Regarding the complicated procedure of trademark application and registration, the lengthy time period required to determine the ownership of a trademark, and the failure to restrain frequent intentional malicious infringements. This overhaul of the existing Trademark Law was made to make it convenient for applicants to apply for and maintain their trademark rights, streamline the trademark opposition procedure, prevent malicious registration of trademarks, strengthen the protection of trademarks, and emphasize the obligations of trademark usage.

Review of the background and process of the Revision

In China, the Trademark Law was the first intellectual property-related law made by the Standing Committee of the National People’s Congress and became effective on March 1st 1983. It provides the essential protection of trademark registration rights necessary to develop the national economy. Following China’s accession to the Paris Convention for the Protection of Industrial Property and the Madrid Agreement Concerning the International Registration of Marks, to match international practices and meet the demands of the market economy, the Law was revised by the Standing Committee of the National People’s Congress for the first time on February 22nd 1993. This amendment introduced service marks, place geographical appellations that cannot be used as trademarks, the cancellation of registered trademarks by the Trademark Office ex officio (if the registration was obtained in violation of prohibitory clauses or through fraudulent means), and the classification of trademark infringements and crimes. To further enhance the protection of trademark-related proprietary rights and accommodate to the demands following China’s accession to the World Trade Organization, the second revision was made on October 27th 2001. This amendment enlarged the scope of subjects and objects of trademark rights, added the protection of prior rights and well-known marks, and introduced the judiciary in examining administrative decisions of trademark ownership.

In the past few years, with the dramatic increase of trademark registrations, the existing law became unsuitable for the practice in some aspects, such as: the complicated registration procedure, the lengthy time period required to determine trademark ownership, the dissimilation of the well-known mark system, the trademark squatting that has becomes increasingly serious, the trademark agent service that does not comply with relevant provisions, the failure to contain malicious infringements, and the inadequate compensation for infringements. Regarding these outstanding issues, it becomes particularly urgent and essential to revise the Trademark Law for the third time, for the furtherance of the intellectual property law system.

Therefore, as commissioned by the State Council, in 2003 the State Administration for Industry and Commerce (SAIC) began and prepared more than ten drafts of the Trademark Law (Revised) (for Comments), and finally formed and submitted the Trademark Law (Revised for Submission) to the State Council on November 18th, 2009. On September 1st, 2011, the Legislative Affairs Office of the State Council began to solicit comments publicly for the Trademark Law (Revision Draft for Comments) and on that basis, formed the Trademark Law Revision (Draft). This Draft was discussed and adopted by the Executive Meeting of the State Council on October 31st 2012, and read to the Standing Committee of the National People’s Congress for the first time on December 24th and then published for comments. Thereafter, it was read to the Standing Committee of the National People’s Congress for the second time on June 27th 2013.

On August 30th 2013, the Fourth Session of the Standing Committee of the 12th National People’s Congress conducted the third reading and adopted the Resolution on the Revision of the Trademark Law of the People’s Republic of China, stating that the revised Trademark Law will become effective formally on May 1st 2014. On that date, after ten years’ continuous efforts, the third revision of the Trademark Law will officially be successfully completed. The new revision contains 73 articles, an expansion from the 64 articles in the previous revision. The changes are made essentially in the following six aspects: (1). the addition of provisions on the time limitation for trademark examination; (2). the enhancement of the trademark registration challenge system; (3). the clarification of the well-known mark protection system; (4). the enhancement of the protection of trademark-related proprietary rights; (5). the regulation of trademark application and usage, to prohibit trademark squatting and protect fair competition in the market; and (6). the regulation of trademark agents.

Good faith, a basic rule for trademark registration and usage

In the new revision, Article 7 provides that “anyone who registers or uses a trademark shall comply with the doctrine of good faith.” As believed by insiders, the inclusion of this basic rule for civil activities is intended to encourage market players to act in good faith in trademarkrelated activities and curb trademark squatting, a problem that has become increasingly rampant. It is expected that this provision will be applied frequently as a catch-all clause in trademark-related ownership determination and rights protection.

According to Huang Hui, a senior partner of Beijing Wanhuida Intellectual Property Agents Co., Ltd., in addition to incorporating the doctrine in a general way, its embodiment can be found in the following provisions, “If a trademark for which one applies is identical with or similar to a mark that another person used without registration, and if the applicant knows about the existence of such other mark by virtue of any contractual or business relationship or otherwise with such other person, other than provided for in the previous paragraph, and if such other person opposes the registration of the trademark, then the trademark shall not be registered” (Article 15(2)). However, it is still unclear whether, as one of the conditions, the prior mark has to be used in China. The new revision states that “in the case of malicious registration of a well-known mark, the proprietor of the mark is not subject to the five-year limitation” (Article 45); any malicious user (Article 36) or registrant (Article 60) of a mark shall be liable for damages; any repeat infringer may be subject to heavier penalties by the industrial and commercial administration (Article 60); for any malicious infringement, the amount of damages may be one to three times the gain of the infringer from the infringement or the royalties (Article 63); trademark agents are required to comply with the good faith doctrine (Article 19), or may suffer from legal consequences for the violation (Article 68).

