By Adam Smith
September 24 2009
The publication this summer of draft amendments to China's Trademark Law revealed that the government is heading in a direction that appears favourable to brand owners (see "Revised draft of amendments to Trademark Law issued"). The authorities started rewriting the law in 2003 and practitioners have followed the evolution of the statute carefully. Foreign rights holders have been working behind the scenes to ensure that the new law significantly improves the trademark protection regime in the world's fastest-growing market. But progress has been slow and the more jaded among those practising in China claim that little attention has been paid to the latest version of the law: although the State Administration of Industry and Commerce (SAIC) is scheduled to submit its final draft to the State Council before the end of the year, a number of commentators told WTR that it could be years before any changes are realized. Wang Zhengfa, a partner at Hylands Law Firm, feels that the draft "may not be submitted to the Congress for a vote until October 2010". He adds: "I personally think that it might be delayed even further if efforts are not made to speed up the process."
Although it may be some time before the final amendments make it onto the statute books, WTR spoke to experts in China asking for their assessment of the latest draft and its likely impact on rights holders. Some of the major changes and problematic areas are detailed below.
Relative grounds examination
An earlier draft amendment removed relative grounds examination (presumably this was seen as a way to expedite the registration process), but the current version now reinstates it. For the most part, mark owners consider the retention of relative grounds examination as vital in keeping the burden of opposing trademark applications to a minimum.
However, concern remains that the China Trademark Office (CTMO) takes up to four years to reach a decision on a trademark registration. "This is a terrible situation," says Steve Dickinson, a partner at Harris & Moure with extensive experience of Chinese practice. "It greatly impacts our trademark work in China." The draft law now outlines a streamlined examination process which should reduce the timeframe to six months. "If this can be achieved it will be a welcome change," adds Dickinson. Details on how exactly the CTMO plans to reduce the examination period remain sketchy.
Date of registration
At present, the draft states that the date of registration starts on the date on which the opposition period ends (Articles 32 and 37). This contrasts with the situation for international registrations designating China through the Madrid Protocol, under which the registration of a mark is extended retrospectively to the filing date.
Article 9 of the draft prohibits the filing of a trademark application on grounds that would violate "the principle of good faith", which will be strongly welcomed by brand owners. On the other hand, for bad-faith registrations deemed to violate Article 9, the current draft imposes a five-year limit on the filing of cancellations for bad-faith registrations (unless the mark is well known) (Article 42). Many rights holders would like to see this removed altogether.
The draft retains an earlier provision to move opposition proceedings from the CTMO to the Trademark Review and Adjudication Board (TRAB). It remains to be seen how popular this would be with rights holders as, according to WTR's research, the cost of bringing an opposition before the TRAB would be much higher.
Trade names versus trademarks
At present, Chinese trade names are registered at different levels with one or a number of local offices of the Administration of Industry and Commerce (AIC). These registrations often conflict with trademark rights at the national level and thus mark owners largely oppose the system. Article 53 in the new draft amendment provides rather vaguely for the "recognition and protection" of famous trademarks at AIC level, which will likely perpetuate the confusion.
Wang calls for "a better solution to the conflict between nationally registered trademarks and trade names not well-known to the general public ".
Mark owners will undoubtedly be happy with the draft's extension of the deadline mark owners have to meet if they wish to appeal opposition or cancellation decisions made by the CTMO. The draft currently doubles the period from 15 to 30 days, although it has no provision by which parties can mutually consent to a further extension during settlement negotiations. "We would also like to see stricter requirements imposed on opponents in trademark opposition actions," says Wang, "so as to curb oppositions filed in bad faith."
Infringement – domain names
With the process of managing IP rights online set to change drastically over the coming years due to the expansion of the generic top-level domain space (see "ICANN reveals details of next steps in gTLD expansion"), mark owners will be pleased to see that the Chinese authorities have, in the current draft, recognized the threat to mark owners by cybersquatters. Article 62 states that the mere registration of a registered mark in a domain name, and use of that name in e-commerce, will constitute trademark infringement.
Likely a contentious issue, multi-class applications are not provided for under the present draft. Many observers argue that this is not aligned with the majority of national systems or the international and Community trademark regimes.
The question of how China can rewrite its law to bring its trademark protection system in line with other jurisdictions while maintaining its market-specific idiosyncrasies is likely to dominate the debate as the law edges closer to implementation. But it is clear that change is urgently needed. "The current law no longer adapts to the reality," explains Wang. "It has caused confusion and difficulties in the work of Chinese trademark agents." However, Dickinson notes that the new draft "has not received a lot of attention", presumably because most observers know that the amendment process still has many years ahead of it. "We are following our usual policy," he says. "We are ignoring these draft laws completely until they are actually promulgated." He added: "Due to the economic crisis and unrest in the provinces, the central government seems to be devoting its time to other issues."
Adam Smith, World Trademark Review, London
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