CHINA - Updated Trademark Act

On 1 November 2019, the latest amendment to the Chinese Trademark Act came into force. The very welcome new provisions strengthen brand owners' ability to fight against product piracy and trademark counterfeiting. Which new legal means against trademark infringements are now available? 

In April 2019, the Standing Committee of the National People’s Congress in China announced that it would amend the Trademark Act, which was revised extensively in 2013. The amendments to the current Chinese Trademark Act 2019 (chinTMA 2019) are designed to strengthen the rights of trademark owners. ChinTMA 2019 thus offers brand-owners new ways of acting against product and trademark pirates. These principally address the following areas: 

Trademark Squatting – Bad faith trademark applications 

Brand-owners often intend to register a trademark in China which has not yet been registered there and find that it has already been protected by a third party – a practice known as ‘trademark-squatting’. 

Until now, owners of unregistered marks could only act against trademark-squatters in China if there was bad faith and the application concerned a trademark that had already acquired a certain market recognition (Art. 9 in conjunction with Art. 32 of the chinTMA 2013). However, this legal framework does not offer satisfactory remedies against such trademark-squatting, especially for foreign brand owners (mainly from Europe and the US). 

Article 4 (1) of the current Chinese Trademark Act 2019 now stipulates that an application to register a trademark made in bad faith must be refused if the applicant has no intention to use that trademark. The Chinese Trademark Office may therefore refuse to register a trademark simply on the grounds of bad faith. 

In addition, trademark owners may oppose a provisionally approved and publicly announced trademark application made in bad faith within the meaning of Art. 4 (1) chinTMA 2019 within 3 months of its publication (Art. 33 chinTMA 2019). If, however, a trademark applied for in bad faith has already been registered, anyone may seek to invalidate the mark. The action to annul may therefore be brought by anyone and not just by the brand-owner concerned.  

Claim for destruction

In China, enforcement of trademark rights has a two-pronged structure. Trademark owners may choose to enforce their trademark rights either by administrative law or civil law means. However, there are differences between these, which the current chinTMA 2019 now adjusts to a certain extent.

Until now, the seizure and destruction of the infringing goods as well as the equipment used to manufacture them could only be ordered ex lege by an administrative order (Art. 60 (2) chinTMA 2013). Now, Art. 63 (4) chinTMA 2019 also provides that a comparable destruction claim may be asserted at a civil court. 

The aim of the provision is to ensure that goods which infringe trademark rights are not put on the market in any circumstances. Article 63 (5) chinTMA 2019 expressly states that goods that use another’s trademark in a manner that infringes upon that trademark may not be put on the market, even if the infringing mark is removed. 

Higher claim for damages 

Within the framework of enforcing trademark rights under civil law, it has so far been possible to increase the claim for damages for an intentional trademark infringement by a factor of one to three. Now the ‘punitive damages’-claim will be tightened, so that ‘punitive damages’-claim for an intentional trademark infringement may be increased up to five times. 
The basis for calculating the increased ‘punitive damages’-claim is the actual damage suffered, the advantage of the infringer or the appropriate licence fee.  

The statutory ‘lump-sum’ compensation was also increased. If the actual damage suffered, the advantage of the infringer or the appropriate licence fee cannot be determined, the People’s Courts were able to rule on an amount of up to RMB 3 million (approximately EUR 385,000). As part of the amendment to the Trademark Act, the lump-sum compensation was increased to a maximum of RMB 5 million (approximately EUR 640,000).  

What can we expect next? 

From the brand-owner’s point of view, the amendments in chinTMA 2019 are gratifying. They provide them with more effective means to deal with product and trademark pirates. However, there are still uncertainties, specifically regarding the question of what is meant by ‘intention to use’ within the meaning of Art. 4 (1) chinTMA 2019. 

In the past, supplementary implementing regulations to the Trademark Act have provided more clarity on vaguely defined terms, showing, for example, how a provision is handled in practice. To date, the Chinese legislator has not yet issued implementing regulations for chinTMA 2019. These will likely be issued shortly.