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Throwing Punches and Fighting Malice – Fourth Amendment to Trademark Law
date: 2019-05-10 Yanyan Tong Read by:

On April 23, 2019, the Tenth Session of the Standing Committee of the 13th National People's Congress passed a decision to amend the Trademark Law of the People's Republic of China. The revision of the Trademark Law has intensified the crackdown on the malicious acts of dishonesty in the trademark field. A total of six relevant legal provisions were revised in this amendment.

Article 4, Paragraph 1

Before the revision: “Any natural person, legal person or other organization that needs to obtain the exclusive right to use a trademark for its goods or services during production and business operations shall apply for trademark registration with the trademark office..”

After the revision: “Any natural person, legal person or other organization that needs to obtain the exclusive right to use a trademark for its goods or services during production and business operations shall apply for trademark registration with the trademark office. Application for registration of a malicious trademark that is not intended for use should be rejected”.

The legislative intent of Article 4 of the Trademark Law is to emphasize the commercial attributes of trademarks, that is, that trademarks are used by commercial entities to distinguish different sources of goods or services in their business operations. In practice, however, due to low costs, the phenomenon of malicious squatting and hoarding of trademarks has intensified. Prior to the amendment, to combat malicious behavior, the trademark administrative agency was forced to invoke the clause only in a small number of trademark dispute cases, but in fact it was an unreliable solution. Following this amendment, the article can be used not only in trademark opposition and invalidation cases, but also can be used at the trademark application stage. In combination with the “blacklist” system established by the Trademark Office of the State Intellectual Property Office for malicious trademark squatting, the author predicts that in the future trademark registration review, once the review authority finds that the applicant is included on the “blacklist” of malicious registrations, it will directly invoke Article 4 of the Trademark Law “Application for registration of a malicious trademark that is not intended for use should be rejected.” Therefore, the revision of Article 4 of the Trademark Law plays an important role in curbing malicious trademark squatting at the source of trademark registration.

Article 19, Paragraph 3

Before the amendment: “If a trademark agency knows or should know that the trademark applied for by the client belongs to the provisions of Articles 15 and 32 of this Law, it may not accept its commission.”

After the amendment: ““If a trademark agency knows or should know that the trademark applied for by the client belongs to the provisions of Articles 4, 15 and 32 of this Law, it may not accept its commission.”

The amendment to Article 19 is a linked modification based on the modification of Article 4. Article 19 is the obligation of the trademark agency to act as an agent in good faith. For the entrustment of a maliciously registered applicant, the agency shall refuse it according to law. Prior to this amendment, the agent was required to refuse to represent the client based on the provisions of Articles 15 and 32 of the Trademark Law. This time, due to the modification of Article 4 of the Trademark Law to combat malicious acts, the content of Article 4 is added to the scope of the agent's refusal of malicious registration. It is also the law's proper meaning, as a trademark agency is intended to be a professional organization which should effectively bear the legal responsibility of preventing malicious registration.

Article 33

Before the amendment: "If a holder of prior rights or an interested party holds that the trademark announced upon preliminary review is in violation of the second or third paragraph of Article 13, Article 15, the first paragraph of Article 16, Article 30, Article 31, or Article 32 of this Law, he may, within three months from the date of the 10 preliminary review announcement, raise objections to the trademark office. Any party that is of the opinion that the aforesaid trademark is in violation of Article 10, Article 11 or Article 12 of this Law may raise objections to the trademark office within the same three-month period. If no objection is raised upon expiry of the announcement period, the trademark office shall approve the registration application, issue the certificate of trademark registration, and make an announcement thereon.

After the amendment: “If a holder of prior rights or an interested party holds that the trademark announced upon preliminary review is in violation of the second or third paragraph of Article 13, Article 15, the first paragraph of Article 16, Article 30, Article 31, or Article 32 of this Law, or considers it a violation of Article 4, he may, within three months from the date of the preliminary review announcement, raise objections to the trademark office. Any party that is of the opinion that the aforesaid trademark is in violation of Article 10, Article 11, Article 12 or Article 19 Paragraph 4 of this Law may raise objections to the trademark office within the same three-month period. If no objection is raised upon expiry of the announcement period, the trademark office shall approve the registration application, issue the certificate of trademark registration, and make an announcement thereon.”

The amendment to Article 33 is mainly based on the absolute cause of any person's objection, based on reasons listed in Articles 10, 11 and 12 of the original Trademark Law. The provisions of Article 19, paragraph 4, “Trademark Agents shall not apply for registration of other trademarks except for the application for trademark registration of their agency services”, and the provisions of Article 4 of the revised Trademark Law are also added. Therefore, the amendment to this article, in absolute terms, strengthens the agency’s over-registration as a violation of absolute grounds, and anyone can raise an objection, and at the same time, the violation of the malicious registration in Article 4 is also included in the absolute grounds for anyone to raise an objection. This amendment further combats malicious registration in the opposition procedure.

