China National Intellectual Property Administration (“CNIPA”) released draft amendments to the Trademark Law (“Draft”) for public comments on January 13, 2023. The Draft expands the current Trademark Law of 73 articles to 101. The 50% increase in legal rules alone suggests there will be systemic changes to the current trade registration and protection system in China.
One of the key motivating factors to the amendments seems to be the government's determination to eliminate the bad faith trademark applications and curb the excessive trademark filings. To accomplish this, the proposed amendments introduce civil liabilities over bad faith trademark applicants, which our team advocated for years, and mandatory transfer of bad faith registrations back to the genuine right owner, and requirement of intent to use and reporting trademark use status. Part of these changes, seem to borrow from US and European trademark practice and is built upon the reforms and improvements that started a few years ago.
This update highlights major changes in the Draft and we also present some thoughts on how these changes may shift the trademark practice in China once finalized.
Legal liabilities to impose on bad faith trademark applicants
Under the proposed amendment, a legitimate right owner now may sue bad faith applicants for civil damages, including reasonable expenses spent on fighting bad faith trademarks. The availability of such monetary remedies is expected to be a major deterrence against bad faith trademark filings.
Previously, despite China's increasing efforts in both administrative and judicial practice to tackle bad faith trademarks, including penalty against trademark agents, the situation of massive malicious filings remains as a challenging issue. Many view the absence of civil liabilities an important missing piece, without which bad faith applicants simply did not have much consequences.
As early as back in 2014, our team already proposed the idea of adding civil liabilities and allowing trademark owners to sue under the general “good faith” principal in the trademark law and unfair competition law. One encouraging case came out of the Fujian court last year, where Emerson succeeded in suing bad faith applicants and the assisting trademark agency for civil damages under tort law and Anti-Unfair Competition Law. With the Draft, there finally comes light that pursuing civil liabilities over bad faith applicants can be a standard option for all brand owners, which can sue under well-known trademark rights or prior rights. In addition, administrative fines and public interest lawsuits are also made available.
Transfer of bad faith registrations back to right owners
The Draft makes it possible for right owners to seek transfer of bad faith registrations back to their names. This remedy would be available for certain registered trademarks only, not for pending trademark applications, probably because applied marks are not yet stable and therefore unfit for transfer.
There are restrictions though. If there are reasons to invalidate such applications based on absolute grounds or the transfer may cause confusion, CNIPA may deny the transfer to the legitimate right owner.
This proposed transfer mechanism resolves a common dilemma for right owners, where they successfully invalidated a prior bad faith trademark but were still unable to get their own registration due to other later existing obstacles. Now, the right owner may get the chance to transform the bad faith registration to good faith use.
Intent to use and trademark use reporting requirements
China made a major change in 2019 to the trademark law by rejecting those bad faith trademark applications that have no intent to use. Apparently as continuity of such legislative change, the Draft emphasizes intent to use at the trademark filing stage and adds trademark use reporting requirement every 5 years after registration. In case of failing to submit the use status update or give fair reasons of no-use, CNIPA can deregister the trademark.
Reporting trademark use status looks much closers to what is done in the US system. But major difference is that China still sticks to the first-to-file principle. Registered trademarks still enjoy more benefits and broader protection than unregistered trademarks in China. That said, adding the reporting requirements could help clean up unused trademark registrations and release such “trademark resources” to the public. It may also force trademark squatters to gradually let go of extensive filings that have no intent to use.
For brand owners, it may be time to re-evaluate existing trademark portfolio and reconsider future filing strategies. In the past, due to frequent trademark squatting, brand owners were forced to file and maintain defensive trademarks on a regular basis. These efforts and resources may no longer be necessary. Furthermore, it becomes even more important than before for brand owners to set up trademark use evidence archives. CNIPA may later come up with new implementing rules and templates with specific requirements of use evidence.
Prohibition of duplicate applications of identical marks
This is a somehow controversial amendment. An applicant is not allowed to apply for an identical mark on the same designations with its existing application, registration or its prior mark that has been cancelled, deregistered or invalidated within a year. The applicant may choose to deregister the existing registration so to secure the later filing. There are certain exceptions, such as that the later filing is an updated version of the existing mark.
The underlying rationale is to reduce duplicate filings that potentially waste limited examination resources. In practice, duplicate filings are often seen where the owner refiles an identical mark after its prior registration is challenged for non-use. In this sense, this new rule could help release spare trademark resources for better use.
Nevertheless, if applied in overzealous way, this rule could potentially hinder a brand owner's fair rebranding efforts and logo upgrades. Reading between the lines, CNIPA may be given much discretion to determine what constitutes identical marks on the same designations, as well as good cause for duplicate filings.
Other noteworthy changes
The Draft also proposes substantial changes to the trademark registration system that aims to enhance efficiency of trademark review work with an impact on everyone. To name a few:
The time frame for filing opposition is shortened from 3 months to 2 months upon publication. That requires brand owners to speed up monitoring and evidence collection work, if they intend to launch oppositions.
Non-approval review proceedings are canceled. Now, where the applicant loses a mark due to opposition, the next resort is to file administrative litigation before Beijing IP Court. There will no longer be a review procedure before CNIPA.
In administrative litigations, courts will make their decisions based on facts at the time the CNIPA decisions are rendered. In other words, change of circumstances after CNIPA decisions are issued are generally disregarded in the administrative litigation, unless disregarding such changes may apparently violate the principle of fairness. In practice, many brand owners would file non-use cancelation against existing obstacles and file for litigation simultaneously after receiving CNIPA refusal decisions, hoping the existing obstacles can be cleared by the time court looks at this case. It is not clear whether the same tactics would work, but there seems to be no better options.
The above highlights are examples of the systemic changes proposed by the Draft. Many echoes with China’s recent policies and practice to tighten scrutiny over bad faith trademarks. That said, some changes seem bolder than others and the impact is unclear. The deadline to receive the comments falls on February 27, 2022. Brand owners need to follow closely to evaluate if there are any unintended consequences out of such systematic changes and send in their comments through relevant channels.