More proposed amendments to Chinese trademark law

China looks set to make yet further significant revisions to its trademark law, with the IP Administration seeking public comments on its draft proposals last month. It will likely lead to a new law this or next year – the fifth revision of the law since its first enactment. The draft proposals would introduce some sweeping changes into the law, including further strengthening the law on bad-faith applications and imposing greater requirements on trademark owners to use or lose their registrations. Comments on the draft proposals are due by 27 February 2023.

We discuss the most important proposed changes - and provide a table comparing the existing and proposed new wording of the legislation - below.

Well-known trademarks: The proposed new Article 10 explicitly introduces the concepts of “passive protection” (ex officio action by authorities who learn about infringement) and confirmation on demand into the law for well-known trademarks. The language appears to stipulate for the first time that whether a mark is deemed well-known or not is a factual rather than a legal question (an issue previously not decided), which may have broad implications in relation to the use of surveys and other evidence of reputation. The factors to be taken into consideration in determining whether a mark is “well-known” have been expanded to include any foreign applications and registrations of the mark (which follows recent practice) and the “value of the mark”. The latter may raise interesting questions as to the (theoretical) purchase price for a given mark and its goodwill, and how to assess and prove it under Chinese law.
Malicious trademark applications: A new Article 22 updates the definition of “malicious trade mark applications” to include applying for a trademark "that is detrimental to the interests of the State, the social and public interests or has other major adverse effects”; “violating Article 18, Article 19, and Article 23 of this Law, intentionally damaging the lawful rights or interests of others, or seeking illegitimate benefits” and - as a catch-all clause - “any other malicious application.” This broader set will allow right holders to rely on “major adverse effects” and “intentional damaging” of interests of others or “seeking illegal benefits” to challenge trademark applications filed in bad faith at the Chinese trademark office.
Re-registration of identical marks: The new Article 14 strengthens the right of CNIPA to reject applications which “violate public order and morals” - an increase of state interference into the content of marks in line with current policy. The second paragraph of Article 14 will likely cause much greater concern as it stipulates that the same applicant shall register only one identical trademark for the same goods and services. Re-registration – for example to prevent loss of trademark rights from a pending invalidation action – is a common strategy and often results in a vicious circle of repeat proceedings and delay of a final decision as these subsequently-filed rights are themselves attacked. The CNIPA has stated in its official comments on the revised draft that it aims to extinguish this practice. This may impact legitimate right owners and the practice of filing defensive marks every three years. The proposed changes thus fit into the Chinese view that a registered mark must be used or forfeited. However, the new Article 21 appears to provide a way out by allowing refiling in cases of “minor improvements on the basis of an actually used mark” or “where the applicant agrees to revoke the prior registered mark”. How this process will be applied and work in practice remains to be seen.
Trademarks filed by trademark agencies: Article 26 strengthens the former rule in Article 19(4) which prohibits trademark agencies from engaging in the business of trademark squatting. This highly useful provision should give greater scope to tackle the multiple attempts and various strategies by dubious agencies to hide such practices and will make it easier to invalidate trademarks filed by them.
Invalidation action and transfer of right: The new Articles 45 and 46 increase the grounds for invalidation and introduce a new right of transfer, rather than only to invalidate the registration in cases where eg trademark squatting has occurred. The right to a transfer is subject to an ex officio review as to whether the trademark in question should be deemed invalid based on other grounds. The process is secured by a legal prohibition on the registrant dealing with the mark until transfer becomes effective, save for actions to maintain/prolong the registration.
New “proof of use” requirement every five years: Under the new Article 61 provision, the owners of registered trademarks will be required to make a statement of use within 12 months of the end of every five-year period from the date of registration. There will be a six-month grace period. If no statement is issued, they will face de-registration. The Chinese trademark office reserves the right to verify such statements and demand further proof of use. Whether this change will extend the non-use grace period from the current three years to five years and what further (potentially criminal?) sanctions might apply if a statement issued is deemed not correct or partially not correct is not yet clear. The official explanation implies that the current three-year grace period will not change. This clause strongly aims at “decluttering” the register - which currently contains more than 42 million live registrations - and forcing trademark owners to either use or abandon their marks.
Infringement: Article 62 introduces some new notable exceptions against claims of infringement, such as “Using one's own name and address in good faith; Using the names of the geographical locations, the generic name, graphics, models, technical term or other signs related to the description of the commodity contained in the registered trademark, to describe the type, nature, quality, function, usage, weight, quantity, value, origin and other characteristics of the commodity; Using the registered trademark only for indicating the function, the target consumer, or the application scenario, except that misleads the public.” These exemptions are likely to trigger doubts and criticism by trademark owners and will require further clarifications, as use of “models” or “other signs related to the description of the commodity contained in the registered trademark to describe … origin of commodity” appears to come dangerously close to “me too” trademark applications, blurring the line between original marks and free riders.
Social credit system entry: Article 87 stipulates the mandatory entry of administrative penalties in China’s social credit database, which will include actions against foreign trademark owners. This may impact the business behavior of foreign investors and follows the general strategy of strengthening industry regulation and increasing transparency around misconduct.

