Enforcement under the Amended Chinese Trademark Law: Strengthened in Form

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Introduction
On 30 August 2013, the Standing Committee of the National People’s Congress of China passed a bill to amend the Chinese Trademark Law (the “Amended Law”), which will come into effect on 1 May 2014. The following article seeks to highlight the long-awaited reforms thereunder in respect of enforcement mechanisms which may be of our readers’ interest.

While China has the largest number of trademark registrations in the world,[1] when compared to other major jurisdictions, the country’s trademark regime has its limitations in protecting owners’ rights. Owners have to overcome high evidential and procedural hurdles. Moreover, remedies offered (even in cases of successful enforcement) are often inadequate to compensate the owner’s actual or expected losses. In response, the Amended Law aims to provide stronger measures and better remedies against bad faith trademark registrations and infringement by bad faith traders. Trade Mark Squatting Under the current law, only agents or representatives of a trademark applicant are prohibited from registering applied-for trademarks in their own names. Under the Amended Law, this prohibition would be extended to persons who have contractual or business relationships with the applicant, as well as persons who apparently know of the applied-for trademark in advance of registration. Application for registration of such marks, if validly opposed based on the above grounds, would not be accepted for registration. Compensatory and Restitutionary Damages The Amended Law provides for clearer guidance as to quantifying loss and damages, arising from trademark infringement, before Chinese courts. The present alternative bases of calculating damages, actual loss suffered because of infringement and profits earned by the infringer, would be retained. Under the Amended Law, it stresses the primary basis would be actual loss; only if such could not be ascertained one could rely on infringement profits. Even if damages could not be assessed on either basis, the Amended Law provides that damages could be assessed with reference to a reasonably multiplied amount of the royalties of the infringed trademark. Further, when the trademark owner has used his best endeavours to adduce evidence, the Court could demand production of infringement-related books of accounts and documents in the infringer’s possession. If the infringer refuses to produce or produce false books of accounts and/or documents, the Court may refer to the owner’s claim and evidence to assess damages. If the damages could not be ascertained from all the above bases, the Court retains a final discretion to award damages based on the acts and circumstances of infringement. The Amended Law significantly raises the maximum amount of such statutory damages from 0.5 million yuan under the current law to 3 million yuan. In the premise, once a trademark owner is able to establish the acts and circumstances of infringement, and able to give credible evidence of loss to the best he can, the owner is assured that he would be allowed some compensation by the Court. With the powerful tool to demand production of books of accounts and documents, it is foreseeable that a certain portion of the infringers’ profits could be disgorged. Exemplary Damages The Amended Law is more ambitious than merely disgorging infringers’ wrongful gains; it seeks to punish them with exemplary damages, which would be an innovation in Chinese intellectual property law. Such damages could be imposed in “serious cases” of bad faith trademark infringement. The quantum would range from 1 to 3 times the actual loss, the infringement profits, or the reasonable multiplied amount of royalties, whichever is the basis adopted in calculation of compensatory or restitutionary damages. Regulation of Trademark Agents For protection against bad faith registration by trademark agents, the Amended Law requires the trademark agents to be abide by the principles of honesty and credibility, loyalty and duty of confidentiality towards their clients. Such agents shall not knowingly accept instructions from trade mark squatters. Further, trademark agencies are prohibited from registering trademarks other than on behalf of their applicant-clients (i.e. in their own capacity as trademark agents). Breaches of the Amended Law and/or codes of conduct by trademark agents would attract disciplinary actions by their trade association as well as legal liabilities. More significantly the Administration for Industry and Commerce would have the power to give a bad credit record in the files of trademark agencies, and the power to suspend their business and announce such suspension. Conclusion

The Amended Law was drafted to broaden the scope of targets and reduce difficulties against which rightful trademark owners may enforce their proprietary rights. More adequate compensation and higher penalties (and thus deterrence) were clearly within the drafters’ contemplation as well. Such developments are encouraging; but as always in China, it still takes time to see if the implementation of the Amended Law would give the intended results of enhanced enforcement and protection for trademark owners.




[1]     As of August 2013, there have been in aggregate more than 12 million trademark applications, more than 8 million registrations and almost 7 million valid registrations in China.

 

IMPORTANT:
The law and procedure on this subject are very specialized and complicated. This article is just a very general outline for reference and cannot be relied upon as legal advice in any individual case. If any advice or assistance is needed, please contact our solicitors.

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Published by ONC Lawyers © 2013