Optimization of the trademark application and registration procedure

The past few years have seen a continuously increasing trend in trademark application and registration, with the number of trademark applications exceeding one million for two years consecutively. The annual increase of applications and the increased awareness of trademark protection in society have led to a dramatic increase of trademark review cases. SAIC statistics show that in 2012, 1,648,000 applications were accepted, more than 16.3% in the previous year, ranking China as the country with the most trademark applications in the world for the 11th year; 1,227,000 applications were examined, more than 1.8% in the previous year; 73,000 trademark opposition cases were ruled, more than 28.7% more than in the previous year; and 52,500 trademark review cases were closed, more than 50% in the previous year. By August 2013, the total trademark registration applications reached over ten million to reach 12,539,000, the total trademark registrations were 8,335,000 and the valid registrations were 6,953,000, with these numbers continuing to be No.1 in the world.

The complicated procedure of trademark registration and the frequent occurrence of malicious registration and infringement have been long-standing issues in the trademark arena. Therefore, one of the essential purposes of the new revision has been to streamline the procedure and improve the efficiency of trademark ownership determination. These problems are also high on the agenda of trademark administrations.

To make it convenient for registration applicants, the new revision includes time limitations applicable to the examination of registration applications and the adjudication of related cases, provides that an applicant may apply for one trademark for more than one category, allows applications to be filed in electronic formats, and restores the examination opinion system. Moreover, it goes further to improve the trademark opposition system by restricting opposition requesters’ qualifications and grounds of opposition and by requiring the Trademark Office to decide whether to grant a trademark immediately after examination, to shorten the period of trademark registration.

It is particularly worth noting that without precedents in trademark legislation in any other country, the new revision creates and states expressly the specific periods and the longest periods applicable to trademark examination, registration, opposition, review and invalidation, to further improve the examination efficiency.

According to Yang Yexuan, a former deputy inspector of the SAIC Trademark Review Board, the pile up of trademark ownership cases is not because the trademark examination offices are less efficient, but essentially because trademark applications are seriously in excess of the need of current economic growth, and some of applications are unnecessary, sometimes referred to as “bubbles,” “wastes” or “zombies.” Thus, the fundamental solution to the administrative backlog is not to “add water” but to “take away the firewood to keep the water from boiling.” In other words, from the perspective of scientific development, what should be done is to reverse people’s erroneous ideas concerning political achievements and the value of trademarks, so that the overheated and reckless increase of trademark applications can return to the healthy level.

Clarification of the well-known mark protection system

Since its inception, the well-known mark protection system has been effective in curbing the passing off of famous brands. In its implementation, however, there have been a number of companies which take the branch for the root. Treating a well-known mark as an honorary title granted by the state, they take it as their end to file for and gain well-known mark recognition and engage in exaggerated promotions of such marks. They compete unfairly and disturb the normal order in the market. The dissimilation of the well-known mark system deviates from the original legislative intention and endangers the normal system.

The new revision clarifies the internal meaning of well-known marks by stating that a well-known mark is “a mark well-known to the relevant public.” It further prescribes that a well-known mark should be determined on a case by case and passive basis, and states who should determine well-known marks and how to do it. Particularly, Article 14(5) provides that “the phrase ‘wellknown mark’ shall not be used by any manufacturer or other business operator on any product or its package or container, or in any advertisement, exhibition or other commercial activities.” Article 53 is a penal clause that “If Article 14(5) herein is violated, correction shall be ordered and a fine of RMB 100,000 may be imposed by the relevant local industrial and commercial administration.”

These provisions are helpful to move the well-known mark system back on track in that it encourages companies to respect market rules and on that condition, and develop their own brands to truly increase their competitiveness in the market.

According to Yang Yexuan, the well-known mark, as a legal concept, is recognized to establish a system to enlarge the protection of trademarks, which is a usual practice internationally. However, the building and enhancement of this system was never intended to establish any special type of trademarks. The legislation was originally intended to provide fair protection to otherwise unregistered reputable marks and prevent unfair competitive acts such as squatting or infringement upon the reputation. The new revision re-defines the wellknown mark system and its return to rationality.

Regulation of the trademark agent sector
 
The past decade has seen a rapid growth of the trademark agent sector. According to statistics in the Annual Growth Report on the Trademark Strategy of China 2012, by December 31st, 2012, there was a national total of 8,719 trademark agent organizations, of which 1,662 such organizations were newly added in 2012, a new historical record high.

