In addition, the Amendment also prohibits manufacturers and dealers using the wordings “well-known trademark” on their products, packages or containers of the products; or in advertising, exhibition or other commercial activities. This is to prevent enterprises from taking “well-known” as an honorable title or as a short-cut to market their products as more popular and competitive, or even as a means to confuse customers.
(d) AIC actions In the current trademark law, the AIC only has right to impose fine no more than 3 times of the illegal operation amount; in the case that the amount cannot be determined, the fine cannot be over 100,000 yuan. Due to the above penalties cannot obstruct infringing activities effectively, Trademark right holders sometime do not like to apply for AIC actions.
The new trademark law grants AIC a right to issue more severe punishment against infringer. Article 60 of the new trademark law stipulates that AIC has the right to impose fine no more than 5 times of illegal operation amount which the amount is over 50,000 yuan; in the case of the amount which is less than 50,000 yuan or cannot be determined; the cap of the fine is 250,000 yuan. More significantly, the infringer, who conducted infringing activities and was punished by relevant AIC twice within 5 years, will be imposed heavier punishment.
3. Infringement compensation (a) Punitive damages Because the current law does not provide the punitive damage system, the judicial system does not have a legal basis to suitably punish certain bad faith infringers. In response of this situation, Article 63 of the Amendment imposes the punitive damage against willful infringement and stipulates that the amount of punitive damage could triple the amount of the potential registered trademark-licensing fee, right holders’ actual loss or infringer’s benefit.
(b) Increasing of the statutory damages The maximum statutory compensation is 500,000 yuan according to the current law. For the purposes of improving the protection of trademark rights and further cracking down on trademark infringement, the maximum statutory compensation is increased to 3 million yuan according to Article 63 (3) of the Amendment.
(c) Reversion of the burden of proof The Chinese civil law system does not have a discovery process. Therefore, it can be difficult for plaintiffs to obtain proofs of the extent or scope of the defendant’s sales, the amount of its profit and the plaintiff’s loss.
This issue is addressed to a certain extent in the Amendment by allowing for the courts to order infringers to produce books of account and records, in situations that the plaintiffs are unable to obtain sufficient evidence by its own efforts under Article 63 (2) of the Amendment.
IV. Tips for foreign enterprises
1. Trademark Registration
Significantly, Article 15 of the Amendment grants protection for unregistered trademark against bad faith registration. However, China is still a civil law country and does not have case law to support prevail right of unregistered trademark as common law country does. That is to say, trademark registration is still the very first step that foreign entities shall do to protect their trademark right in China.
According to the new trademark law, the whole process of a smooth trademark registration application shall be completed within 9 months from receipt of the application documents. Article 22 of new trademark law also allows multipleclass application. Article 21 introduces the e-filing system. All these improvements will definitely save both time-consuming and pecuniary costs for applicants.
2. Evidence collection Collection of evidence is crucial in handling trademark dispute or infringement cases.
In trademark registration, as new trademark law demonstrates that sound can be recognized as a registerable trademark element independently and dependently, the entities that have the need or intention to register sound trademark shall initiate the preparation works at present and apply for registration promptly after the implement of the new trademark law on May 1st 2014. The potential applicant shall apply the sound to promotion in China frequently before the implementation of new trademark law and collect this use as proof, in case of opposition occurred in course of application.
In AIC actions, it is advice to take this protection method seriously in protection of trademark right as the new trademark law imposes heavier penalty against infringer. In course of filing an AIC action application, onsite investigation should be taken into account seriously. It is crucial for right holder to collect relevant evidence before file a complaint in conducting an AIC action application. If the amount of infringing products found in the warehouse exceeds 50,000 yuan, the infringer could be imposed very heavy penalty. Through on-site investigation, we also may find repeat infringers who may be punished even more heavily.
In trademark proceedings, the warning letter shall take very important position in determination of “bad-faith.” In addition, due to the new trademark law introduces the “non-use for three consecutive years” as a defense against compensation claim, it is crucial to collect and retain proofs of use in Chinese market.
3. Preparation of contractual documents
“Good faith” principle has been illustrated in Article 3 of the new trademark law. In an action against bad-faith registration, a well-prepared contract or agreement with Chinese subcontractor would be a nuclear weapon. In our point of view, a well-prepared contract shall, at least, demonstrate the acknowledge of right holder’s unregistered trademark by the counter-party expressly. By doing so, any potential trademark squatting conducted by the contractor shall be deemed as “bad faith,” and therefore will be rejected according to Article 15 of the new trademark law.
V. Conclusion
Through the amendment to the Trademark Act, the Chinese legislators hope to speed up the registration process at the Trademark Office and strengthen the protection of registered, unregistered and well-known trademarks.
It also must be pointed out that in this Amendment, several substantial and procedural provisions have been significantly changed. That is why the Amendment will be enacted on May 1st 2014. During the transitional period, Chinese relevant administrative authorities, court and legal practitioners shall learn the Amendment in-depth and make corresponding adjustments.
