By Lisa Wang

lwang@iprights.com

In response to startling economic growth, a flood of trademark applications by local and international brand owners, and increasing infringement problems, the Chinese government is updating the nation's Trademark Law.

China's Trademark Law was first enacted in 1982, and then amended twice ­ first in 1993 and again in 2001 when China joined the WTO. Now the law is undergoing further amendment in response to market pressure and in order to harmonize with international norms and fulfill China's international treaty obligations under TRIPS, the Madrid Agreement and Protocol and the Singapore Treaty on the Law of Trademarks. The most recent draft amendment of the Trademark Law (the Third Draft Amendment) was released for public comment in August 2007. After the public comment period is completed, this draft will be further reviewed and revised, before final approval by the National People's Congress. While this draft is still a work in progress, it is nearing its final form and includes notable changes relevant to brand owners. Below are a few key changes proposed in the Third Draft Amendment (Draft).

Scope of Trademark Protection

Trademark Protection Extends to Single Colors and Non-visual Marks

The current Chinese Trademark Law defines a trademark as "Any visual sign capable of distinguishing the goods or service of one natural person, legal person or any other organization from those of others" (Trademark Law, Article 8). The Draft removes the "visual" requirement, expanding the definition of trademark to include any signs capable of distinguishing the goods or services of one entity from that of another. This effectively allows non-traditional marks such as single colors and non-visual marks such as sounds to be registered as trademarks in China, thus opening up a myriad of branding possibilities. However, there are still many uncertainties regarding how such non-traditional applications will be examined and evaluated in practice by the Chinese Trademark Office.

Registration Process

Time Limits for Registrations

The Draft establishes a 12-month time limit for the Trademark Office to examine a trade mark application. This is a welcome response to the current three-year wait to register a trademark.

Removal of Examination on Relative Grounds

Under current law, China's Trademark Office reviews new trademark applications on both absolute and relative grounds. Thus, China's trademark examiners will reject trademark applications which bear a similarity to existing trademark registrations. This process, along with the increasing numbers of trade mark applications both foreign and domestic, has created an unsustainable backlog at the China Trademark Office. The Third Draft Amendment removes the relative examination requirement in order to make the registration process more efficient. Under the Draft, the Trademark Office would examine new applications based only on the legal requirements of registrability and then publish the mark in the trademark gazette for interested parties to oppose. The opposition period is extended to four months from the original three months. If this new provision is passed, the change will place the burden on brand owners to police their marks to prevent other parties from registering same or similar marks. While many large brand owners have the resources to continuously watch for conflicting marks, small companies will face additional costs if they want to ensure that their registered marks are not threatened by similar and potentially conflicting applications.

Fines for Bad Faith Oppositions

In an attempt to decrease malicious or groundless trademark oppositions, the Draft requires a bad faith opponent to compensate the opposed party for damages: "Where it is ruled that the opposition is not justified, the registration of the opposed mark shall be approved. Where the opposing party raises the opposition out of ill intentions, it shall compensate the opposed party for the losses caused to the delay in the registration of the opposed mark." (Draft, Article 47)

Deterring Trademark Infringement

Increased Fines for Trademark Infringement

In order to deter trademark infringement, the Draft increases the maximum fines available to punish infringers. Under the current legislation, the Administration for Industry and Commerce (AIC) may fine one to three times the "illegal business amount" of an infringing product. If it is not possible to determine the amount, the maximum statutory amount was Rmb100,000. The Draft increases the fines to one to five times the illegal business amount, or a maximum fine of RMB 1,000,000 if the illegal business amount is indeterminable.

Summary

The Third Draft Revision of China's Trademark Law attempts to address many problems faced by brand owners including general inefficiencies in the trademark registration and adjudication system, bad faith trademark registrations, and rampant trademark infringement. While the resulting law is both more nuanced and robust, it remains to be seen how well the proposed changes will be implemented and interpreted in practice.