China’s Top 10 trademark developments 2021

Anna Mae Koo and Ann Xu of Vivien Chan & Co discuss ten key trademark updates from China.

Bad faith provisions against trademark squatters and agents

The Fourth Amendment to the Trademark Law took effect in November 2019. In an effort to tackle bad faith trademark squatting and hoarding, the updated law includes provisions that empower the China National Intellectual Property Administration (CNIPA) to reject bad faith trademark applications filed without the intention to use. In addition to CNIPA now being able to reject such applications, any party may now also challenge trademark applications or registrations based on this ground.

Furthermore, trademark agencies assisting in a trademark application where they know, or ought to know, that applicants are acting in bad faith may also be punishable by administrative fines of up to RMB 100,000 (approx. US $148,000). It is not uncommon that agents themselves are behind trademark squatting. The administrative fines can help deter trademark agents in assisting and engaging in bad faith filings.

CNIPA keeps bad faith applicant blacklist

CNIPA is maintaining an informal internal blacklist of bad faith applicants. Blacklisted applicants’ applications may be provisionally rejected, and the applicants will be required to produce evidence and an explanation showing that the application was not filed in bad faith. This list provides CNIPA with a new weapon in the fight against habitual squatters as well as easing the burden on brand owners dealing with the issue. We shall keep an eye on the potential formalization of the blacklist.

Online publication of opposition decisions

As of January 1, 2020, trademark opposition decisions are being published online. As a running record of applicants’ filing history and previous decisions finding bad faith on opposition and invalidation actions, this will become a new source of bad faith evidence.

Suspension of refusal review pending disposition of prior marks

Beginning in late 2019, CNIPA began issuing “Notice of Examination Opinions,” listing the prior mark(s) and inviting applicants to file applications for suspension until the determination of the status of the prior mark(s). Up to this point, there was no formal procedure for suspension of refusal review procedure pending the disposition of prior conflicting marks, and it was at the sole discretion of examiners to suspend.

This Notice does not constitute a Notice of Refusal and is normally issued if the prior marks are still under examination or pending change of address/name of the proprietor or assignment. A formal Notice of Refusal will be issued if, after the conclusion of the aforesaid, the prior mark(s) still constitutes an obstacle to the application. The introduction of these Notices is a welcome development as direct refusal of trademark applications can now be avoided based on prior marks with unstable status.

It has yet to be seen whether this new practice will be extended to cases where prior marks are subject to opposition/invalidation/cancellation proceedings.

“Direct refusal of trademark applications can now be avoided based on prior marks with unstable status.” - Ann Xu and Anna Mae

 

 

Stricter adjudication of deceptiveness ground

CNIPA is becoming stricter on the issue of deceptiveness and has raised more objections as to whether the applications are deceptive and likely to mislead the public in terms of the quality, place of origin, or other characteristics of the goods. Objections may be raised in relation to terms which describe raw materials, nature of goods, content of services, and geographic origins.

Objections may also be raised if marks contain references to the nature of the business (e.g., school) if it does not correspond with the applicants’ names (e.g., ABC Education Consultancy Limited). To overcome such objections, brand owners should provide evidence to show that they engage in such business and have obtained permits (if required by law).

Stricter examination of specifications for international registrations

CNIPA has gradually adopted a stricter approach to non-standard goods/services when examining international registrations. For international registrations, CNIPA generally adopted a relaxed approach and allows specifications that do not adopt standardized descriptions. Having said that, CNIPA is increasingly raising objections if they are too broad or unable to be fit into a particular subclass.

Whereas previously CNIPA would generally accept these types of applications from foreign brand owners, applicants must now file refusal review applications with CNIPA and simultaneously file requests for limitation of goods and services with the World Intellectual Property Organization to overcome such objections.

OEM constitutes trademark use

The Guidelines for Trial of Trademark Right Granting and Verification Cases issued by the Beijing High Court in April 2019 confirm the long-standing view that original equipment manufacturing (OEM) use can be used to resist non-use cancellation actions. While several decisions held that OEM use did not constitute trademark infringement, the Supreme People’s Court’s decision in the landmark Hondakit case (October 2019) held that OEM activities may constitute trademark infringement.

The Court explained that although the infringing goods were for export, transport operators would have access to the infringing goods, and they also fall within the “relevant public.” Nonetheless, we are of the view that bad faith on the part of the infringer played a material role in the Court’s decision finding infringement. We now wait to see if this case has precedence over future cases.

“Under the amended Trademark Law, statutory damages for trademark infringement have been increased.” - Ann Xu and Anna Mae

 

 

 

Increased penalties against trademark infringers

Under the amended Trademark Law, statutory damages for trademark infringement have been increased from RMB 3,000,000 (approx. US $446,760) to RMB 5,000,000 (approx. US $774,601) and punitive damages from three times to five times the amount of the actual damages.

New guidance on trademark infringement

CNIPA issued its “Criteria for Determining Trademark Infringement” document in June 2020, to assist Chinese enforcement authorities in identifying infringement activities. These criteria serve to clarify the laws and fill the legal gaps and loopholes exploited by infringers, thus providing a useful guidance to enforcement agencies. The document also details what activities constitute trademark infringement. To name a few such activities: offering infringing goods as giveaways, delay on the part of e-commerce operators in stopping infringing activities, prominent use of trade names in company names which are similar to registered trademarks, and the alteration of a registered trademark rendering it similar to a prior registered trademark and thus causing customer confusion, all constitute infringement.

Greater Guidance as to Acceptability of Letters of Consent

Under the current practice, letters of consent will unlikely be accepted if the marks at issue are identical or substantially similar. The 2019 Guidelines of the Beijing High Court also provide that conditional or revocable consent will not be accepted. If the parties intend to come into coexistence, they should enter into a separate coexistence agreement instead of having a single consent letter covering all the parties’ rights and obligations.

Anna Mae Koo is a partner at Vivien Chan & Co and leads all areas of IP practice including non-contentious, contentious, and transactional IP law in the Hong Kong and China Office. She is a Techstars mentor and is actively involved in the Litigation Committee of the International Bar Association, and the INTA Bulletins Committee. She can be contacted at: vivchan@vcclawservices.com

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