China’s eagerly anticipated amendments to its trademark law come into force on May 1, 2014. This new legislation aims to modernize and streamline the trademark process, strengthen trademark enforcement and make trademark squatting and counterfeiting more difficult. But it can also yield opportunities for trademark hijackers.
Here are the top 5 steps to take now to protect your trademarks.
1. Do a trademark audit.
The new law makes opposition difficult. One of the most important changes in the new trademark law is the removal of the opponent's right to file a review against the Trademark Office's decision in an opposition if the initial opposition does not prevail. In that case, the only option remaining would be to file for cancellation. Judging from the China Trademark Office (CTMO)'s prior track record, the chance of success in an opposition is not high. This means that you should timely do an audit to identify the gaps in their portfolios and then try to fill these gaps before the new law comes in. Unlike in the US, in China there is no use or intention-to-use requirement to file (it is purely a first-to-file system). Any gaps in a portfolio could allow hijackers to acquire your marks.
2. Tighten up the portfolio.
Once any gaps are identified in the audit, you should file applications to address any identified issues and close the gap. The new law provides for multi-class applications, allowing companies to file a greater number of applications (even for defensive purposes) that will tighten up their portfolios in a more streamlined way. This process should include Chinese trademarks, which are hugely important for the Chinese market, considering the complexity involved in choosing and protecting Chinese trademarks. Sound marks are allowed – important for technology companies. Note that the multi-class application process essentially makes filings cheaper. But added to China’s lack of use or intention-to-use requirements, this also means lower cost for hijackers.
3. Start compiling good records
The Implementing Regulations section of the new law is still under discussion, but according the latest draft, the time limit to file supplemental submissions and evidence has been substantially reduced – from three months to 30 days. Often, materials obtained outside of China need to be notarized and legalized, so a 30-day deadline is going to be tight. We don't know if this draft will ultimately be approved, but you should start collecting and putting together folders of good records (to illustrate such things as use, registration, fame and reputation) so materials are at hand when needed.
4. Record all trademark license agreements as appropriate
Under current practice, a trademark license has to be recorded with CTMO within three months upon signing. However, neither the law nor the rules set out the consequence for failing to do so (and because of that, many companies chose not to record their licenses, or at least some of them). In practice, CTMO still processes the license recordal applications, as long as they are filed within a reasonable time (such as a year upon signing). The new version of Implementing Regulations expressly provides that CTMO will not process late-filed license recordal applications – and although failure to record a trademark license does not affect its validity, the license then cannot be enforced against a third party acting in good faith. You should review your trademark licenses and take the appropriate actions.
5. Plan ahead for your enforcement campaign
Strategy is the key word for managing a company’s trademark portfolio. When it comes to enforcement, the new law has substantially increased compensation for damages as well as penalties. For example, the concept of additional damages has effectively been introduced: statutory damages (for which most cases in China are based upon) have been increased sixfold (from RMB500K to RMB3 million); administrative penalties can now be up to five times the illegal revenues. The government has shown a clear desire to clamp down on infringements. You should take advantage of this and act assertively against infringers. There are many enforcement options available in China (civil, criminal, administrative, Customs). This is the time to utilize these options and formulate an effective enforcement strategy.