Moves to close trade mark loopholes

PUBLISHED : Monday, 23 December, 2002, 12:00am
UPDATED : Monday, 23 December, 2002, 12:00am

It is easy to forget that China?s trade mark laws have been developed very recently. It was not until the late 1970s? that China began to introduce and enforce specific intellectual property laws. The current Trade Mark Law traces its roots back to the early 1980s.

The National People?s Congress introduced sweeping changes to China?s Trade Mark Law which came into force on 1 December 2001. Although the previous law was less than 20 years old and had been kept broadly up-to-date with international developments by amendments (such as those allowing for the registration of trade marks covering services), the law had to be updated for several reasons.

The first and most pressing reason was that China?s imminent entry to the World Trade Organisation meant that the Trade Mark Laws had to be up-dated so as to comply with international standards fixed under the Trade Related Aspects of Intellectual Property Rights (TRIPs) agreement.

The second reason was that the rapid economic change in China required the development of a more sophisticated and streamlined system for registering and enforcing trade marks. In recent months, trade marks are being registered in China at a rate of approximately 5,000 per week, so it was clear that any legal obstacles to efficient administration would have to be removed.

Although the new Trade Marks Law came into force on 1 December 2001, the regulations which set out the detailed procedural reforms did not come into force until 15 September 2002. During the 9 months between the introduction of the new Trade Mark Law and the introduction of the new regulations, there had been considerable uncertainty regarding the scope and the practical application of the provisions of the new law. Certain procedures of the Chinese Trademarks Office and the Trademark Review and Adjudication Board (which decides cases taken on appeal from decisions of the Trade Marks Office) had effectively been suspended.

Broadly, the new law brings China up-to-date with the latest international developments in the trade mark field and in conjunction with the recent amendments to the Patent and Copyright Laws it will establish a sound and transparent legal structure which will assist China?s economic development by encouraging investment by foreign companies.

Coupled with recent improvements to China?s administrative trade mark enforcement procedures and amendments to the rules of evidence, the new Chinese Trade Marks Law should provide investors with a greater sense of security that their intellectual property rights can be adequately enforced both though existing administrative means and through the courts.

One of the changes which will be most welcome to foreign trade mark owners is the provision of clear and specific procedures which will provide additional protection to owners of trade marks which have attained well-known status. Helpfully, a list of principles to be taken into account when determining whether or not a trade mark is well-known has been incorporated into the law for the first time. Although China has officially been accepting formal applications for recognition of trade marks as well-known since 1996, no foreign trade marks have as yet been officially recognised as well-known. The incorporation of specific provisions concerning well-known trade marks is likely to provide weight to the arguments of foreign proprietors seeking protection of their trade marks in China.

Under the old law, protection was only given to registered trade marks (although certain protection for unregistered marks could be obtained by taking action under the Anti-Unfair Competition Law). Under the new law, protection is given for trade marks which are the subject of a pending trade mark application and which are already in use in China.

In addition, evidence of prior use of trade marks in China will formally be taken into account for the first time when determining whether or not a particular mark can be registered in China.

Under the new law, decisions of the Trade Mark Review and Adjudication Board may be appealed in the courts. China is beginning to develop a network of specialist intellectual property courts and although this is not clear from the legislation, it seems likely that responsibility for deciding such reviews will be the responsibility of these specialist courts. The introduction of judicial review is a very welcome move which will increase transparency. Procedures have also been introduced to ensure that both parties in a trade mark dispute will be given the opportunity to view the evidence which is filed by the other side.

Under the new law, it will become possible to apply for an interim injunction, as well as an order for preservation of evidence. As has already occurred following the introduction of such remedies in patent matters, it can be expected that foreign companies will be quick to pick up the opportunity to obtain prompt redress through the courts as an alternative to relying upon administrative enforcement of their trade marks through the local offices of the Administration for Industry and Commerce.

The maximum penalty for trade mark infringement has been increased to 300 per cent of the infringer?s illegal turnover. In cases where the turnover is not ascertainable, fines of up to 100, 000 yuan may be imposed.

Foreign trade mark owners with active licensing programs will be comforted to know that while it is still mandatory to record trade mark licences with the Chinese Trademarks Office, the specific penalties for failure to record licence agreements have now been eliminated.

Minor changes to the definition of ?use? of a trade mark have been introduced. These changes suggest that the Chinese Trademarks Office will no longer accept non-commercial advertising of trade marks as valid evidence of use to enable non-use cancellation actions to be defended.

The amendments embodied in the new law and regulations are generally extremely positive and they will over the course of time provide a significant boost to foreign investor confidence in China.

Lindsay Esler is a partner with Deacons Intellectual Property Department.