Navigator Insights

China trademark law changes

The bilateral relationship between New Zealand and China has grown to become one of New Zealand’s most valuable and important. As a global and regional power, New Zealand’s second-largest trading partner, China is important to New Zealand as a bilateral, regional and multilateral partner.

The New Zealand–China Free Trade Agreement is a bilateral free trade agreement signed between the People’s Republic of China and New Zealand in April 2008. It is the first free trade agreement that China has signed with any developed country, and New Zealand’s largest trade deal since the 1983 Closer Economic Relations agreement with Australia. The New Zealand-China FTA was signed on 7 April 2008 in Bejiing, and entered into force on 1 October 2008, after ratification by the New Zealand Parliament. The provisions of the agreement are expected to be phased in gradually over 12 years, fully coming into force in 2019.

Over time the FTA will result in elimination of tariffs on 96% of New Zealand exports to China, and is projected to lift New Zealand’s export revenue from trade with China by between NZ$225-$350 million per year. Overall China is one of the biggest markets for New Zealand business with many planning to eventually enter the Chinese market.

One of the mistakes that many NZ businesses commit when entering the Chinese market is failing to register their trade marks adequately there before they enter the market, resulting in loss of brand value and brand recognition, or worse, they are prevented from using their own brand in that market.   Brand owners should consider registering the plain word version of the their mark, plus the Chinese translation/transliteration of that mark in Chinese characters, as well as any logo that they will use in China.

Here’s a look at recent changes in the Chinese trademark law in an effort to bring it more in line  with international laws.

On August 30, 2013, the Standing Committee of the People’s Congress passed the draft text of the third revision to China’s Trademark Law, which enters into force on May 1, 2014. The amendments are considered to be the most significant ones since the first promulgation of the Chinese Trademark Law in 1982.

The new Trademark Law endeavours to align the Chinese system with those in foreign countries by introducing multi-class applications (Article 22) and allowing for registrability of sound marks (Article 8). The multi-class system should ease the administrative burden in trademark portfolio management and bring down the costs of registering and renewing trademarks.

Bad-faith applications (e.g. a potential distributor registering the brand of the manufacturer) are rampant in China and are a major concern for foreign brand owners. The new Trademark Law introduces a number of provisions that strengthen the trademark regime against such applications. One of the articles stipulates that the registration and use of trademarks should follow the principles of honesty and trustworthiness. This general principle originates from the General Provisions of the Chinese Civil Law and is a ‘catch-all’ provision governing trademark applications and use. However, this principle is not stipulated as one of the grounds for opposition (Article 33) or invalidation (Article 45), and so we wonder how it will be applied in practice.

Another interesting new provision is Article 15(2), which prohibits the registration of a third party’s unregistered mark that has previously been used for identical or similar goods if there is evidence showing that the applicant has clear knowledge of that third party’s mark through contractual, business or other relationships.

The time that it takes to complete a trademark application or other proceedings such as opposition proceedings is notoriously long in China. The new Trademark Law sets out specific time limits for the Chinese Trademark Office (CTMO) and the Trademark Review and Adjudication Board (TRAB) to examine cases. The examination of a trademark application must be completed within nine months and no extension is allowed. For reviews of refusals, invalidation on absolute grounds, cancellation and reviews on cancellation, the time limit is nine months, with a possible extension of a further three months. For oppositions, reviews on opposition and invalidation on relative grounds, the time limit is 12 months, with a possible extension of a further six months. This is a vast improvement on the current practice; the only question is whether the quality of decisions will be compromised by such quantitative performance targets.

The new Trademark Law goes a long way to improving the situation for foreign brand owners seeking protection in China.  However, the new law also introduces changes that might not work to the benefit of brand owners. For example, under Article 35(2), if the CTMO rejects an opposition, the mark will proceed to registration. The opponent may then file an application with TRAB to invalidate the registered mark. The opponent can no longer file a review of the CTMO decision with TRAB to prevent registration of the opposed mark. This could cause great difficulty for brand owners who are unsuccessful in opposing a bad-faith application, because they then run the risk of trademark infringement if they use their own marks in China. Furthermore, under the new Trademark Law, a plaintiff unable to show use of its mark in an infringement action may not be awarded any compensation (Article 64)..

We set out below a summary of these and other key changes to the new Law.

  •  Sound marks and multiple class trademark applications made available
  • The new law clarifies that conflicts between registered trademarks or unregistered well-known trademarks and trade names, i.e. company and business names, should be handled under the Unfair Competition Law, not the Trade Mark Law.
  • Increased fines, compensation, and statutory damages against infringement.  Assessed damages can be multiplied up to three times where the infringer acted in bad faith or the circumstances are serious. No further details are given as to what “bad faith” or “serious” means in this context.
  • Oppositions: Only the owner of a prior right or an interested party can bring an opposition on relative grounds or for misleading use of a geographical indication, but anyone can bring an opposition on absolute grounds.
  • Bad faith applications: New provisions have been added to prevent registrations of trademarks applied for in bad faith.
  • Well-known trade marks (WKTMs): Protection for WKTMs will only be provided on a case-by-case basis, and only when necessary to determine the case, e.g. when there is a claim of infringement involving dissimilar goods or services.
  • Shortened trademark prosecution times.

Any business that sells or is considering selling into China should consider the following actions:

  • Conduct a trade mark search in China to check that no one has applied to register your mark there, remembering to search for the Chinese character version of the mark too.
  • File trade mark applications in China covering the word mark, the Chinese characters for the word mark as a minimum, and the  particular logo used in China if funds permit.
  • Utilise the Chinese characters that represent the mark on invoices and other commercial documentation bound for China so that you can establish use of the Chinese character mark in commerce in China, if your registration is ever attacked for non-use.

Image courtesy of Feelart / FreeDigitalPhotos.net