Many companies are confronted with Chinese trademark squatting every year. Trademark squatting, in which someone else registers your trademark, suddenly prevents you from using your brand in China. In case you do use your brand, you can be charged with infringement actions, and can be asked to pay compensation to the trademark squatter who lawfully holds your trademark.
Since November 1, 2019, China has a new Trademark Law that seeks to combat this trademark squatting. This law was introduced to prevent trademark squatting with bad intentions. This article discusses Chinese trademark law and the benefits that companies can derive from the change in the law.
What is a trademark?
A trademark can be the name of a company (for example Philips), a product (iPhone), a Chinese name (宝马 (translated as Baoma, precious horse) for BMW), a logo, (golden arches from McDonald's), a sound (roar from MGM lion), a 3D shape of a product (Ferrero Rocher), a color combination (Ebay), a number combination (1688) or a combination of any of the above. Every company has to do with trademarks, because every company has a name.
If you register a trademark, you will receive a monopoly on use for the trademark for the goods or services for which you register it. In other words, nobody can legally use that brand except you. This is very interesting, because it means that you can build up goodwill and possibly issue licenses with regard to the trademark.
Why is registration important for China?
A trademark only gives protection in the country you register it for. In China, the 'first-to-file' principle applies.
In other words: the person who is the first to register a trademark in China will acquire the exclusive right to it.
Unfortunately, this has led to a similar problem that we saw in the world around the millennium change regarding domain names. People quickly registered domain names of companies, and then demanded large sums of money from these companies to buy back the domain names.
In China, this practice still happens, but then with regard to trademarks, i.e. trademark squatting. The chance that someone in China has already registered the name of your product or company as a trademark is therefore high. For that reason, it is important to register brand names for China as quickly as possible as a trademark.
What was the problem with the old trademark law?
The old trademark law did have provisions to recover a trademark that had already been registered by someone else with bad intentions, but this was only the case if there was a relationship with that party, there was an older right, it was a world-famous trademark, or in case there were many different registrations made by someone with regard to already existing brands.
Will it be easier to get a trademark back under the new trademark law?
The new trademark law now states that persons and companies are not allowed to register trademarks in bad faith when they do not intend to actually use the trademark.
The trademark office in China must now check this per trademark application. Even if the trademark office discovers any bad faith, there is the opportunity for everyone to file an opposition against the trademark to be registered after it has been published. Everyone has three months to do this.
Even after this time, an invalidation can still be filed by an interested party concerned, on the basis of bad faith and the intention to not actually use the mark. In short, it will become easier for companies to get their trademark back in China if it has already been registered by someone else.
Will the compensation for trademark infringement also increase due to the new trademark law?
Under the new law, up to five times the losses suffered by the company or the profit enjoyed by the infringer can now be claimed as compensation. Even if it is difficult or impossible for a company to prove this, the compensation that the court itself can apply is increased to CNY 5 million.
Are there any other interesting changes?
Under the old law, products that infringe trademark law could be destroyed. Under the new law, the tools used to make the products, as well as the raw materials themselves, can now be destroyed. This reduces the chance that an infringer will infringe again. It is advisable to demand this in procedures.
Conclusion
The new Trademark Law will indeed make it easier for companies to get back trademarks registered in bad faith. With higher compensation and the ability to destroy tools and raw materials, it will also become less attractive for infringers to continue their business.
In combination with the social credit system (which punishes IP infringement), it seems that China is intensifying its actions against intellectual property infringement.
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.
