The China National Intellectual Property Administration (CNIPA) has published a draft revision of the country’s Trademark Law and called for comments from the public. In our first post on the potential implications of the revised law for international brands, we looked at proposed changes to the definition of what constitutes a trademark and the absolute grounds for China Trademark Office refusal of a trademark application. Today we turn our attention to the draft law’s provisions regarding bad faith trademark applications.
Bad faith trademark applications have long been a grave problem for international brands. I know of a company that had to pay $250,000 to secure its own trademark from someone who had registered the same in bad faith—and surely there are others that have paid even more. CNIPA has acknowledged that China’s current Trademark Law has proven ineffective in dealing with the problem. It therefore comes as no surprise that combatting bad faith trademark applications more effectively is one of the priorities of the draft revision, as evidenced by its numerous provisions on the subject.
Article 22 of the draft revision identifies a number of circumstances in which an application would be in bad faith, two of which international brands encounter fairly often. One involves applying for a large number of trademark registrations without an intent to use them. This essentially refers to trademark squatting, where someone registers trademarks for the sole purpose of trying to score a payday if someone else (often a foreign brand that has been using the trademark elsewhere) wants to secure the trademark.
The second circumstance that international brands regularly face is an application that infringes on their prior existing rights or interests, or where someone seeks to register a trademark that has already been used by the international brand and has certain influence (一定影响). Applications of this kind are prohibited by the draft revision’s Article 23. Sometimes, these bad faith trademark applications are filed by squatters, who have no intention of using the trademark. In other cases, however, the bad faith applicant may be seeking to use the trademark, or prevent the legitimate owner from using it.
One example of a prior existing right (现有的在先权利) that might be infringed by a bad faith trademark application is a copyright held by the brand over its logo. Due to China’s treaty obligations, an international brand might enjoy copyright protection over the logo in China, even if it has not registered that copyright in China (or indeed anywhere else). This is in contrast to trademark rights, which only arise in China through registration in China, except in very limited circumstances.
Interestingly, the draft revision’s Article 23 would add the term “interests” (权益) to the universe of what can be infringed by a bad faith trademark applications. This addition may reflect a move to broaden the scope of the circumstances under which a party that does not have a prior trademark or intellectual property registration in China (or at least an unregistered trademark that it has used in China) can combat a trademark application that potentially harms it. This is speculation, but interests could potentially include situations where a brand’s ability to disrupt its exports out of China is threatened by a bad faith trademark registrant’s ability to record the bad faith trademark with China Customs.
Under the draft revision, the penalties for bad-faith registration will become more severe and the remedies for bad-faith registration will become more dynamic. In some cases, fines of up to RMB 250,000 (~$36,855) could be imposed on a bad faith trademark applicant. The new Article 48 also clarifies that someone who registers a trademark in bad faith will be liable for infringement of a trademark it registers in bad faith, even for uses of the trademark that take place when the party in question is technically the owner of the brand. Affected parties will also be able to request that a trademark registered in bad faith be transferred to them.
With bad faith applications at the top of the list of problems faced by international (and Chinese) brands seeking trademark protection in China, the draft revision’s proposals are good news for just about everyone other than bad actors themselves. The interests of fairness will no doubt be served by moving away from a system that formalistically prioritizes earlier trademark applications, without regard for real-world circumstances, such as actual use of the trademark in China and the increasingly transnational way in which consumers are exposed to trademarks. This all said, the draft revision is just that, a draft. It will still take some time for the proposals to come into effect, and even then, how exactly the new provision are enforced remains to be seen. It is still critical for brands to be extremely diligent when it comes to registering their trademarks in China.