The changes in the current draft seem more far-reaching than those introduced by the fourth revision of the law and are now open to debate. There is a clear attempt to try to prevent trademark owners from clogging the register with defensive marks or re-filings, and to take steps against bad-faith trademark applications and the actors behind them (including irregular trademark agency activities).

Here is a translated comparison of the current and proposed new laws (provided by our trademark agency in Beijing, Tailun IP Agency, Ms. Helen WAN):

Article 4.1 Any natural person, legal entity or other organization intending to acquire the exclusive right to use a trademark for the goods or services in production and business activities, shall file an application for registration of the trademark with the Trademark Office.

Article 5 [trademark application for registration] Any natural person, legal entity or unincorporated organization intending to acquire the exclusive right to a trademark to use or commit to use on the goods or services in production and business activities, shall file an application for registration of the trademark with the Intellectual Property Administrative Department of the State Council.

A trademark approved by the Intellectual Property Administrative Department of the State Council is a registered trademark, and the trademark registrant enjoys the exclusive right to use the trademark and be protected by law.

Article 3.1 Registered trademarks mean trademarks that have been approved and registered by the Trademark Office.

Article 13 The rights holder of a well-known trademark among the relevant public may request the well-known trademark protection according to regulations in this Law, when he believes his rights have been infringed upon.

Article 10 [a well-known trademark and its protection] The rights holder of a well-known trademark among the relevant public may request the well-known trademark protection according to regulations in this Law, when he believes his rights have been infringed upon.

The protection of a well-known trademark shall follow the principles of case-by-case confirmation, passive protection and confirmation on demand.

The scope and intensity of protection of a well-known trademark should be appropriate to its distinctive features and popularity.

The well-known status of a mark shall be recognized based on the request of the party concerned and as a factual determination for the necessity of the trademark case to confirm. Account shall be taken of the following factors in confirmation of the well-known status of a mark:

reputation of the mark to the relevant public;
time, manner and geographical scope for continued use of the mark;
consecutive time, extent and geographical area of advertisement of the mark;
domestic and foreign applications and registrations of the mark;
record of protection of the mark, particularly as a well-known mark;
value of the mark;
any other factors relevant to the reputation of the mark.

A well-known mark shall be recognized based on the request of the party concerned and as a factual determination for the necessity of the trademark case. Account shall be taken of the following factors in establishment of a well-known mark:

reputation of the mark to the relevant public;
time for continued use of the mark;
consecutive time, extent and geographical area of advertisement of the mark;
records of protection of the mark as a well-known mark; and
any other factors relevant to the reputation of the mark.

Article 9.1 Any trademark in respect of which an application for registration is filed shall be so distinctive as to be distinguishable, and shall not conflict with any prior right acquired by another person.

Article 14 [conditions of registration] Any trademark in respect of which an application for registration is filed shall be so distinctive as to be distinguishable, and shall not violate public order and morals or conflict with any prior right acquired by another person.

Except as otherwise provided, the same applicant shall register only one identical trademark for the same goods or services.

