Why Registering Trademark in China Will Become More Significant in the Future

Since the adoption of its policy of reform and opening up, the Chinese Government has been paying increasing attention to the importance and role that IP plays in socioeconomic development and consistently working to improve the country’s IP system. The Trademark Office of the administrative authority for industry and commerce under the State Council shall be responsible for the registration and administration of trademarks throughout the country. The Trademark Review and Adjudication Board, established under the administrative authority for industry and commerce under the State Council, shall be responsible for handling matters of trademark disputes.

In the year 2019, the Supreme People’s Court’s newest regulations on interim and preliminary injunctions came into effect. The Regulations clarify the existing procedure and standards for IP trials, and provide typical cases illustrating them. China’s latest Trademark Law Amendment was passed by the Standing Committee of the thirteenth National People’s Congress on April 23, 2019 and the revised articles (Articles 4, 19, 33, 44, 63, and 68) became effective on November 1, 2019. The latest amendment addresses two longstanding concerns of the business community in the country – tackling bad faith trademark applications and intensifying the punishment for trademark infringement.

 

Besides registration, the prior use of a trademark can also be protected in China. For example, a bona fide prior use of an unregistered mark can defend against the tort claim of infringement. An unregistered well-known trademark can be protected against copy or imitation by a third party on similar goods/services, through oppositions or invalidations, as stipulated by the China Trademark Law. China has had specialist IP tribunals in the Chinese courts to deal with patent (and other IP-related) cases. Article 19 of the 2013 Trademark Law provides inter alia that a trademark agency should not accept representation of a trademark applicant client if it knows or should know that the application for registration of a trademark by its client violates a third party’s prior rights (in violation of Articles 15 and/or 32 of the Trademark Law). The 2019 amendment expands the scope of Article 19 to include violations of revised Article 4, thereby requiring that an agent refuse representation of a client if it knows or should know that the subject trademark is being filed in bad faith and without an intent to be used.

The amount of damages granted is determined either by ‘the actual losses suffered’ or ‘the gains derived by the infringer’. Article 63 has been amended to increase the maximum amount of statutory damages available from RMB 3 million to RMB 5 million. In addition, punitive damages allow, ‘in serious cases’, for the compensation amount to be up to five times this amount (previously the maximum was three times). Having said this, the punitive multiplier is rarely used on the basis that it is hard to calculate the amount of actual losses or gains derived in the first place. Therefore, the increase in statutory damages is expected to have more of an impact.

Trademark has a value not only to the owner due to its distinctiveness but also to customers who associate this trademark to a specific product or service. Moreover, if a foreign company wants to enter into a licensing agreement with a Chinese distributor, the foreign firm has to register trademark in China first. Most of the renowned Chinese distributors will only form business relationship with the overseas enterprises whose trademark is registered in China.

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