New Trademark Law in China Promises Efficiency and Enhanced Enforcement Capabilities for U.S. Brand Owners

by Foley Hoag LLP - Trademark, Copyright & Unfair Competition

ChinaThe People’s Republic of China is considered by some to be the next great economic superpower, and U.S. companies seeking to gain a foothold in the Chinese marketplace often begin by attempting to secure trademark rights in China for their many brands, famous and otherwise.  However, they are often stymied by China’s complicated trademark registration system, a body of law relatively unfriendly to well-known foreign brands, and a number of bad apples that seek to take advantage of foreign trademark owners.  It is good news, then, that this year marks the PRC government’s first major reform of its Trademark Law in over a decade.

Changes to Chinese Trademark Office Practice

The new law largely aims to bring Chinese Trademark Office (CTO) practice in line with the trademark offices of other major jurisdictions worldwide, and in the process implements many changes that U.S. and other Western brand owners will find quite welcome.  The law increases the availability of electronic filing and search systems, prescribes time limits for CTO examination and review functions, and includes support for non-traditional marks such as sound marks.  It also allows for multiple-class applications — a particularly happy development given the frequent need for broad registration strategies in China, and one likely to result in lower costs across the board, both with respect to official fees and the amount of time companies and law firms spend juggling multiple filings.

On the contentious side of things, opposition and cancellation proceedings are similarly streamlined and shortened, with stronger rules in place to limit standing to interested parties.

Targeting Bad Faith

Fairly or unfairly, in trademark circles China is often considered to be a “Wild East” of sorts — a trademark jurisdiction rife with bad-faith applicants, opposers, and distributors, those who seek to take advantage of well-known brands or “stick up” Western brand owners by securing trademark registrations and then holding them for a hefty ransom.  The new law targets these bad apples and paves the way to a friendlier atmosphere for brand owners.  To this end, it includes provisions prohibiting applications filed in bad faith, including imposing fines for the “trademark agencies” that file such applications.  In addition, use of a registered or well-known trademark as a business name by someone other than the owner is prohibited.  A “restitution” provision affords brand owners potential remedies to recoup losses previously suffered at the hands of bad-faith registrants in infringement proceedings.  There are also formal protections in place for the owners of “well-known” marks, as well as those brand owners that have used a mark in China on an unregistered basis.

Enforcement Enhancements

On the trademark infringement side of the coin, the new law increases maximum fines for trademark infringement by six times (from about $81,000 to $486,000), and mandates a likelihood of confusion test that is similar to the thorough analyses adopted by other major trademark jurisdictions.  It also includes provisions recognizing the equivalents of contributory and vicarious infringement, as well as a burden-shifting provision that requires discovery in some cases — a rarity in the Chinese legal system.

Brand Owners Should Remain Wary

It remains to be seen whether the new and improved Trademark Law signals a reprieve of sorts for U.S. brand owners.  On paper, it looks promising, though Chinese trademark practice will continue to include hidden pitfalls — including a complicated sub-class system that exists alongside the International Classification system — that frustrate trademark practitioners and present clear dangers to brand protection in China.  More importantly, it is unclear whether incremental improvements to trademark practice will subdue the various bad-faith operators that are the source of significant frustration for brand owners in the PRC.  The new law will go into effect in May 2014.

Image courtesy of KyFlick

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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