Amends to the Trademark Law could put an end to bad-faith filings

One of the most important amendments is the codification of the prohibition against bad-faith filings. Article 4 now specifically states that “applications for trademark registrations in bad faith which are not intended for use shall be refused”. This is in line with the China National IP Administration’s growing practice of proactively rejecting bad-faith applications during the examination stage.

The requirement of intention to use” was further elaborated under the Guidelines for the Trial of Trademark Right Granting and Verification Cases issued by the Beijing High People’s Court one day after the amendments were enacted. The following will be deemed a violation of Article 4:

• applying for marks that are identical with or similar to ones pertaining to different subjects with certain fame or high distinctiveness, where the situation is serious;
• applying for marks that are identical with or similar to ones pertaining to the same subject with certain fame or high distinctiveness, where the situation is serious;
• applying for marks that are identical with or similar to any other commercial signs (other than trademarks), where the situation is serious;
• applying for marks that are identical with or similar to any name of place, scenic spot or building (among others) with certain popularity, where the situation is serious; and
• applying to register a large number of marks without good reason.

While there is still uncertainty as to how Article 4 can be interpreted, this is a good indication of the government’s intention to take a firm stand against bad-faith filings.

As a side note, there is concern that defensive filings may accidentally be caught in Article 4, under the phrase “not intended to use”. However, given that the amendments are aimed at enhancing protection for right holders and there is a prerequisite of bad faith for an application to be legitimate under Article 4, this should not worry rights holders.

Bad faith as basis of opposition and invalidation

The amendments to Articles 33 and 44 will allow any person to file opposition or invalidation proceedings on grounds of bad faith (ie, Article 4). Prior to this, a rights holder had to establish their prior rights to file an opposition or invalidation proceeding against bad-faith filings, or else it was not accepted as they were not regarded as an interested party in the corresponding opposition or invalidation. Further, rights holders with no relevant registered marks or evidence of use of the corresponding marks in China lacked standing to even try to initiate an opposition or invalidation proceeding. With the amendments, rights holders will now be equipped with a further weapon and grounds to commence opposition or invalidation proceedings against bad-faith filings. This should be a welcome development to strengthen protection for rights holders who may not have prior rights in China.

However, the loosening of the requirement to launch an opposition proceeding could lead to an increased number of malicious oppositions filed against rights holders’ applications. The release of rules and guidelines on how opposition proceedings pursuant to Article 4 may be accepted after the amendments come into force should be expected.

Liability on trademark agencies to assist bad-faith filings and lawsuits

The amendments expressly prohibit trademark agencies from assisting in bad-faith filings. Article 19 provides that a “trademark agency is forbidden to represent the client where it knows or should know the trademark to be filed for registration by such client falls under the circumstances prescribed in Article 4”.

Further, trademark agencies that assist in bad-faith filings will be subject to an administrative penalty (eg, a warning and a maximum fine of Rmb100,000 (around $15,000)). The head of the agency and other personnel directly responsible may also be fined up to Rmb50,000 (around $7,500).

To deter trademark agencies from launching malicious trademark lawsuits, the paragraph “for a bad faith suit over a trademark, the people's court shall impose punishment according to the law” has been added to Article 68. Although the wording of the paragraph is vague and there is no clear definition of a ‘bad faith suit over a trademark’, the amendment is believed to be directed at trademark infringement actions commenced by trademark squatters against right holders to force settlement payment.

Enhanced protection against trademark infringement

The amendments also provide enhanced protection to right holders against trademark infringement by increasing the statutory damages and codifying the power of the court to order the destruction of the counterfeits and their production tools and materials.

In particular, Article 63 states that:

• Where the infringement involves bad faith, the maximum amount of damages imposed may be five times (as opposed to three times) the amount assessed with reference to the losses suffered by the rights holder, the profits the infringer has earned or the fees of licensing a registered trademark from the rights holder.
• Where it is difficult to determine the amount of damages using this assessment, the maximum amount of statutory damages is increased from Rmb3 million (around $450,000) to Rmb5 million (around $750,000).

Further, it also states that the court may order the destruction of the counterfeit products as well as the manufacturing materials and tools. The infringers are also prohibited from putting the counterfeit products and the manufacturing materials and tools back into commercial circulation.

Ways forward

The amendments generally codify recent practices of courts and administrative authorities in dealing with bad-faith filers and trademark infringers and are positive moves to encourage the consistent application of such practice by examiners and judges.