China Marches Toward Third Revision of Trademark Law: New Draft Amendments Signal Potential Ease of Surveillance Burden on Owners

06 July 2009 Publication

Legal News Alert: China

The current era of intellectual property reform in China is impacting both patent and trademark law alike. China is in the process of revising — for the third time — its Trademark Law, which was first promulgated on August 23, 1982. Unlike the second amendment to the PRC Trademark Law, adopted in preparation of China's accession to the World Trade Organization in 2001, the current third revision was initiated by the China Trademark Office (CTMO) to streamline the trademark prosecution and enforcement process to meet the demand of rapid domestic economic growth. On June 20, 2009, the State Administration for Industry and Commerce (SAIC) issued a revised draft of the proposed amendments to the PRC Trademark Law (2009 Draft Amendments). The 2009 Draft Amendments are significant, as they represent changes currently contemplated in an ongoing process to reshape the law governing brand procurement and protection in China. It is anticipated that the third amendment will be finalized and implemented within the next two years.

Chinese trademark policy is presently a dynamic area of change. The 2009 Draft Amendments come on the heels of the May 1, 2009 implementation of the Judicial Interpretation of Several Issues Regarding Application of Laws in Well-Known Trademark-Protection-Related Civil Disputes (Interpretation) issued by the PRC Supreme People’s Court. [See Foley’s June 11, 2009 Legal News Alert: China, “Judicial Recognition of Well-Known Trademarks in China May Be Tightened Up,” at] The Interpretation addresses various issues related to well-known trademark recognition that have surfaced since the Provisions for the Determination and Protection of Well-Known Trademarks were issued by the SAIC on June 1, 2003.

The 2009 Draft Amendments retain features similar to those previously presented in a draft last circulated for comment in August 2007 (2007 Draft). [See Foley’s June 11, 2009 article, “China Trademark Law Is Being Revised: Is the Third Time Really a Charm?” at] Specifically, the 2009 Draft Amendments provide for a scope of registrable trademarks to include color marks and non-visual marks such as sounds, smells, and motion marks. Notably, the examination and registration procedures for marks will be addressed in regulations to be separately promulgated by the SAIC. The 2009 Draft Amendments allow for multi-class applications and propose to double the present limit for maximum statutory damages to RMB 1 million (currently about U.S. $147,000). In addition, the 2009 Draft Amendments provide for increased administrative fines of up to five times the amount of the illegal gain and, where the illegal gain cannot be quantified, the maximum statutory fine may reach RMB 1 million (about U.S. $147,000). Also, standing to file trademark oppositions and invalidation actions would be restricted to parties holding prior rights and interested parties. Notably, the 2009 Draft Amendments do not define “interested parties.”

The 2009 Draft Amendments retain features of the 2007 Draft that serve to enhance enforcement of owners’ rights in either registered or unregistered marks. For example, the 2009 Draft Amendments provide for enforcement rights where “the principle of honesty and credibility” has been violated. As such, separate from the Anti-Unfair Competition Law, the PRC Trademark Law would provide a potential protection for owners of unregistered trademarks against the knowing preemptive registrations of other parties. The 2009 Draft Amendments also provide a remedy in favor of select marks that are not recognized as “well-known” trademarks. In present practice, only well-known trademarks can have the cross-class protection, but the well-known trademark status is difficult to obtain. It is nearly impossible for most foreign brand owners to protect their trademarks from “bad-will” copy registrations in other classes. Significantly, the 2009 Draft Amendments provide cross-class protection for trademarks having certain significance in China but that are not yet well known. As a result, many foreign brand owners would likely benefit from this expansion of cross-class protection.

The 2009 Draft Amendments have been revised in several important areas in relation to the 2007 Draft. First, the 2009 Draft Amendments no longer require the CTMO to complete the examination of trademarks within 12 months of the date of application filing. The 2007 Draft proposed to set a statutory one-year examination term for trademark applications. This was a very ambitious proposal in view of the increased volume of applications and significant backlog for pending cases. Second, the 2007 Draft proposal shifted the burden of “gate keeping” before and after the applications to applicants and registrants. In the 2009 Draft Amendments, substantive examination of a candidate mark by the CTMO for refusal based on relative grounds has been maintained. Retention of this requirement may serve to ease significantly the burden on trademark owners to monitor the marketplace for and file oppositions against confusingly similar marks.

The ascendance of the Chinese marketplace as a global powerhouse serves to heighten international interest in changes implemented during this period of intellectual property reform in China. The 2009 Draft Amendments provide insight into the potential changes to Chinese trademark law that will set the tone for future brand creation, management, and protection in this important market.

Legal News Alert is part of our ongoing commitment to providing up-to-the-minute information about pressing concerns or industry issues affecting our clients and colleagues. If you have any questions about this alert or would like to discuss the topic further, please contact your Foley attorney or the following individuals:

Sharon R. Barner
Chicago, Illinois

Catherine Sun
Shanghai, China

Wen (Jo) Xu
Shanghai, China

Foley & Lardner LLP is licensed to operate in China as a foreign law firm. Under Ministry of Justice regulations, foreign law firms in China are permitted to advise clients on certain aspects of international transactions and to provide consultation concerning the impact of the Chinese legal and regulatory environment; foreign law firms in China are not permitted to practice Chinese law. The content of this communication does not constitute an opinion on Chinese law nor does it constitute legal advice, but is based on our research and our experience advising clients on international business transactions in China.

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