the-right-direction-620
1 October 2012TrademarksZhang Xu and Fabio Giacopello

The right direction? Amendments to Chinese trademark law

Changes may soon be introduced in China by the Third Amendment of the Trademark Law of PRC, the draft of which was published in September 2011, for comments.

Procedural aspects

Anyone who wishes to obtain protection for a trademark in China must apply for registration with the Chinese Trademark Office (CTMO) under the State Administration for Industry and Commerce (SAIC).

Indeed, very limited rights are granted to unregistered marks. CTMO, having received an application for registration of a trademark, performs formal and substantive examinations and, if no obstacles are found, publishes the trademark for opposition under Article 27 of the Trademark Law (TML).

The examination is wide in scope and relates to both distinctiveness and novelty (conflicts with prior trademarks and other rights). Within three months of publication, any person may file an opposition against a trademark that, after examination, has been preliminarily approved (Article 30 TML).

The current TML does not specify who is eligible to file an opposition. The draft has provided that only the prior right holders or interested parties are allowed to lodge an opposition so as to introduce some limitations. This is welcome, given certain abuses under the current system.

When an opposition is filed, the CTMO will hear facts and legal grounds from both applicant and opponent, then make its own investigation and verification, and finally issue a decision (Article 33, TML). The application for opposition must contain specific requests, facts and grounds, with relevant proof and certificates.

After filing an opposition, the opposer is granted a threemonth period to provide additional evidence (Article 22, Implementing Regulations to TML). The current TML does not define the grounds for trademark opposition.

The draft provides that the possible legal grounds for an opposition are limited to the following: protection of well-known marks, liabilities of trademark agent or representative, geographical indications, prior trademark rights, trademark application for identical or similar marks filed on the same day, protection based on other prior rights, and registration in bad faith.

Under the current system the CTMO will send a copy of the application for opposition to the applicant, requesting a reply within 30 days. Nevertheless, failure to reply does not affect the adjudication of the trademark.

Any party dissatisfied with the decision on the opposition may, within 15 days of notification of receipt, file an application for review with the Trademark Review and Examination Board (TRAB). During the procedure in front of TRAB, unlike with CTMO, the opponent might be requested to file a counter-reply to the applicant’s reply. The applicant may then reply to the counter-reply.

"It is highly recommended to colect evidence such as advertising in China (and abroad), invoices and documents proving sales in China (and abroad), and awards and prizes."

The procedure in front of TRAB could be longer, more complex and more expensive than the one in front of CTMO. In the current system oppositions are examined by CTMO in the first instance and then by TRAB in the second instance. Moreover, any interested party who is not satisfied with the decision issued by TRAB may file an administrative litigation to the People’s Court in Beijing within 30 days of the date of receipt of the notice.

The draft provides that oppositions will be examined by TRAB, thus eliminating one instance. The People’s Court will still examine appeals. A new provision in the draft specifies that where an opposition is raised to a trademark on the grounds of non-compliance with the provision on well-known marks, liabilities of the trademark agent or representative, and registration in bad faith, the prior trademark owner may request TRAB to transfer the exclusive right to the opponent.

Practical tips

CTMO has a pretty low acceptance rate of oppositions. Our personal estimate is that 80 percent of oppositions are rejected by CTMO and at least 50 percent of reviews on opposition are rejected by TRAB.

Unfortunately, CTMO does not publish any statistics, so this is merely our estimation. This unfavourable approach should be taken into account in shaping an opposition strategy.

A trademark published for opposition has been already examined by CTMO, as explained above. The opposition then should either highlight a wrong assessment done by the examiner in evaluating facts and grounds already in his possession, or should introduce new facts and grounds that he was unaware of.

Reputation

The higher the reputation, the wider scope of protection granted. To this extent it is highly recommended to collect evidence such as advertising in China (and abroad), invoices and documents proving sales in China (and abroad), awards and prizes won by products bearing the mark, etc.

Bad faith

The opponent should be able to provide CTMO with evidence of the applicant’s bad faith during an opposition procedure.

Warning letter and anti-counterfeiting actions

If the registration of a certain mark is regarded as a potential risk and an opposition is filed, the use of such mark should be regarded as risky as well. To this extent, data collected from the monitoring of the CTMO’s Gazette should be provided by those who take care of anti-counterfeiting, in order to have proper actions executed.

Squatters

We have observed that in many cases oppositions are instituted against trademarks that are obviously squatted, filed in order to be sold to the owner of the legitimate right. Given the fact that prior use of a trademark provides only limited rights, and the negative attitude of CTMO, negotiation in order to obtain withdrawal of the application or transfer may be sensible.

Expand registration portfolio

Despite the fact that it is possible to cancel a mark after three years of non-use, it is advisable to enlarge the trademark portfolio until relevant classes/subclasses are covered.

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