On November 6th 2012, SAIC and the Ministry of Justice jointly issued the Measures for the Management of Law Firms Providing Trademark Agent Services that became effective on January 1st 2013. The inclusion of law firms with trademark agent services for statistical purposes led to a considerable perceived growth in the number of trademark agent organizations.

Despite its contribution to the prosperity of the trademark cause, the rapid growth of the trademark agent market sector introduced a number of issues or problems. These included a below-average industrial structure, below-average or unqualified employees, various levels in the quality of services, chaotic pricing, malicious competition, violations of the good faith doctrine, and the use of false promises to cheat customers.

In light of the tumultuous situation, the new revision strengthens the management of the trademark agent sector. It clearly provides that the good faith doctrine is applicable to trademark agent activities; requires that trademark agent organizations shall not accept any commission to squat or infringe any mark; further requires that trademark agent organizations shall not apply for or register any trademark other than commissioned by their clients; strengthens the management of the trademark agent sector; and particularly prescribes penalties applicable to trademark agent organizations. The above are embodied in Articles 19, 20 and 68 of the new revision.

This is the first time that the Trademark Law provides for regulation of trademark agent organizations, which lays a foundation for the regulation of the entire sector and the monitoring of the operations of related organizations. It is believed that the provisions will also encourage the sector to self-regulate and develop itself in a more healthy fashion.

Strengthening the protection of proprietary trademark rights

Based on the rules of damages defined in Article 56 of the existing Trademark Law, Article 63 of the new revision added the following: 1) the amount of damages may be determined as a reasonable multiple of the royalties for the registered trademark concerned; 2) the burden of proof shall be reasonably allocated; and 3) the cap of legal damages is increased to RMB 3,000,000 yuan. The changes offer a good solution to such prominent problems, such as the insufficient amount of damages awarded in judicial practice and the insufficient protection of trademark proprietors. They also provide a powerful deterrent to potential infringers.

According to Zhang Weijun, the legal cap was set to be RMB 1,000,000 in the early drafts of the new revision. It was not until June 2013 in the Trademark (Revision Draft) submitted to the Third Session of the Standing Committee of the 12th National People’s Congress for the second reading that the amount of legal damages for infringement cases were changed from “RMB 1,000,000 yuan or below” to “between RMB 20,000 yuan and RMB 2,000,000 yuan.” In the third-reading draft, which was submitted to the Fourth Session of the Standing Committee of the 12th National People’s Congress in August, the legal cap was further raised from RMB 2,000,000 yuan to RMB 3,000,000 yuan. The changes were intended to exhibit more power in cracking down on trademark infringements.

The inclusion of punitive damages in express terms in the new revision has attracted wide attention and led to extensive discussions in related sectors. It is generally believed as a huge breakthrough and a great attempt in the advancement of intellectual property legislation of China.

Among the many changes in the new revision, this author believes, the rules on malicious infringement and punitive damages are significant because they are more powerful in fighting against infringements and protecting trademarks, and because they are also a technical breakthrough in the intellectual property legislation.

As explained by Li Yongbo, a lawyer from Unitalen Law Office, the law of China, which has its origin in the Continental Law system, has taken a “break-even” approach to determine civil damages. Punitive damages have been introduced gradually only in a few areas, thanks to the growth of the market economy. In the case of infringement damages, this “break-even” approach, in a sense, provides an encouragement to infringers. The inclusion of punitive damages provides a good deterrent to repeat or potential infringers. It also provides an incentive that encourages trademark proprietors to proactively protect their rights against infringements and to create more social wealth and value. Thus, the move is dependent upon the characteristics of intellectual property and social economic development.

In the Opinions of the Supreme People’s Court on a Few Issues in the General Situation of Intellectual Property-related Adjudicatory Services under the Current Economic Trend issued in 2009, Article 16 places a requirement to improve the compensatory, punitive and deterring power of the awarding of damages, lower the cost for right holders to defend their rights, and increases the price that infringers must pay for their infringement. In determining the amount of damages, the court shall be adept at using rules of evidence to examine and compute evidence in a comprehensive and objective manner. It should employ logical reasoning and daily life experience to judge the truthfulness, lawfulness and probative force of evidence, and should find the facts based on the preponderance of evidence. Moreover, the parties should be guided to use the infringement-related damage or gain to compute the amount of compensation, and try to avoid any oversimplified application of legal damages. If it is difficult to prove the exact amount of the damage or gain, but is obviously in excess of the legal cap, the entire picture of evidence should be taken into account and an amount higher than the legal cap may be awarded.

The inclusion of the guiding opinions of the Supreme People’s Court is a great step forward in maintaining fair competition in the market and protecting the legal rights of trademark proprietors and consumers. It stands out as a practical reference for other changes to intellectual property-related laws in the future.

(Translated by Ren Qingtao)