Article 44 Paragraph 1

Before amendment: “A registered trademark shall be declared invalid by the Trademark Office if it is in violation of Article 10, Article 11 or Article 12 of this Law, or its registration is obtained by fraudulent or other illegitimate means. Other entities or individuals may request the trademark review and adjudication board to declare the aforesaid registered trademark invalid.”

After amendment: “A registered trademark shall be declared invalid by the Trademark Office if it is in violation of Article 4, 10, Article 11, Article 12, or Article 19 Paragraph 4 of this Law, or its registration is obtained by fraudulent or other illegitimate means. Other entities or individuals may request the trademark review and adjudication board to declare the aforesaid registered trademark invalid.”

The amendments to the first paragraph of Article 44 accompany the amendments to Article 33; Article 33 is the legal basis for objecting to the unregistered trademarks under preliminary examination. Article 44 Paragraph 1 is the legal basis for invalidation of registered trademarks. Both articles added Article 19, Paragraph 4, and Article 4 of the revised Trademark Law to the absolute grounds. The law combating malicious behavior stipulates the consistency in the trademark opposition procedure and the trademark invalidation procedure, so that the opposition and invalidation procedures are connected for maximum efficacy against malicious behavior.

Article 63

Before amendment:

Paragraph 1

“The amount of damages for infringement on the exclusive right to use a trademark shall be determined based on the actual loss suffered by the right holder as a result of the infringement; if it is difficult to determine the actual loss, the amount of damages may be determined according to the profits gained therefrom by the infringer, if it is difficult to determine both the loss of the right holder and the profits gained by the infringing party, the amount of damages may be reasonably determined in reference to the multiples of the trademark for royalties. Where an infringer maliciously infringes upon another party's exclusive right to use a trademark and falls under serious circumstances, the amount of damages may be determined as not less than one time but not more than three times the amount that is determined according to the aforesaid methods. The amount of damages shall cover the reasonable expenses paid by the right holder for stopping the infringing act.”

Paragraph 3

“Where it is difficult to determine the actual loss suffered by the right holder as a result of the infringement, the profits gained by the infringer from the infringement or the royalties of the registered trademark concerned, the people's court shall render a judgment awarding damages in an amount not more than RMB three million based on the circumstances of the infringing acts”

After amendment:

“not less than one time but not more than three times” in Paragraph 1 is changed to “not less than one time but not more than five times

“not more than RMB three million” in Paragraph 3 is changed to “not more than RMB five million

Newly added Paragraph 4 – “When a People's Court hears a trademark dispute case, at the request of the rights holder, the goods belonging to the counterfeit registered trademark shall be ordered to be destroyed except in special circumstances; the materials and tools mainly used for the manufacture of counterfeit registered trademarks shall be ordered to be destroyed and shall not be compensated. Or, in exceptional circumstances, order the prohibition of the aforementioned materials and tools from entering the commercial channel without compensation.”

Newly added Paragraph 5 – “Products that are counterfeit registered trademarks may not enter commercial channels only after the removal of counterfeit registered trademarks.”

This amendment increased the compensation amount and the statutory compensation amount for malicious infringement of the exclusive right to use the registered trademark. The amendment also added the fourth and fifth paragraphs to clarify the way of handling, that is, destroying and prohibiting access to the circulation area of counterfeit registered trademark products, production materials, tools, etc. The infringer is unable to obtain any compensation on the infringing product and offset the amount of compensation, so as to maximize the cost to the infringer as well as to increase the attack on the counterfeit registered trademarks.

Article 68

Before Amendment: Paragraph 1.3 - “Violating the provisions of the third or fourth paragraph of Article 19 of this Law.”

After Amendment: “Violating the provisions of Article 4 and the third or fourth paragraph of Article 19 of this Law.”

Newly added Paragraph 4: “For malicious registration of trademark registration, administrative penalties such as warnings and fines shall be given according to the circumstances; if a trademark lawsuit is filed maliciously, the people's court shall impose punishment according to law.”

Article 68 mainly regulates the terms of the agency. Article 4 of the revised Trademark Law is added to the third point of the first paragraph, which embodies the increased crackdown on malicious registration. The agency's refusal of malicious registration is its legal responsibility. If it is violated, it should be subject to administrative, civil and even criminal liability. On the basis of the original record of losing the letter of trust, stopping the agency business, and bearing civil liability, it has added administrative penalties and judicial punishments such as warnings and fines to trademark agencies. The author believes that the malicious behavior in the fourth paragraph should include both malicious registered trademark applicants and trademark agencies commissioned by malicious applicants to maximize the scope of combating illegal behavior.

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