China updates its trade mark law: how will this impact Australian businesses?

We have previously posted on the importance of protecting IP rights in China. In short, if you are doing business in China, then it is essential to protect your IP rights in China.

China’s IP rights regimes are relatively young. However, they are increasingly being strengthened and are, to some degree, aligning with well established regimes in other jurisdictions, such Europe, the US and Australia. To this point, recent amendments to China’s trade mark law were approved on 30 August 2013, and will enter into force on 1 May 2014.

Clear positives (and possible negatives) can be gleaned from the amendments. Significant points of interest are summarised as follows:

Filing, Licensing and Renewals

  • Sound trade marks will now be protectable in China as they are in Australia. In addition to traditional marks, such as words and logos, China currently permits applications to register colours and 3D shapes as trade marks.
  • Multi-class applications will be allowed – this should significantly reduce filing and prosecution costs for Australian businesses.

Coincidently, the Chinese Trade Marks Office has taken the unprecedented step of reducing the official fees for filing trade mark applications from RMB1,000 to RMB800 effective from 1 October 2013. A new fee structure is expected once multi-class applications become available.

  • The new law formalises the requirement to record trade mark licenses with the trade marks office. A license, not recorded, cannot be used by the licensee to enforce trade mark rights against a third party.
  • Interestingly, where a registered trade mark is assigned, the assignor is now required assign all identical or similar registered trade marks in respect of the same or similar goods. Supposedly, this requirement has been introduced to ‘maintain market order’, however it could represent an unnecessary burden for some businesses.
  • It is currently possible to renew a Chinese trade mark registration within 6 months of expiration date. Under the new law, the window to renew will be extended to 12 months. For Australian businesses having large portfolios of registered trade marks, including Chinese marks, this should bring flexibility and cost savings to the renewal process.

Prosecution, Opposition and Invalidation

  • There will be a time limits (of between 9 to 18 months) placed on the Trade Marks Office for examining trade mark applications, and on Trade Marks Review and Adjudication Board (TRAB) for reviewing appeals to the refusal of trade mark applications and considering oppositions.

Given that there has traditionally been little scope to address the substantive objections raised during examination (other than, for example, to delete goods/services or to file an appeal against the refusal of an application), a shorter prosecution time will be welcomed by Australian business.

Again, as the appeal review and opposition processes provide small windows of opportunity in which to submit supporting arguments and evidence, these time limitations will also be welcomed.

  • Currently any one can oppose an application for a Chinese trade application. Under the new law, where an opposition is raised based on relative grounds (such as the existence of a prior registration), only pre-existing rights holders and other interested parties can be party to the opposition. This has been introduced to stop the abuse of the opposition system.

Notably, where an opposition is rejected, it will no longer be possible to request a further judicial review. The only option to proceed will be to request invalidation (see below).

  • A trade mark ‘invalidation’ procedure replaces the current ‘cancellation’ procedure. The Trade Marks Office or any party can raise an invalidation action under absolute grounds (such as a lack of distinctiveness, or that a registration was obtained fraudulent or unfair means). Only pre-existing rights holders and other interested parties can file a request for invalidation under relative grounds within five years from the date of registration. However, where a well-known mark is registered in bad faith, the genuine owner of the mark shall not be restricted by this five year limitation.

An appeal to an invalidation action can be filed by the trade mark registrant with the TRAB. The TRAB will be subject to reduced time limitations (between 9 to 12 months) in considering the appeal, which should beneficial to Australian businesses.

Enforcement

  • The new law introduces defences to infringement. Similarly to a provision under the Australian Trade Marks Act 1995, a person will not infringe a registered trade mark if prior use of the mark before the date of filing can be established. This may provide some relief where an Australian business has used an unregistered mark in China, and where the mark is subsequently registered by a third party in bad faith. Conversely, where an unregistered mark has been misappropriated and used by a third party in the Chinese market, and where the trade mark owner, an Australian business, is late to register the mark, it may be difficult to enforce rights granted by the registration against the third party.
  • Where an allegation of infringement is made, the trade mark owner can now be made to provide evidence of use of the mark within the previous three year period. If evidence of use cannot be provided, the alleged infringer is not required to pay compensation. It is unclear as to the level of use required to support an infringement action. Under Australian law, a single, bona fide use of a trade mark is sufficient to rebut an allegation of non-use.
  • A provision for ‘contributory infringement’ has been added to the new law, where assisting or providing conditions to facilitate infringement are considered offences.
  • The Chinese Administration for Industry and Commerce (an administrative body) will be able to issue fines against infringing parties.
  • The limit for statutory compensation will increase 6 fold from RMB500,000 to RMB3,000,000. The new law also introduces the concept of punitive damages, which can be up to three times actual damages in serious cases of infringement.
  • While Chinese law does not provide for ‘discovery’, when deciding on compensation, a court will now be able to request that an alleged infringer provide accounting books or other materials. If the alleged infringer fails to provide books/materials, or provides counterfeit books/materials, the court can judge the compensation based on the claims and evidence provided by the plaintiff.

The associated regulations, which will provide finer detail on how the laws will be applied in practice, have yet to be released. However, the update to the trade mark law is in line with China’s current focus on strengthening its IP rights regimes. Provided that Australian businesses act quickly to protect their IP rights in China, these amendments will undoubtedly facilitate and strengthen robust relationships with Chinese consumers.

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