In March 2018 the China Trademark Office (CTMO) announced its intention to revise the Trademark Law and invited the public to make comments and suggestions. The period for such contribution lasted until the end of June 2018.
Much of the public comments have been regarding the fact that:
- the number of trademark applications is abnormally high – too many trademarks are filed, mostly for the wrong reasons;
- over the years, the Supreme People's Court (SPC) has issued interpretations and judgments that have directly affected the practice of trademark law. Some of these have been positive and should be introduced in the future revision, but others have had a negative impact and should be rectified; and
- a few practical issues could be clarified.
In 2019, for reasons perhaps relating to the trade negotiation between the United States and China, the Trademark Law was rapidly revised without public consultation. This revision, which is relatively limited, has two main objectives:
- to address the problem caused by trademark applications made in bad faith and without the intention to use (ie, refusing their registration and punishing abuses); and
- to increase the powers of the courts in judicial enforcement (eg, statutory damages, punitive damages and destruction of counterfeit goods).
This article analyses what remains to be done and what a fifth revision of the Trademark Law should cover.
Proliferation of unused trademarks
The revocation of unused trademarks should be facilitated. This would help to make the filing of trademarks, for the mere sake of their accumulation, less attractive. For example, if the China National IP Administration (CNIPA) allowed the evidence of use submitted by a trademark registrant to be cross-examined by the party that filed the non-use revocation application, such a simple procedural change could have a significant impact on the duration of the whole procedure. Further, where a trademark application is refused ex officio by CNIPA and the applicant files an application for review, CNIPA could invite the owner of the prior cited trademark – if they have been registered for more than three years – and request them to submit evidence of use. If the cited mark is not used, then the refused trademark should be accepted. Moreover, the time limit to submit the use evidence, which can be extended on request, should be strictly respected. If a trademark registrant does not submit any evidence of use in due time the revocation should be final without the possibility of review or appeal.
Positive trend in SPC interpretations and case law
Some of the SPC's interpretations and judgments have had a beneficial impact on the protection of trademarks.
For example, according to Article 13.2 of the law, the owner of a well-known unregistered trademark can obtain the refusal, invalidation or cessation of use of an identical or similar sign. However, nothing was said relating to obtaining damages. This has now been rectified by case law and there is no longer an obstacle for obtaining infringement damages for a well-known trademark under Article 13.
Likewise, the courts' decisions have increasingly accepted the possibility of obtaining protection based on well-known status, even if the conflicting trademark is used on the same or similar goods. Thus, the likelihood of confusion is not necessary – a risk of association is sufficient. These positive changes could easily be inserted into the future revised law.
Negative effects of SPC interpretations
However, the future revision of the law will also be an opportunity to revise some concepts that were established in 1982 when China's trademark legislation first entered into force but have never been put to question.
Two judicial interpretations of the SPC in 2008 and 2009 provide that where the trademark registrant needs to sue a later registered trademark it must first invalidate the defendant's registered trademark unless it can prove:
- that the distinctive feature of the defendant's trademark has been modified or such trademark is used on different goods; or
- that its own trademark was already well known on the date that the defendant filed its trademark.
As a result, while an invalidation action is pending before CNIPA, the alleged infringer can continue to use the conflicting trademark.
The background of these SPC interpretations can be found in the wording of the Trademark Law (Articles 3 and 56), namely in the words "exclusive right to use a trademark". This is where the fundamental error lies. It helps to compare this wording with the equivalent in the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS Agreement) (Article 16.1):
The owner of a registered trademark shall have the exclusive right to prevent all third parties not having the owner's consent from using in the course of trade identical or similar signs for goods or services which are identical or similar to those in respect of which the trademark is registered where such use would result in a likelihood of confusion.
'Right to use' implies that the registration confers a positive right, whereas 'right to prevent' constitutes a negative right. Thus, there is no such thing as a right to use a trademark and a business operator need not obtain an authorisation to use a distinctive sign. The registration grants only the right to prevent others from using the same or a similar sign.
This error, which dates back to the first version of the law, is the reason why the SPC issued the abovementioned restrictions. These restrictions contradict the last sentence of Article 16.1 of the TRIPS Agreement: "The rights described above shall not prejudice any existing prior right, nor shall they affect the possibility of Members making rights available on the basis of use." Further, they contradict the rest of the SPC's 2008 interpretation, which provides that prior copyright, design or enterprise names are not subject to the restriction imposed on prior trademarks, which makes such restriction all the more unjustified. Why should a copyright, design or an enterprise name be better protected than a prior registered trademark?
Therefore, it seems that the 2008 and 2009 SPC restrictions were created as a compromise with the CTMO. Indeed, the CTMO's argument was that since trademark applications are subject to an ex officio examination of their availability, if the mark is approved, this implies the absence of prior trademarks, and hence the granting of a right to use.
This argument overlooks an important procedural detail. First, the trademark approved by the CTMO is subject to opposition by third parties, which means that the approval is not equivalent to an authorisation. Further, even if the opposed trademark becomes automatically registered after the opposition fails (as provided in the 2013 revision of the law), the opponent can still file an application for invalidation. Moreover, before the 2013 revision, a negative CTMO decision on the opposition was subject to review before the Trademark Review and Adjudication Board (and eventually the courts). Thus, the target trademark was still not registered and it was possible for the prior trademark owner to take legal action aiming to prevent its use. However, since the 2013 revision, when the opposition fails the opposed trademark becomes registered and the prior rights holder seeking to sue this later registered trademark is faced with the obstacles raised by the SPC in its 2008 and 2009 interpretations.
Thus, it is necessary to prescribe in the trademark law that, in any case, the "exclusive right to use" (if such wording is maintained) is conferred by the registration without prejudice to any prior right, including a registered trademark. Alternatively, the law should modify its wording and replace the terms 'right to use' with 'right to prevent others'.
Article 7 as an independent ground for action
A further revision of the Trademark law concerns whether Article 7 – which provides for the principle of good faith in filing and using trademarks – may constitute an independent ground of action.
Today, Article 7 is considered only as a general principle and may not serve as an independent legal ground for legal action.
This self-imposed restriction has no justification. In fact, nothing in the law prevents CNIPA or the courts from accepting a case based on Article 7. Further, Article 30 provides not only for the refusal of trademarks that are identical or similar to prior registered or applied trademarks, but also, in general terms, for the refusal of trademarks that do not conform to the law. Therefore, a trademark that is filed or used in bad faith should be considered as not conforming to the law. It should be possible to oppose a trademark application or apply for the invalidation of a registered trademark on the sole basis that it has been filed, or is being used, in bad faith.
In particular, this logic should be implemented in Article 45, which concerns the invalidation of registered trademarks. First, if bad faith existed at the time of filing, the elimination of the five-year limit for filing an application for invalidation should apply in favour of all parties concerned and not only in favour of the owner of a well-known trademark. Second, if at any time the registered trademark becomes used in an altered form which infringes a prior registered trademark, this should be considered as a specific violation of Article 7 and, therefore, as a ground of invalidation.
Indeed, making alterations to a registered trademark in actual use, with the intention and effect of infringing a prior registered trademark, while claiming the existence of a right to use, is the most malicious and sophisticated form of bad faith.
No legal right should be allowed to survive bad faith. As the old Romans used to say: "fraus omnia corrumpit" – fraud corrupts everything.
This article was first published by the International Law Office, a premium online legal update service for major companies and law firms worldwide. Register for a free subscription.
