Revisions to the PRC Trademark Law entered into effect on May 1 2014. They offer some potentially valuable weapons for addressing registry pirates as well as infringements in the market. Set out below is a summary of these new tools, as well as an overview of changes to the law’s Implementing Regulations, issued by the State Council in late April.
Bad faith registrations
The State Administration for Industry and Commerce (SAIC) recently issued regulations on retroactivity that grant the Trademark Office (TMO) and Trademark Review and Adjudication Board (TRAB) the power to apply the revised law in any case pending before them that has not yet been substantively reviewed. Trade mark owners are therefore strongly advised to review whether pending oppositions and cancellations they have on file might benefit from the submission of new arguments and evidence relying on the new law, particularly where they touch on the following three grounds.
- Proving “relationships”: Article 7 of the revised law sets out a general requirement of “good faith” in the use and registration of trademarks. Neither the law nor its Implementing Regulations permits direct use of this provision as a basis for oppositions or cancellations. However, Article 15(2) of the revised law allows actions where an opposing party and the applicant for a pirated mark had a contractual relationship, business dealings, or “other relationship/association” (其他的关系) and the evidence thereof can prove the applicant knew of the existence of the opposing party’s mark. There are conflicting signals from national authorities as to whether the new language on “other association” applies only to cases where a direct relationship can be proven. However, some authorities have recently suggested that indirect relations may be sufficient.
- Although the law in this regard is unclear for the time being, brand owners should clearly attempt to support their oppositions and cancellations with evidence that the pirate knew or had good reason to know of the pirated mark, for example by virtue of being a competitor in the same market.
- Trademark agents: The revised law also prohibits trademark agents from filing applications for trade marks not required for their business. Trademark owners are accordingly recommended to investigate for evidence of whether the pirate is itself a trademark agent or that the agent used another party as a proxy (such as a relative) for the filing.
- Serial pirates: While the revised law is silent on the legal significance of serial piracy (where a pirate is proven to have filed for multiple famous brands without the apparent intention of using them), the TMO has recently issued decisions confirming that such applications can be deemed a violation of Article 10(1)(8) of the revised law, which prohibits use or registration as trademarks of signs whose use or registration would result in “adverse effects on society”.
- Prior to the entry into effect of the revised law, the TMO and TRAB applied this provision in the law in an unpredictable manner, and it is therefore hoped that the latest decisions are a signal that authorities will handle disputes against serial pirates more consistently going forward.
Civil compensation: Shifting of burden of proof
Statutory damages under the revised law have been increased dramatically from Rmb500,000 ($82,000) to Rmb3 million ($492,000). But of perhaps greater practical significance is the provision in the revised law generally shifting to infringers the burden of proof in compensation claims. The revised law encourages courts to support the plaintiff’s compensation claim where the defendant fails to present its own books and records or files any false information with the court. Since counterfeiters are only rarely willing to disclose their transactional records to the authorities, this new provision in the Trademark Law could help in promoting quick and more satisfying settlements.
The Supreme People’s Court (SPC) recently issued rules on retroactivity confirming that the revised law should be applied in any case where the infringement took place before May 1 2014, but continues thereafter.
Revised Implementing Regulations
Set out below is a summary of the more significant provisions in the revised Implementing Regulations.
Overall, the Regulations do not present as many significant changes as were anticipated based on drafts circulated earlier in the year for public comment. But they do warrant close attention in many respects.
- Parties are accorded the right to request suspension of proceedings by the TMO and TRAB on the basis that the outcome will be impacted by parallel proceedings. While this right has always existed informally in practice, it was never granted on a consistent basis, and thus this new provision is clearly welcome.
- ISPs and landlords are now explicitly set out in the list of parties that may be subject to contributory liability for trademark infringement.
- Local administrative enforcement authorities – the Administrations for Industry and Commerce (AICs) – are given the power to request verification from brand owners as to whether seized goods were produced with the trademark owner’s authorisation. (Notably, under a prior draft of the regulations, trademark owners were required to provide verifications. But this requirement was removed from the final draft.)
- Applicants for registration are permitted to divide trademark applications where a portion of the goods or services are deemed to be in conflict with prior marks.
- Assignors and assignees of trademark registrations are now required to jointly file applications to the TMO for approval of assignments. By contrast, the prior Regulations required the assignee to file such applications on its own. But buyers of trademarks would be well-advised to obtain a power of attorney from the seller granting the buyer the sole power to manage the assignment process.
- The new Regulations eliminate the previous three-month post-execution deadline for filing applications to record licences of registered trademarks.
Additional guidance on the application of the revised law is likely to be forthcoming in the next few months in the form of judicial interpretations and regulations now being drafted by the SPC and SAIC.
Troy Rice and Joe Simone