For many years China has made deliberate attempts to model itself as a strong intellectual property (IP) economy. The Chinese IP system continues to evolve, and, most recently, changes coming into effect on 1 November 2019 have been made to improve the strength of the Chinese trade mark system. The changes are aimed at bad faith trade mark applications, enhanced ability to seek destruction of manufacturing tools bearing counterfeit trade marks, increased infringement penalties, and improvement of the efficiency and capacity for trade mark examinations.
- Trade marks filed with no intention to use – deemed to be filed in bad faith
China has a "first-to-file" system. This is unlike most systems in common law-based or western countries, which offer trade mark rights and protections on a "first-to-use" basis. The Chinese "first-to-file" system does not require an intention to use, or evidence of use, to be included in the trade mark application process. As Chinese laws did not expressly require that trade mark applicants must have an intention to use, or evidence of use of a mark in good faith for that application to be valid, this often led to frustrated overseas brand owners finding their mark had been gazumped on the Chinese trade mark register by what was considered to be a bad faith trade mark applicant. For some time, overseas brand owners have been able to challenge applications thought to be made in bad faith through invalidation actions. Now, trade mark applications filed with no intention to use a mark can be considered bad faith applications.
Therefore, a lack of intention to use a mark can now be raised by overseas brand owners as a bad faith issue against trade marks filed in China: 1) during the application processes; 2) in opposition; or 3) as a basis for invalidation challenge post-registration. These changes provide overseas brand owners with an increased arsenal of weapons to use against bad faith trade mark filings.
- Increased penalties for trade mark infringements and destruction of counterfeit manufacturing tools
China has also reshaped its punitive trade mark damages system. Punitive damages for wilful infringement are now capped at 5 times ( they were previously 3 times) the amount of loss suffered by the trade mark owner, or the money earned by the infringer, or a notional licence fee. Whilst China has increased the cap of statutory damage awards to RMB 5 million (from RMB 3 million), damages awarded in China may remain comparably low due to the difficulty plaintiffs face in proving their loss or the defendant's gain. It will be interesting to see whether the changes in the quantum of damages available results in higher damages being awarded in infringement cases.
Brand owners in trade mark infringement proceedings should also now be aware that, at the request of a trade mark owner, courts may order the destruction of manufacturing tools bearing counterfeit trade marks.
- Improved capacity for trade mark examination
The speed and consistency of trade mark examinations in China has long been a concern. With the number of trade mark filings in China in 2019 at around 7 million, this is understandable as this would swamp most national IP systems. To deal with this volume, China has implemented measures to enhance the capacity and management of Chinese trade mark examinations by opening five Trademark Examination Coordination Centres across the country. The Centres have been issued with unified examination criteria for trade mark applications, performance assessments and provided with artificial intelligence search systems, all with the goal of increasing capacity for trade mark examiners.
It is hoped that these measures will lead to a swifter, more efficient and standardised examination process for all Chinese trade mark applicants. However, as with the implementation of any new technologies, there is often a period of bedding down, and applicants will be watching with great interest to see how the new artificial intelligence system, in particular, operates in practice.
As the importance of the Chinese economy grows, so too does the importance of the Chinese IP system in the global context. The strength of China's IP system is relevant to any business operating in today's global market. The Chinese government has implemented a series of changes to its trade mark laws in 1993, 2001, 2013 and now 2019, all with a view to reaching its stated goal of being a strong IP economy. China has been in talks to implement these latest changes and increase overall effectiveness of its trade mark processes since 2016. Any IP system has its pros and cons, but the current changes are expected to create more options for brand owners to challenge bad faith trade mark applicants and users, while also improving the speed and efficiency of trade mark examinations in China.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.