10 Jul Law reform for trade marks in China
China has long been aware of the criticisms of its trade mark system made by overseas business and, over the last few years, has sought to address those criticisms through law reform. The latest reforms to be implemented came in April this year, apparently driven by strong accusations from the US, in the ongoing trade war over China’s failure to prevent IP theft and infringement.
‘Trade mark squatting’ in China has been a problem for many years but increasingly so as businesses have moved manufacturing operations to China or sought to exploit the enormous sales opportunities it presents.
Current practice for filing trade marks in China
China is a ‘first-to-file’ country with, historically, very weak mechanisms by which legitimate business owners could cancel bad faith trade mark registrations. As such, a legitimate business would often face a trade mark infringement action or seizure of goods by customs that threatened their ability to manufacture (even if solely for export) or sell goods in China. This situation has created an industry in which the unscrupulous can demand large sums of money for the transfer of trade mark registrations.
The new Chinese trade mark law reforms
Now, when filing trade marks in China, applicants must have an intention to use their mark, and trade mark examiners have been granted authority to refuse applications made in ‘bad faith’. Circumstances that will lead to a cancellation of an application/registration include filing an application imitating a mark that is known to be ‘free-riding’ another’s reputation, filing an application for a mark that is in use by another party for the purpose of taking advantage of that other party’s reputation, filing (within a short period of time) a large number of applications “beyond reasonable need” and filing repetitive applications with a malicious intention.
The new law states that where bad faith is found, the penalty may be a warning and fine as well as being placed onto a “blacklist” for dishonest business operators. In addition, if it is found in court proceedings for infringement that the trade mark was filed in bad faith, then the proprietor may face punishment by the court – although it is not specified what that punishment will be.
Time will tell
Whether these provisions will be sufficient to deter would-be squatters is going to depend upon whether and how well the Trade Marks Office manages to enforce them. This will require a real culture change within the Chinese Trade Marks Office.
While we wait to see what affect these new provisions will have, our advice regarding filing trade marks in China remains the same – if you have an intention to manufacture or sell goods in China you need to obtain a trade mark registration as early as possible.