INTA Comments on Proposed Revisions to China's Trademark Law

By Danielle T. Brink, Foley & Lardner LLP

This article is part of our Summer 2010 edition of Legal News: China Quarterly Newsletter, Eye on China.

China’s State Legislative Council, the mission of which is to review pending legislation prior to its debate and passage by the National People’s Congress, invited the International Trademark Association (INTA) to provide comments on the latest draft revision of the Chinese Trademark Law (Draft). INTA’s concerns regarding several key areas are discussed below.

Continuing Problem of Bad Faith Registrations

Defining Bad Faith
Under Article 9 of existing Chinese law, the trademark for which an application for registration is filed must have distinctive, easily identifiable characteristics, and may not conflict with the legal rights acquired by others with priority. A trademark registrant has the right to mark the words “registered trademark,” or a designation indicating that the trademark is registered. However, this provision does not refer to bad faith as a basis for intervening against trademark pirates. Under the proposed law, the filing of trademark applications that violate “the principle of good faith” is prohibited in Article 9, which provides grounds for opposing or canceling marks filed in bad faith. INTA advocates that additional rules should clearly define “good faith and bad faith.”

Protection of Unregistered Marks
Under Article 34 of the Draft, the protection of unregistered marks against bad faith piracy by others is subject to a number of conditions. INTA has expressed concern that Article 34 may not represent the only basis for opposing or canceling marks based on bad faith.

Under the proposed law, Article 34 would permit a prior user of a mark to prevent registration of an application covering dissimilar goods or services where the applicant has “copied” the prior user’s mark, and the mark itself “bears relatively strong distinctiveness and enjoys a certain level of influence and easily misleads the public.” INTA suggests that obvious and unjustified bad-faith behavior can be adequately addressed in the course of oppositions and cancellations, and that oppositions should be permitted on this basis.

Five-Year Time Limit for Cancellations
Under Article 42 of the Draft, a cancellation petition against a registration obtained in bad faith must be filed within five years of registration. The five-year limitation is not applicable if the victim’s mark is deemed “well known.” INTA reasons that such limitation should be eliminated for any mark registered in bad faith, regardless of whether the victim’s mark is well known.

Protection of Famous and Well-Known Marks

Burden of Proof
INTA recommends inserting a paragraph to address the burden of proof required to establish that a trademark is well known as follows:

If the concerned party has furnished the basic proof to support the fact that its mark is widely known by the general public within China, the authorities should promptly determine that the trademark is famous. (Cf. Article of Judicial Interpretation No. 3 (2009) of Supreme Court.)

Further, the formality requirements such as notarization and legalization could be dispensed with, as it could be helpful to simplify the burden of establishing that a trademark is well known. Moreover, considerations should be given to the “spillover” effect of reputation of a trademark from outside China into the country.

Famous Local Brands
INTA advocates deleting the “famous marks” provisions in the present Draft to harmonize Chinese law with international standards and to avoid local protectionism.

Anti-Counterfeiting
In the proposed Draft, no significant changes have been advanced to existing anti-counterfeiting laws. INTA believes that new and more aggressive measures should be considered.

Mental State Required for Infringement Actions
INTA suggests that the intent standard should be expanded from “knowingly” to also impose liability on those who act with “reason to know.” INTA contends that proving actual knowledge is very often difficult and impractical, thereby creating loopholes that were not intended by legislators. Further, the standard of “reason to know” should be considered acceptable on the basis that the Chinese Trademark Law only sets out civil and administrative remedies, and not criminal penalties.

Power to Appeal AIC Penalty Decisions
Under the existing law and the Draft revisions, it is ambiguous whether a trademark owner has the legal right to appeal against administrative penalty decisions issued by local Administrations for Industry and Commerce (AICs). INTA suggested that this issue should be clarified.

Fines
INTA supports Article 67 of the Draft, which imposes heavier fines on repeat offenders. However, there are currently no guidelines on how to calculate the fine. INTA encourages guidelines on how to implement this provision. Additionally, consideration should be given to establishing a minimum penalty to deter infringers.

Investigative Powers
The existing law requires parties to comply with AIC requests for cooperation without setting out penalties for failure to comply, thereby making the requirement unenforceable. INTA believes that the legal powers of AICs should be clarified in greater detail.

Other Anti-Counterfeiting and Enforcement Issues
INTA also has suggested clarification on some issues:

• Attendance at raid by trademark owner or its agent: INTA suggests that the Draft should clarify whether the trademark owner or its agent has a legal right to attend raid actions conducted on the infringer’s premises.
• Timeline for conducting AIC actions: The Draft is unclear as to when the AIC must formally accept a complaint by a trademark owner, and when a raid action must be organized. INTA recommends establishing a reasonable deadline for conducting raid actions.
• Disposal of infringing goods: INTA advocates the law should state that appropriate steps must be taken to ensure all counterfeit goods are compulsorily destroyed, definitively removed from channels of commerce, or disposed of with the rights-holders’ consent where there is no health or safety risk, rather than merely requiring that display of the infringing trademark be removed.
• Auction of confiscated goods: INTA suggests that the law should clarify that, where a decision is made to auction infringing goods, the trademark owner or its agent should be provided adequate notice and opportunity to confirm that infringing trademarks have been removed prior to the auction.

Conclusion
In INTA’s view, the latest Draft of the revised Chinese Trademark Law is an improvement over existing law, which enhances protection of trademarks through strengthened enforcement measures. However, the proposed statute has significant room for improvement, which would provide greater clarity and protection for trademark owners. The passage of this comprehensive law and the rapid implementation of new guidelines and regulations that may stem from this legislation is expected.