China: Proposed Amendment to the Trademark Law

Beginning in 2021, the China National Intellectual Property Administration (CNIPA) began exploring ways to improve the country’s industrial property legislation. However, it was only on January 13, 2023, that the CNIPA released the draft amendments to China’s Trademark Law for public consultation.

The draft represents the fifth revision of China’s Trademark Law since its enactment in 1982. Its main objectives are to combat bad-faith filings, strengthen trademark use requirements, and ultimately reduce the significant number of trademark applications. The version currently in force is the law revised in 2019; however, this legislation is still considered deficient in several areas.

Below, we present the main changes proposed by the fifth amendment, based on our analysis as of the publication date of this article.

ARTICLE 4

Concept of “Bad Faith”

The new Article 4 of the draft amendment to China’s Trademark Law reinforces that any natural person, legal entity, or other organization that needs to acquire the exclusive right to use a trademark in connection with goods or services in the course of business operations must apply for trademark registration with the Trademark Office. A bad-faith trademark application filed without an intention to use the mark will be rejected.

According to the Guidelines for Trademark Examination and Adjudication, a bad-faith application is one that demonstrates malicious conduct involving the improper appropriation of trademark resources and disruption of the trademark registration system, such as the accumulation of applications.

Some applicants file a large number of trademark applications without any intention to use the marks, with the aim of obtaining financial gain, including through trademark assignment proceedings. Such conduct may characterize a bad-faith filing.

According to the Guidelines for Trademark Examination and Adjudication, the following circumstances are categorized as bad-faith trademark applications:

• Filing a large number of trademark applications that clearly exceed the applicant’s ordinary business needs, without an intention to use the marks, thereby disrupting the trademark registration system;

• Extensively copying, imitating, or plagiarizing trademarks belonging to multiple entities that are already well known or highly distinctive, thereby disrupting the trademark registration system;

• Repeatedly applying to register specific trademarks belonging to the same entity that are already well known or highly distinctive, thereby disrupting the trademark registration system;

• Filing a large number of trademark applications that are identical or similar to third parties’ corporate names, abbreviated corporate names, e-commerce names, domain names, product names, packaging, trade dress, well-known and distinctive advertising slogans, designs, or other commercial signs with an established reputation;

• Filing a large number of trademark applications that are identical to the names of well-known individuals, famous works or characters, famous and distinctive artistic works, or other public cultural resources;

• Filing a large number of trademark applications that are identical or similar to the names of administrative divisions, natural landforms such as mountains, tourist attractions, buildings, or other signs;

• Filing a large number of trademark applications consisting of generic names, industry terms for designated goods or services, or signs that lack distinctiveness and directly indicate the quality, main ingredients, function, purpose, weight, quantity, or other characteristics of the designated goods or services;

• Filing and transferring a large number of trademarks to multiple different assignees, thereby disrupting the trademark registration system;

• Seeking improper financial gain by engaging in large-scale trademark sales, coercing prior trademark users or other parties into entering commercial arrangements, or demanding excessive assignment fees, licensing fees, or compensation for alleged infringement;

• Other circumstances in which trademark applications involve dishonest, misleading, or fraudulent conduct.

ARTICLE 5

Current Articles 4.1 and 3.1

Revision of the General Provisions and Introduction of the Use Requirement and Commitment to Use

This article revises the general provisions concerning applicants for trademark registration and the corresponding rights, including general provisions regarding trademark use.

The wording of the current Article 4.1 and the proposed Article 5 is set out below:

Article 4.1 — Fourth Amendment

“Any natural person, legal entity or other organization intending to acquire the exclusive right to use a trademark for the goods or services in production and business activities, shall file an application for registration of the trademark with the Trademark Office.”

Article 5 — Proposed Fifth Amendment

“Any natural person, legal entity or unincorporated organization intending to acquire the exclusive right to a trademark to use or commit to use on the goods or services in production and business activities, shall file an application for registration of the trademark with the Intellectual Property Administrative Department of the State Council. A trademark approved by the Intellectual Property Administrative Department of the State Council is a registered trademark, and the trademark registrant enjoys the exclusive right to use the trademark and be protected by law.”

Article 5 would also require trademark applicants to apply only for marks that are already in use or that the applicant undertakes to use in commerce at the time of filing.

Similar to the practice adopted in the United States, a declaration of use would be required five years after the registration date under Article 61. If the trademark owner fails to submit the declaration, the trademark will be deemed abandoned and cancelled by the CNIPA.

Under Article 21, the trademark may not be refiled for a period of one year following cancellation. This is similar to the practice adopted in certain Arab jurisdictions, where the refiling restriction applies for five years.

The CNIPA may conduct random inspections to verify the authenticity of declarations and may require trademark owners to provide additional evidence of use. Filing a false declaration may result in cancellation of the trademark.

ARTICLES 14 AND 21

Current Article 9.1

Prohibition of Overlapping Trademark Applications

Articles 14 and 21 of the proposed amendment also introduce the principle of preventing duplicate registrations.

This means that when a person files overlapping applications seeking registration of the same trademark for the same goods, the later application will be rejected once registration of the earlier application has been confirmed.

