that the opposition time limit should be four months after the mark is published and the opposing party cannot appeal to the court for judicial review of the TRAB's decision on the opposition, if the opposition is not justified or partially justified.

To fulfil its new role, the TRAB will be granted quasi-judicial status in inter partes cases. A party will be unable to bring a case against the TRAB itself, except on appeal to the court for the review of a decision to uphold refusal on absolute grounds. The draft law states that if a party is dissatisfied with the TRAB's decision in opposition, cancellation or invalidation cases i must initiate a civil lawsuit against the other party involved and not the TRAB. Once such a ruling is issued by the court, the winning party can file an application with the administrative trademark bodies, requesting execution of the judgment. It is hoped that this new procedure will relieve the TRAB of the burden of numerous (and often vexatious) lawsuits; however, in the author's opinion, it appears merely to shift this burden on to the courts instead.

Strengthening enforcement of trademark rights

The current law lists certain categories of infringing activity. Article 52, for example, outlines five circumstances that will infringe an owner's exclusive right to use e registered trademark. In addition, Article 50 of the regulations implementing the Trademark Law sets out two further circumstances, while a judicial interpretation issued by the Supreme People's Court in 2002 lists three more acts of infringement.

The draft law will include all these infringements and will add to this group the printing or sale of representations of trademark similar to another party's registered mark. It will also strengthen the penalties for infringement.

Article 53 of the current Trademark Law provides that the administrative authorities for industry and commerce may confiscate and destroy infringing goods and any equipment specifically used to manufacture such goods or counterfeit representations of registered trademarks. Article 52 of the implementing regulations stipulates that the fine imposed for trademark infringement shall be no more that three times the amount earned through the infringing act. Where it is impossible to calculate this amount, the fine shall be no more than Rmb100,000 (approximately $13,530).

The government has concluded that such fines are insufficient and do not act as a deterrent against trademark infringement. The draft law allows for larger fines to be imposed on infringers (ie, up to five times the amount produced by the illegal activity). If the volume of infringing activity cannot be ascertained, the maximum fine will be no more than Rmb1 million (approximately $135,300).

Allowing registration of GIs and special signs

Under the current Trademark Law, GIs can be registered as collective or certification marks. Article 6 defines a 'GI' as an indication that identifies a particular product as originating from a region, where a given quality, reputation or other characteristic of the product is essentially attributable to the region's natural features or human factors. The amendment alters the latter part of this definition so that it refers to the given quality, reputation or other characteristics of a product essentially attributable to its natural features and human factors. Further, it lists the general principles and requirements of registration. Among other things, it stipulates who is qualified to apply for registration, the formalities of registration, what constitutes fair use and issued surrounding assignment.

The proposed law also provides for registration of special signs. Special signs are those used by national or international bodies approved by the State Council for, among other things, cultural or sporting events, scientific research or other social or charitable activities. A special sign will be valid for four years starting from the date of registration. The amendment sets out the registration and cancellation procedures, and the prohibitions against registration.


Moving online and correcting errors

E-filing has become an important part of the registration procedure in many jurisdictions, speeding up the process considerably. Despite the significant numbers of applications received, China has yet to introduce an online system. The draft law looks set to change this. It indicates that filing documents and related information can be submitted in writing and by other means as prescribed by the Trademark Office, leaving room for the implementation of e-filing in the future.

The draft proposal also clarifies the procedures for correction of non-substantive errors to filing documents. The 2001 revision to the Trademark Law was supposed to provide guidance in this area, but a lack of implementing regulations has made this problematic.


Assignments and licensing

Another thorny issue relates to the bad-faith recordal of assignments. On occasion, parties have forged a corporate seal to stamp on assignment documents or signed documents without the relevant authorization. Cancellation of such bad-faith assignments requires the filing of a lawsuit with the courts or an application for administrative review with a supervisory body of the Trademark Office. The draft law seeks to combat bad-faith assignment by obliging the Trademark Office to notify the assignor of the recordal of an assignment.

Under current practice, a licence must be recorded at the Trademark Office if it is to be used against a third party in good faith. This has led the Trademark Office to demand the registration of all licences. However, as the Trademark Office does not examine the contents of a licence contract, recordal need not be obligatory. The draft law reiterates that recordal is necessary for use against third parties in good faith, but indicates that its is not mandatory.

Statistics on IP protection for 2006 released

The Chinese government has released statistics regarding the protection of IP rights in China during 2006. In relation to trademarks, the government says that 766,000 applications for registration were filed. Of those, 313,000 applications were examined.

Over the course of the year, a total of 50,534 cases of trademark infringement were handled, resulting in confiscation of 30.36 million units of articles bearing infringing marks and fines totaling Rmb398 million. The number of criminal trademark cases prosecuted was 252.

There were over 2,000 new customs recordal cases in 2006, 50% more than 2005. The total number of records in the Customs database reached 9,917 at the end of 2006. During 2006, Customs dealt with 2,473 IP infringement cases, resulting in confiscation of nearly 200 million articles of a value of over Rmb2 million.

The number of civil cases involving IP rights filed with the people's courts of first instance in 2006 amounted to approximately 14,000 and over the year around 14,000 cases were concluded. The court of second instance received 2,686 civil IP cases, and 2,652 cases were concluded. The total number of criminal IP cases prosecuted was 2,277.

Harmonization with TLT

A number of changes likely to be introduced by the draft law have specific aim of bringing the Trademark Law into line with the TLT. Currently, the law states that a registrable mark must consist of any visual sign capable of distinguishing the goods or services of one natural person, legal person or any other organization from those of others, including words, devices, letters, numerals, three-dimensional symbols, combinations of colours or any combination of the above elements. The new law changes 'visual sign' simply to 'sign'. It allows for a widening of the scope of mark to include things such as hologram marks motion marks, single colour marks, and mark consisting of non-visual signs (eg. sounds, scents or textures).

In addition, as provided by the TLT, applicants will be allowed to communicate with examiners and present their opinion before refusal. It is hoped that this will help to eliminate the need for applicants or interested parties of file for review of the Trademark Office's decisions or bring applications for cancellation.

At present, China allows only one application for a trademark in a single class. The new law, on the other hand, permits an application for a trademark to cover multiple classes.

The TLT stipulates a number of remedial measures which are included in the draft Trademark Law. However, the new law does not provide for the six-month grace period for filing a renewal application after the expiry date. Such a remedy, which could be made available subject to payment of an additional official fee, would be a useful addition to Chinese procedure. It is hoped that there is still a chance that it will be included in the final draft.


Subject to change

With its new draft Trademark Law, the Chinese government is hoping on the one hand to speed up and improve registration and enforcement procedures, while on the other to amend the law to allow for accession to the TLT. The process is far from finished: the government is still soliciting public opinion and comments. Therefore, it is as yet unclear whether all the changes outlined in this article will make it into the final law. Moreover, at the time of writing, no date has been set for the law to come for review by the standing committee of the National People's Congress. Thus, Chinese trademark law will remain in a state of flux for some time yet.

Liu Guizeng is a senior trademark attorney and the deputy director of the trademark department at CCPIT Patent and Trademark Law Office in Beijing liugz@ccpit-patent.com.cn

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