Newly added

Article 21 [Prohibition of duplicate registration] An application for registration of a trademark shall not be the same as the prior application, the prior registered trademark or the prior trademark having been announced to be revoked, cancelled, or invalidated within one year before the application date filed by the same applicant on the goods of same kind. Except in the following circumstances or where the applicant agrees to revoke the prior registered trademark:

for the needs of production and operation, the applicant can explain the difference by making minor improvements on the basis of the actually used prior trademark;
failure to renew the prior trademark due to reasons not attributable to the applicant;
the previous registered trademark has been revoked due to the failure to submit the trademark use instructions in time, but the prior trademark has been actually used;
due to reasons not attributable to the applicant, the previous trademark was cancelled because of the failure to provide use evidence in the non-use cancellation procedure, but the prior trademark has been actually used;
the prior trademark is declared invalid due to conflict with the prior rights or interests of others, but the prior rights or interests no longer exist;
other legitimate reasons for repeating or reapplying for trademark registration.

Newly added

Article 22 [malicious application for registration] The applicant shall not apply for trademark registration maliciously, including:

hoarding trademarks without use purpose, disturbing trademark registration order;
an application for registration of a trademark registration by fraud or other improper means;
applying a trademark that is detrimental to the interests of the State, the social and public interests or has other major adverse effects;
violating Article 18, Article 19, and Article 23of this Law, intentionally damaging the lawful rights or interests of others, or seeking illegitimate benefits;
any other malicious application for trademark registration.

Article 19.4 Trademark agencies shall not apply for registration of other trademarks in addition to applying for trademark registration on its agency service.

Article 26 [restrictions to trademark agencies] Trademark agencies shall not apply for registration of other trademarks in addition to applying for trademark registration on its agency service, nor shall they engage in the above-mentioned acts in disguised form in other ways.

Newly added

Article 37 [Revocation of the preliminary approval gazette] Before the approval of registration of a trademark, if the Intellectual Property Administrative Department of the State Council. finds that a trademark having been preliminarily approved violates the provisions of Article 15 of this Law, it may revoke the gazette and re-examine it.

Article 35.3 During the review by the Trademark Review and Adjudication Board under said rules, where a determination of prior rights involved is based on the decision of a case pending before the People’s Court or before the administrative authority, the review may be suspended. Upon the elimination of the reason to suspend the review, the review may continue.

Article 42 [Suspension of procedure] During the examination and review by the Intellectual Property Administrative Department of the State Council under said rules, where a determination of prior rights involved is based on the decision of a case pending before the People’s Court or before the administrative authority, the examination and review may be suspended. Upon the elimination of the reason to suspend the review, the examination and review may continue.

The people's court hearing the decision of review on refusal, the decision of rejection of registration or the decision of invalidation made by the Intellectual Property Administrative Department of the State Council in accordance with Article 24 and/or Article 25 of this Law shall be subject to the state of fact at the time of the sued decision was made. Any change in the state of the relevant trademark after the sued decision was made shall not affect the hearing of the sued decision by the people's court, except for the obvious violation of the principle of fairness.

Article 45 [relative grounds for invalidation] Where a registered trademark is in violation of the second and third paragraph of Article 13, Article 15, the first paragraph of Article 16, Article 30, Article 31 or Article 32 of this Law, the holder of prior rights or an interested party may, within five years upon the registration of the trademark, request the Trademark Review and Adjudication Board to declare the registered trademark invalid. Where the aforesaid registered trademark is registered in bad faith, the owner of a well-known trademark is not bound by the five-year restriction.

The Trademark Review and Adjudication Board shall, after receiving an application for declaring the registered trademark invalid, notify the party concerned as such in writing, and require the party concerned to respond within a time limit. The Trademark Review and Adjudication Board shall, within 12 months upon the receipt of the application, render a decision on either maintaining the validity of the registered trademark or declaring the registered trademark invalid, and notify the party concerned as such in writing. Where it is necessary under special circumstances, an extension of six months may be granted upon approval by the administrative department for industry and commerce of the State Council. If the party concerned is dissatisfied with the decision made by the Trademark Review and Adjudication Board, it may bring a lawsuit to the people's court within 30 days upon the receipt of the notice, in which case the people's court shall notify the counterparty to the trademark ruling procedures to participate in the litigation proceedings as a third party.