The ultimate objective is, once again, to improve the efficiency of the trademark authorities.

Particular attention should be given to the second paragraph of proposed Article 21, which establishes the following exceptions:

1. Minor improvements have been made to an earlier trademark that has been effectively used, due to production or business operation requirements, and the applicant is able to explain the differences;

2. The earlier trademark was not renewed for reasons that cannot be attributed to the applicant;

3. The earlier trademark was abandoned because the applicant failed to provide a timely explanation of use, although the earlier trademark had in fact been used;

4. The earlier trademark was cancelled due to the failure to submit evidence of use in proceedings based on three consecutive years of non-use, for reasons that cannot be attributed to the applicant, although the earlier trademark had in fact been used;

5. The earlier trademark was declared invalid because of a conflict with third-party prior rights or interests, but those rights or interests no longer exist;

6. There are other justified reasons for filing a duplicate trademark application or for seeking an extension of the trademark registration.

ARTICLE 18

Protection of Well-Known Trademarks and Protection Against Dilution

Article 18 seeks to introduce restrictions on the use of any copy, imitation, or translation of a well-known trademark that is not registered in China in connection with identical or similar goods.

It also prohibits the use of copies, imitations, or translations of well-known trademarks in connection with different goods.

With respect to the category of well-known trademarks addressed in the second paragraph, the proposed amendment removes the expression “registered in China,” which appears in the corresponding provision of the current Trademark Law.

In other words, the scope of protection provided under the paragraph would be expanded to include well-known trademarks that are not registered in China.

Regarding protection against dilution, the following additional provision has been included in the third paragraph of proposed Article 18:

“When a trademark in use or subject to an application for registration consists of a copy, imitation or translation of another trademark that is notably recognized by the general public and is sufficient to lead the relevant public to believe that the trademark is strongly connected with the notably recognized trademark, thereby diminishing the distinctive character of the notably recognized trademark, damaging its reputation or improperly exploiting its reputation, its use shall be prohibited and no application for registration shall be approved.”

ARTICLE 22

Prevention of Conduct Characterized as Bad Faith

The new Article 22 contains a list of circumstances that the CNIPA and the courts will presume to indicate that an application was filed in bad faith.

As a result, such applications may be rejected ex officio by the CNIPA during examination or opposition proceedings.

Applications characterized as bad-faith filings may also serve as the basis for a compensation claim by a trademark owner that has suffered harm.

The case records and the grounds for rejection based on bad faith would also become publicly available, allowing other trademark owners to become aware of the conduct and preventing applicants from filing trademarks under the same circumstances.

The proposed amendments also establish penalties for violations of Article 22.

Under Article 67 of the proposed amendments, engaging in any of the conduct described above may result in a warning and a fine of up to RMB 50,000.

In serious cases, a fine ranging from RMB 50,000 to RMB 250,000 may be imposed. Any illegally obtained profits will also be confiscated.

The following are examples of conduct characterized as bad faith by the CNIPA under Article 22 of the draft amendment:

• Filing numerous trademark applications without an intention to use them, as specifically provided under Article 22.1;

• Filing a trademark application through deceptive or other improper means;

• Filing a trademark application that harms national interests or public social interests, or that produces other serious adverse effects;

• Violating Article 18, which prohibits the copying, imitation, or translation of well-known trademarks; Article 19, which prevents agents or representatives from filing trademarks belonging to the owner or represented party in their own name without authorization; or Article 23, which restricts applications for trademarks that have already acquired a certain degree of influence, where such conduct harms third-party legal rights or interests or seeks illegitimate benefits;

• Maliciously filing a trademark application.

ARTICLE 37

Revocation of Official Gazette Publications Relating to Preliminary Approval

Before a trademark application is approved, if the CNIPA determines that a preliminarily approved trademark violates the provisions of Article 15 of the current law, it may revoke the publication in the Official Gazette and re-examine the application.

ARTICLE 39

Reduction of Deadlines and Elimination of Administrative Appeal Proceedings

Draft Article 39 proposes reducing the opposition period from three months to two months.

The most significant change, however, would be the complete elimination of the administrative appeal proceedings currently available against opposition decisions.

Under Article 39, the only remedy available to a trademark owner whose application is rejected by the CNIPA in opposition proceedings would be to file an appeal directly with the Beijing Intellectual Property Court.

This change is intended to streamline the trademark examination procedure and improve the efficiency of the local Trademark Office by consolidating examination proceedings before the CNIPA and directing appeals straight to the courts.

Regarding the applicable deadlines, a party wishing to challenge a CNIPA opposition decision may file proceedings before the Beijing Intellectual Property Court within 30 days of receiving the decision.

The court will notify the opposing party so that it may participate in the proceedings as a third party.

ARTICLE 42

Current Article 35.3

Preservation of Earlier Decisions Before the Beijing Intellectual Property Court

Article 42 provides that when the People’s Courts, namely the Beijing Intellectual Property Court or the Beijing Higher People’s Court, review an appeal, rejection, or invalidation matter based on prior rights, a subsequent change in the status of the relevant earlier trademark will not affect the court’s review, unless the principle of equity would be manifestly violated.

