Trademark Law amendments: impact on enforcement of IP rights

The National People’s Congress released proposed amendments to the Trademark Law for public comment in January 2013. China’s Congress clearly intends to strengthen the enforcement of IP rights by giving more powers to the administrative authorities and the courts.

The draft features around 40 amended provisions, which, if approved, will greatly change enforcement work in China:

• Punitive damages - the proposed changes introduce punitive damages into the Chinese trademark system. This can be good news for international brand owners who have been seeking higher amounts of damages against infringers. However, increased damages may make the situation very complicated for brand owners, as the very same provision may be availed of by trademark squatters who may have actually used the contested mark in the marketplace. This means that the squatters can threaten to sue and seek higher damages from legitimate brand owners. 
  
  What is somewhat comforting is that the National People’s Congress has introduced a new defence: a defendant may request that the trademark owner prove the actual use of the trademark. Failure to prove such use may result in no damages being awarded. This provision could arguably help to alleviate some of the pain in cases where a legitimate brand owner is sued by a trademark squatter. As most squatters do not actually use the marks, this new provision, if passed, will prevent them from obtaining monetary damages from legitimate trademark owners.



• Higher fines are to be imposed by the administrative authorities - under the proposed changes, local authorities may impose a fine of up to five times the amount of 'illegal business revenue' obtained by the infringer. This has somewhat exceeded the expectations of the legal community and it is hoped that this will deter infringers to some extent. Notably, the same increase in fines has been applied in the copyright law amendments and related regulations. China has recently announced an increase in fines under a number of its copyright regulations, including those protecting software and online distribution rights.  



• Evidentiary burden - what differentiates the latest version of the draft from prior proposals is the evidentiary burden used for the calculation of damages. The proposed law allows the courts to rely on the plaintiff’s evidence in calculating damages where the plaintiff has exhausted the different ways of presenting evidence and the defendant has failed to comply with the court's order to produce evidence, such as financial account records. Such changes may benefit brand owners seeking civil damages.
  
  Again, similar provisions can be found in the proposed amendments to the Copyright Law and the Patent Law. It thus seems that proposed changes to the trademark legislation lead the way in terms of IP rights enforcement in China. 

He Jing and Lynn Chang, AnJie Law Firm, Beijing