Article 45 [relative grounds for invalidation and transfer of trademark] Where a registered trademark is in violation of the Article 18, Article 19, the first paragraph of Article 21, Article 23, Article 24 or Article 25 of this Law, the holder of prior rights or an interested party may, within five years upon the registration of the trademark, request the intellectual property administrative department of the State Council to declare the registered trademark invalid. Where the aforesaid registered trademark is in violation of Article 18 or Article 19, or the provision “preempt the registration of a trademark that has been used by another person and has a certain influence” of Article 23 of this Law, the holder of prior rights may request that the registered trademark be transferred to itself. Where the aforesaid registered trademark is registered in bad faith, the owner of a well-known trademark is not bound by the five-year restriction.

The intellectual property administrative department of the State Council shall, after receiving an application for declaring the registered trademark invalid or an application for transferring the registered trademark, notify the party concerned as such in writing, and require the party concerned to respond within a time limit. The intellectual property administrative department of the State Council shall, within 12 months upon the receipt of the application, render a decision on maintaining the validity of the registered trademark, or transferring the registered trademark, or declaring the registered trademark invalid, and notify the party concerned as such in writing. Where it is necessary under special circumstances, an extension of six months may be granted upon approval. If the party concerned is dissatisfied with the decision made by the intellectual property administrative department of the State Council, it may bring a lawsuit to the people's court within 30 days upon the receipt of the notice, in which case the people's court shall notify the counterparty to the trademark ruling procedures to participate in the litigation proceedings as a third party.

Newly added

Article 46 [disposal of trademark transfer] After examination, the intellectual property administrative department of the State Council shall make a decision on the transfer of a registered trademark if it considers that the reason for requesting the transfer of the registered trademark is tenable, that there is no other reason for declaring the registered trademark invalid, and that the transfer is not likely to cause confusion or other adverse effects. The department shall make decision to declare the registered mark invalid if it considers that there are other reasons that the registered trademark should be declared invalid, or that the transfer is likely to cause confusion or other adverse effects although the reason for requesting the transfer is established.

After the decision on the transfer of the registered trademark is made and before it comes into effect, the trademark registrant shall not dispose of the trademark, except the disposal made to maintain the validity of the registered trademark.

Article 46 [invalid or effective decision] Upon the expiry of the statutory time limit, if the party concerned fails to apply for review of the Trade Mark Office’s decision on declaring a registered trademark invalid, or fails to bring a lawsuit to the people's court against the Trademark Review and Adjudication Board’s review decision or its ruling on maintaining the validity of a registered trademark or declaring a registered trademark invalid, the Trade Mark Office’s decision or the Trademark Review and Adjudication Board’s review decision or ruling shall become effective.

Article 47 [invalid or effective decision] Upon the expiry of the statutory time limit, if the party concerned fails to apply for review of the intellectual property administrative department of the State Council’s decision on declaring a registered trademark invalid, or fails to bring a lawsuit to the people's court against the review decision, or the ruling on maintaining the validity of a registered trademark, or transferring a registered trademark, or declaring a registered trademark invalid, the intellectual property administrative department of the State Council’s review decision or ruling shall become effective.

The ruling on transferring a registered trademark will be published after it comes into effect and the applicant for transfer will own the exclusive right to the use of the trademark from the publication date.

Newly added

Article 58 [removal of trademark] Where a trademark registrant applies for removal of its registered trademark or removal of its trademark registration on part of the designated goods, after approval by the intellectual property administrative department of the State Council, the removal shall be published. The effect of the exclusive right to the use of the registered trademark or the exclusive right to the use of the registered trademark on part of its designated goods shall be terminated from the publication date.

Newly added

Article 61 [statement on trademark use] The trademark registrant shall, within 12 months after every five years from the registration date, make a statement to the intellectual property administrative department of the State Council the use of the trademark on the approved goods or the justifiable reasons for not using the trademark. The trademark registrant may make a centralized statement of the use of multiple trademarks within the above-mentioned period. If no statement is made at the expiration of the time limit, the intellectual property administrative department of the State Council shall notify the trademark registrant. If the trademark registrant fails to make a statement within six months from the date of receipt of the notice, it shall be deemed to have abandoned the registered trademark, and the intellectual property administrative department of the State Council shall cancel the registered trademark. The intellectual property administrative department of the State Council shall conduct a random spot check on the authenticity of the statement, and may, if necessary, require the trademark registrant to supplement relevant evidence or entrust the local intellectual property administrative department to carry out verification. The intellectual property administrative department of the State Council shall cancel the registered trademark if the statement is not true after spot check.

