China 30 Nov 2019

Changes in the Chinese Trademark Act – makes it difficult for squatters

For a long time, China’s trademark system has been based on a “first-to-file” system, meaning that the applicant to file first, has the best right to a trademark, regardless of other circumstances. Unfortunately, this has led many international companies discovering that their trademark being already applied for by a local filer prior to their establishment in China. The most serious issues are trademark squatters that apply for trademarks of others, with the intention to sell the trademark to the rightful owner. On November 1, 2019, amendments to the Chinese Trademark Act where introduced to fight these issues.

China is one of the world’s largest countries and has one of the world’s fastest growing markets. This is also evident in the number of trademark applications filed in the country. During a six-month period, between December 16, 2018 and June 15, 2019, the Chinese trademark office, CNIPA, received 3.3 million trademark applications. Unfortunately, among these applications, there are also many bad faith applications made by trademark squatters.

Previously, trademark owners could try to fight these bad faith applications by filing oppositions or invalidity actions at the CNIPA. However, the costs, both time and money, for foreign companies could often become substantial.

On November 1, 2019, amendments to the Chinese Trademark Act were introduced. Among other things, a requirement was introduced that the person or company applying for trademark protection must show a genuine intention to use the trademark already in the application process. This is known as “intent-to-use” in many other countries. Through this requirement, the trademark office hopes that applications from trademark squatters applying in bad faith should be rejected already during the office’s review. Thus, foreign companies should not have to file oppositions or invalidity actions.

In connection with these amendments, CNIPA has also received guidelines in order to identify applications made in bad faith. These guidelines include, among other things, if the applicant has previously filed bad faith applications, the volume of applications and stated goods/services, as well as if the application refers to a name of well-known person, company or product.

Some other notable changes to the Chinese Trademark Act have also been made:

 – Trademark squatters may be fined for filing bad faith applications.
 – Trademark agents are prohibited from representing an applicant where the agent knows, or should have known, that the applicant is acting in bad faith or does not intend to use the trademark. Representing such clients may result in fines or the agent being deprived of its authorization.
 – The maximal amount for damages to claim in court for trademark infringement was increases from RMB 3 million to RMD 5 million (from approximately €400,000 to €650,000).
 – Destruction of goods that constitute trademark infringement is now a possible sanction in court proceedings.

For questions about trademarks in China or the new Chinese Trademark Act, please contact our trademark attorneys.

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