Trademark squatting has long been one of the top concerns to the brand owners both in China and overseas. The squatters usually file the trademark registrations soon after the new brands are launched and then wait to offer them to the brand owners. In order to enhance the IP protection to brand owners, on 23 April 2019, the Standing Committee of the National People’s Congress approved the Fourth Amendment to the PRC Trademark Law which will become effective on 1 November 2019.
Restrictions on bad faith trademark registration
The amended Article 4 of the PRC Trademark Law provides that “applications for trademark registrations in bad faith which are not intended for use shall be refused”. This amendment is of great significance that the trademark squatter problem in China is directly addressed by the legislation for the first time. It expressly allows the trademark applications filed in bad faith with no intent to use to be rejected by the examiners even at the examination stage.
For those trademark applications accepted at the examination stage or registered already, the amendments provide brand owners the rights to oppose to the registrations within 3 months of the publication (Article 33) and request the Trademark Review and Adjudication Board to declare a registered trademark invalid (Article 44) on the ground of bad faith registration with no intent to use. These rights are not only exclusive to the brand owners, but can be exercised by any organization or individual.
In order to further strengthen the regulation on trademark squatters, the amendments to the PRC Trademark Law also impose heavier burden and stricter regulation on the trademark agencies. Amended Article 19 prescribes that trademark agencies should not represent applicants or handle the trademark applications if they know or should have known that the applications are filed in bad faith with no intent to use. Trademark agencies assisting in bad faith registration may be subject to administrative penalties such as a warning or a fine pursuant to the revised Article 68.
With the bad faith registration with no intent to use recognized as an independent ground in the legislation, the new amendments to the PRC Trademark Law not only tighten restrictions on new trademark applications filed in bad faith by allowing rejection by examiners and opposition by brand owners, but also allow brand owners to apply to invalidate any registered trademarks. Since the trademark agencies will be also held liable for any bad faith filing, it is expected that they will be more careful in taking on these kinds of representations, which may help to combat the trademark squatter problem in China.
Increased damages and disposition of goods
for trademark infringement
The amendments to Article 63 of PRC Trademark Law also increase penalties for trademark infringement. Where the infringement is committed in bad faith and in serious circumstances, the amount of punitive damages increases from treble damages to quintupled damages. Where the losses suffered by the trademark holders are difficult to assess, they may claim for statutory compensation and the upper limit of the amount increases from RMB 3 million to RMB 5 million after the amendments.
In addition to damages, the trademark holders can also request the court to order destruction of the commodities bearing counterfeit trademarks, except in special circumstances, and materials and tools mainly used for manufacturing those commodities. The new law also provides that the counterfeited commodities are not allowed to enter commercial channels after trademarks being removed.
Takeaway for brand owners
The amendments addressing the bad faith trademark registration without intent to use shows that the Chinese government has taken the problem of trademark squatters seriously. Whilst the requirement on applicants to show that they have an intention to use the trademark may stop squatters from filing bad faith applications in certain degree, it may be also a concern to the brand owners who wish to file legitimate defensive applications or makes the application process more complex. It is essential for brand owners to file their marks as soon as possible to preserve their own position in filing and stay alert and monitor the developments of the law and guidelines to be introduced in order to review their strategy in filing trademark registrations in China.
Although brand owners can apply to invalidate a registered trademark on the ground of bad faith, it would need to spend extra efforts, time and costs to remove the squattered marks so that it is advisable for brand owners to better keep a close watch on the published applications for trademark registration so that they can oppose any bad faith filings and take proactive actions against any trademark squatters promptly.
Further clarifications are required on “bad faith”, “special circumstances” and other terms used in the amendments as well as what evidence is required to establish an intent to use the trademarks so that brand owners can know better how the new law will be enforced in practice and affect their strategy in making trademark registrations. In any event, though the newly amended law is a significant step in the long road to combat trademark squatters and counterfeiting, the brand owners are still advised to initiate appropriate preventive measures for trademark protection.
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Important: The law and procedure on this subject are very specialised 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.
Published by ONC Lawyers © 2019