Article 59 [circumstances without right to prohibit] The holder of the exclusive right to use a registered trademark shall have no right to prohibit others from properly using the generic name, graphics or models of a commodity contained in the registered trademark, or such information directly indicating the quality, main raw materials, functions, purposes, weight, quantity or other features of the commodity, or the names of the geographical locations as contained therein.

The holder of the exclusive right to use a registered trademark that is a three-dimensional symbol shall have no right to prohibit others from properly using such forms as contained in the registered trademark due to the inherent nature of a commodity or the commodity forms necessary for achieving technological effects or the forms that bring substantive value to the commodity as contained therein.

Where, before a trademark registrant applies for registration of a trademark, another party has used a trademark that is of certain influence and is identical with or similar to the registered trademark on the identical goods or similar goods, the holder of the exclusive right to use the registered trademark shall have no right to prohibit the said party from continued use of the trademark within the original scope of use, however, the holder may require the latter to add a proper sign for distinguishment.

Article 62 [circumstances without right to prohibit] The holder of the exclusive right to use a registered trademark shall have no right to prohibit others from carrying out the following acts consistent with commercial practices:

using one's own name and address in good faith;
using the names of the geographical locations, the generic name, graphics, models, technical term or other signs related to the description of the commodity contained in the registered trademark, to describe the type, nature, quality, function, usage, weight, quantity, value, origin and other characteristics of the commodity.
using the registered trademark only for indicating the function, the target consumer, or the application scenario, except that misleads the public.

Article 57 [infringement on the exclusive right to use a registered trademark] Any of the following acts shall constitute an infringement on the exclusive right to the use of a registered trademark:

using a trademark that is identical with a registered trademark on the identical goods without obtaining licensing from the registrant of the registered trademark;
using a trademark that is similar to a registered trademark on the identical goods, or using a trademark that is identical with or similar to the registered trademark on similar goods without obtaining licensing from the registrant of the registered trademark, and is likely to cause confusion;
selling goods that infringe on the exclusive right to the use of a registered trademark;
counterfeiting, or making without authorization, representations of another person's registered trademark, or selling such representations;
altering a registered trademark without permission of its owner and selling goods bearing such an altered trademark in the market;
providing, intentionally, convenience for such acts as infringe upon others' exclusive right of trademark use, to facilitate others to commit infringement on the exclusive right of trademark use
impairing in other manners another person's exclusive right to the use of its registered trademark.

Article 72 [infringement on the exclusive right to use a registered trademark] Any of the following acts shall constitute an infringement on the exclusive right to the use of a registered trademark:

using a trademark that is identical with a registered trademark on the identical goods without obtaining licensing from the registrant of the registered trademark;
using a trademark that is similar to a registered trademark on the identical goods, or using a trademark that is identical with or similar to the registered trademark on similar goods without obtaining licensing from the registrant of the registered trademark, and is likely to cause confusion;
using a trademark that is identical or similar to the registered trademark in electronic commerce related to identical or similar goods without obtaining licensing from the registrant of the registered trademark, and is likely to mislead the public;
selling goods that infringe on the exclusive right to the use of a registered trademark;
counterfeiting, or making without authorization, representations of another person's registered trademark, or selling such representations;
altering a registered trademark without permission of its owner and selling goods bearing such an altered trademark in the market;
providing, intentionally, convenience for such acts as infringe upon others' exclusive right of trademark use, to facilitate others to commit infringement on the exclusive right of trademark use
impairing in other manners another person's exclusive right to the use of its registered trademark.

Newly added

Article 87 [credit supervision] Where an administrative penalty is imposed due to violation of the provisions of this Law, the department that imposed the penalty shall record it in the credit record and publicize it in accordance with the provisions of relevant laws and administrative regulations.