China’s continued trademark reforms

China has made significant trademark reforms in recent years. Besides a notable acceleration in trademark registration processing, two recent developments concerning trademark squatting and the guiding cases system are particularly relevant for trademark owners in China.

Database for trademark squatters
Trademark squatting has long been a serious problem in China and the China Trademark Office (CTMO) has continued its effort to restrain pre-emptive bad faith filings. According to the Opinions on Deepening the Reform of Trademark Registration Facilitation and Effectively Raising Efficiency of Trademark Registration issued by the State Administration of Industry and Commerce on November 14 2017, the CTMO will explore whether trademark owners must provide evidence of use after a certain period following registration or at the time of renewal in order to remove trademarks that are not put into actual use from the register. Further, during the China Trademark Festival in September 2017, the CTMO Deputy Director General Cui Shoudong claimed that one of the potential measures for tackling trademark squatting in China may be the development of a database for suspects of bad faith trademark applications.

With China’s adoption of the first-to-file system for obtaining trademark rights and no common law protecting unregistered trademarks (other than those which have well-known trademark status), brand owners have found it difficult to block bad faith applications, especially when they own no prior trademark registration in China or where such registration is not in the relevant class.

While the evidence of use requirement may be a double-edged sword to genuine brand owners in protecting their marks in China (ie, it would create an additional evidential burden on brand owners to maintain their trademark registrations in China), the intention to establish a database of trademark squatters shows the CTMO’s determination to:

• alleviate brand owners’ burden of proving bad faith; and
• curb China’s escalating problem of trademark squatting.

Discussions are at a preliminary stage and a number of uncertainties surrounding the database remain, including:

• the criteria for entering trademark squatters into the database; and
• whether it will be open for public inspection.

If established, the database would likely deter trademark squatting activities in China. However, as trademark squatters tend to be individuals or shell companies, even if they are recorded in the database, they may easily engage in the same activities under the guise of a new entity. Therefore, the database’s effectiveness in curbing trademark squatting remains uncertain.

New IP case system
In 2010 the Supreme People's Court launched the guiding cases system, which publishes representative cases from all court levels. Courts could refer to these guiding cases while interpreting, clarifying or refining written laws. However, the system did not function effectively – in practice, these cases were rarely cited or considered. In order to make the system a more comprehensive and practical resource, the Supreme People's Court implemented the IP case system at the Beijing IP Court in 2015.

The IP case system adopted the principle that subsequent cases should be adjudicated in accordance with effective judgments and rulings of prior similar cases. While judgments of prior similar cases by higher-level courts should guide lower-level courts, rulings from other courts at the same level should be referred to by judges adjudicating pending cases.

According to Article 7 of the Beijing IP Court's Case Guidance Work Implementation Measures, the hierarchy of precedents from most to least persuasive is as follows:

• guiding cases published by the Supreme People's Court;
• cases included in the Supreme People's Court Gazette;
• cases issued by the Supreme People's Court;
• high court cases;
• intermediate court cases;
• district court cases; and
• cases from foreign jurisdictions.

While the IP case system can be seen as an evolution of the guiding cases system, some  commentators have likened it to an initiative of the case law system. However, the former should be distinguished from the latter, which originated from the common law tradition. In China, a civil law country where court decisions cannot be an independent source of law, the IP precedents play only a guiding role in filling statutory gaps and refining given statutory rules as opposed to creating new ones; they may be cited as a reason, but cannot be a legal basis for a ruling.

While it remains unclear whether the IP case system can be used at a national level by the IP law community, case citation rates at the Beijing IP Court have increased since its inception.  The system looks set to remain in place and could achieve a more uniform application of law in China.