Legal Update: China Reforms its Trademark Law to Crack Down on InfringementMay 2019
In April 2019, China passed a new trademark reform, expected to take effect on November 1st, 2019, that offers new tools against IP infringement.
This new legislation includes provisions aimed at:
- limiting trademark squatters and bad faith filings
- cracking down on infringers with increased penalties
- offering better remedies for victims of infringement
The New Provision Against Bad Faith Filings
The new PRC Trademark Law amendment provides that a trademark application “filed in bad faith” and “not intended for use” shall be rejected. This creates a strong basis for the Chinese Trademark Office to reject marks filed without an actual intent to use in commerce, whereas previous regulations did not expressly provide any prohibition on bad faith filings, often forcing legitimate owners to pay a premium price to register their rights.
Additionally, holders of unregistered trademarks now have a cause of action for infringement where they previously did not. Under the new law, rightful owners of a mark can file an opposition to an application filed in bad faith, within three months from the date of publication.
The amendments also impose liability on applicants for bad faith filings. The Trademark Office can fine bad faith applicants between RMB 10,000 (about $1,400 US) and RMB 50,000 (about $7,250 US).
Finally, trademark agents and attorneys who assist in bad faith filings can also be liable for fines and penalties if the Trademark Office finds that the agent knew or had reason to know that the filing was made in bad faith.
Cracking Down on Infringers: Increased Penalty on Trademark Infringement
The amendments also increase penalties for trademark infringement from a maximum of 300% of the infringer’s profits, victim’s losses, or a royalty rate to a potential 500% of those base amounts. In cases where the relevant base amount is unascertainable, the amendments increase potential statutory damages from RMB 3 million (about $435,000 US) to RMB 5 million (about $725,000 US).
Offering Better Remedies to Victims of Infringement: Destruction of Counterfeit Products, Materials and Equipment
Lastly, the new law offers better remedies to victims of IP infringement. Under the previous regime, goods found to be infringing or counterfeit could re-enter the market if the infringing marks were removed from the articles. Under the new amendments, courts may, at the request of the rightful trademark owner, order the total destruction of all goods with infringing marks and the materials and equipment used in their manufacture, or forbid the re-entry of infringing or counterfeit goods into the market, even after any infringing marks have been removed from the articles. This change creates a major deterrent for manufacturers of counterfeit goods who could previously rely on profits from the continuing sale of infringing goods once the marks had been removed.
Overall, the amendments to the PRC Trademark Law offers a new toolbox for practitioners to help their clients defend their intellectual property rights in China against trademark squatters and infringers. We are following these developments closely and are looking forward to taking advantage of these new tools to defend our clients’ rights in China.