With significant changes in store for China’s trademark law this year, Loke-Khoon Tan, James Lau and Harrods Wong explain what brand owners should be watching for.

On January 13, 2023, the China National Intellectual Property Administration (CNIPA) released draft amendments to the PRC Trademark Law for public comment until February 27, 2023. The proposed changes are substantial in nature and will have a significant impact on how brand owners manage and protect their trademark rights in China.

Bad faith trademark squatters have plagued China's trademark registration system for years. One of the goals of this legislative exercise is to combat bad faith trademark filings by introducing new procedures. Key changes include a ban on repeated filings and a requirement to file a statement of use every five years after registration. A mechanism to compel the transfer of trademarks registered in bad faith to their rightful owners has also been suggested.

The following highlights some of the more significant proposed amendments.

Prohibition on repeated filings of identical trademarks

The draft provides that a trademark applicant may only own one registration for the same mark on identical goods or services (Article 14).

A trademark application must not be identical to a prior trademark registered or applied by the same applicant for the same goods or services, or a prior trademark that has been revoked, cancelled or declared invalid within one year before the application date. Some exceptions are provided, such as where the applicant agrees to revoke the prior registration, or if the previous trademark was not timely renewed due to reasons that are not attributable to the applicant (Article 21).

Statement of use required every five years post-registration

The draft introduces a new requirement for registrants to file statements of use (or to provide valid justification for non-use) every five years after registration (Article 61). This is aimed at cleaning up unused and idle trademarks from the register. Unused trademarks will be automatically cancelled, and CNIPA is also empowered to conduct random spot checks and can request supplemental evidence from registrants.

In line with this change, the draft also provides that an applicant can only apply for the registration of a trademark if it “uses or promises to use” the mark in connection with the claimed goods or services (Article 5).

Mandatory transfer of bad faith trademarks in certain circumstances

The draft provides for the establishment of a mandatory transfer mechanism for trademarks registered in bad faith. The mechanism allows brand owners to request the transfer of bad faith registrations back to them. In order to take advantage of this new procedure, the petitioner will need to show that the disputed registration (a) infringes the petitioner's well-known trademark, (b) was filed by the petitioner's agent or representative without authorization, or (c) constitutes a pre-emptive registration of the petitioner's mark that was in prior use and enjoys a certain degree of influence (Articles 45, 46 and 47).

Other specific measures to combat bad faith filings

The draft also increases regulation over bad faith activities by:

• Setting out specific circumstances that would constitute bad faith trademark filing (Article 22);
• Increasing fines for bad faith trademark registration to a maximum of Rmb250,000 (US$36,270) (Article 67);
• Specifying that compensation may be awarded to the genuine brand owner for losses caused by bad faith applications in civil proceedings, and that criminal liability could arise in situations where national or public interests are harmed by the bad faith trademark (Article 83); and
• Punishing improper acts such as fabricating evidence or concealing important facts with a fine of up to Rmb100,000 (US$14,500) (Article 32).

Enhanced efficiency of the opposition process

There are several changes aimed at improving trademark examination efficiency. First, the opposition period of a preliminarily approved application is shortened from three months to two months (Article 36). Second, the opposition appeal procedure at the CNIPA level is cancelled in its entirety (Article 39). If a trademark application is rejected by the CNIPA as a result of successful opposition, the opposed party can only file an appeal with the court if it is dissatisfied with the outcome.

Courts to not consider change of circumstances in appeal proceedings

The draft proposes a significant change in relation to the court's discretion to consider changes in factual circumstances in court appeals. Unless it is clearly unfair, the courts under the proposed draft would have to adjudicate appeal cases based solely on the state of affairs at the time when the CNIPA's appealed decision was made, regardless of whether the circumstances or status of the related trademarks or cases may have subsequently changed (Article 42).

Broadened protection for well-known trademarks

The draft provides for expanded protection of well-known trademarks by introducing an anti-dilution provision: the use and registration of a trademark shall be prohibited if it dilutes the distinctiveness of a well-known trademark, tarnishes the market reputation of a well-known trademark, or otherwise misuses such market reputation (Article 18).

When determining whether a trademark is well-known, the draft also introduces two new factors to be considered: (a) the status of domestic and overseas applications and registrations of the mark, and (b) the value of the mark (Article 10).

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Overall, the proposed amendments should help safeguard the integrity of the trademark registration system in China, lessen the administrative burden on the CNIPA, and protect brand owners from trademark pirates. Although the proposals are well-intentioned, they may also have unintended impacts on genuine brand owners, who will need to reassess their trademark filing and management strategies if the amendments come into effect as proposed.