In other words, Article 42 provides that the status of the earlier trademark rights at the time the CNIPA decided the specific matter will take precedence over any subsequent change in the status of the trademark, unless this would produce a manifestly unfair result.

Under current practice, CNIPA examiners have a certain degree of discretion to postpone their review.

One point requiring further clarification is which exceptions would fall within the application of the “principle of equity” and how this would affect practice.

ARTICLES 45 AND 46

Assignment of Bad-Faith Trademarks to the Legitimate Rights Holder

The new Articles 45 and 46 provide several benefits to the genuine owner of a trademark, beginning with the possibility of obtaining ownership of a trademark that was unfairly applied for by another party.

Currently, a third-party trademark application may be challenged through opposition proceedings and non-use cancellation actions. These measures would remain available, with no proposed changes.

However, the new articles would allow the trademark to be assigned to the legitimate rights holder instead of merely invalidating the application or registration, as occurs under the current system.

During these proceedings, the disputed trademark would remain suspended until the transfer is completed, as the legitimate owner would only be able to use the trademark after approval of the assignment.

The proposal also provides that an assignment will not be granted when the transferred trademark would cause market confusion or other adverse effects. In such cases, the trademark would simply be cancelled, as provided under the current law.

Circumstances relevant to the application of these provisions include:

• Use involving trademarks of high reputation;

• Situations in which infringement of third-party prior rights is clearly identified;

• Situations in which the owner or legal representative does not have the legal capacity to file a trademark application or exercise other powers related to trademark registration proceedings.

ARTICLE 48

Effectiveness of Invalidity Declarations

Article 48 expands the provision currently contained in Article 47 by confirming that the use of a registered trademark that is subsequently declared invalid may be subject to administrative penalties for infringement under the new Article 74.2.

This applies when the use infringes third-party registered rights and the owner of the invalidated registration or its licensee acted in bad faith.

ARTICLE 50

Establishment of a “Quarantine Period”

Article 50 expands the current version of the same provision by confirming that a one-year “quarantine period” will apply to applications for trademarks that are identical or similar to registered trademarks that:

• Have been cancelled under items III, IV, or V of Article 49, contained in Chapter VI concerning the Administrative Control of Trademark Use;

• Have been cancelled for violating the prohibition against unilateral alteration under Article 64;

• Have been revoked for failure to submit evidence of use under Article 61;

• Were not renewed within the applicable period following the expiration of the registration term.

ARTICLE 61

Declaration of Use

Article 61 provides that a trademark owner must submit a declaration to the CNIPA within a 12-month period every five years following registration of the trademark.

The declaration must include information concerning the use of the trademark in connection with the approved goods or services, or justified reasons for non-use.

If no declaration is submitted within the applicable period, the CNIPA will notify the owner.

If the owner fails to submit the declaration within six months following the notification, the trademark will be deemed abandoned and cancelled by the CNIPA.

ARTICLE 62

Current Article 59

Exceptions to the Right to Prohibit Use

The owner of the exclusive right to use a trademark may not prohibit third parties from carrying out the following activities, provided that they are consistent with fair commercial practices:

• Using their own name and address in good faith;

• Using geographical names, generic names, graphics, models, technical terms, or other signs appearing in the registered trademark to describe the type, nature, quality, function, use, weight, quantity, value, origin, or other characteristics of the goods;

• Using the registered trademark solely to indicate the function, target audience, or context in which the goods or services are intended to be used, except when such use is likely to mislead the public.

ARTICLES 83 AND 84

Right to Civil Compensation

Under Articles 83 and 84 of the proposed amendment, any party that suffers losses resulting from a bad-faith trademark application may file a lawsuit before the competent court and claim compensation.

For the first time, the law expressly provides that the “reasonable expenses incurred by the affected party to prevent or challenge the bad-faith application” will be included in the calculation of compensation.

Articles 83 and 84 would also establish a system of public-interest industrial property litigation, under which the Public Prosecutor’s Office may intervene.

When a trademark application harms state interests, the public interests of society, or causes significantly adverse effects, the Public Prosecutor’s Office must initiate legal proceedings in accordance with the law.

As may be observed, the proposed amendments seek to prevent and penalize bad-faith conduct, which may help attract further investment and provide greater legal certainty for foreign investments in China.

Sources

CHINA NATIONAL INTELLECTUAL PROPERTY ADMINISTRATION. Circular of China National Intellectual Property Administration on Seeking Public Opinions on the Draft Amendment to the Trademark Law of the People’s Republic of China (Draft for Comments). China: CNIPA, 2023. Accessed July 15, 2023.

EMBASSY OF THE PEOPLE’S REPUBLIC OF CHINA. Guidelines on Trademark Protection and Enforcement in China. China: GB China Embassy, 2021. Accessed June 22, 2023.

NATIONAL PEOPLE’S CONGRESS. Database of Laws and Regulations: Trademark Law of the People’s Republic of China. China: NPC, 2007. Accessed August 1, 2023.

XU, Liang. “New Trends, New Possibilities: A Comment on the Proposed Fifth Amendment to China’s Trade Mark Law.” GRUR International, published August 9, 2023. Accessed August 15, 2023.