CCPIT Patent and Trademark Law Office
Legislative framework and causes of action
Trademark law, rules and regulations
China has a comprehensive and integrated legal framework for trademark protection based on domestic legislation as well as international IP treaties and conventions. The Trademark Law and its Implementing Regulations are the primary sources of law on trademark protection. The Trademark Law entered into force in 1983 and has been amended in 1993, 2001, 2013 and 2019. The most recent amendment (23 April 2019) took effect from 1 November 2019. The key purpose of the recent amendments is to enhance trademark protection with new prohibitions to more effectively curb bad-faith filing and provide harsher penalties for trademark infringement.
In addition to the Trademark Law, the domestic laws, rules and regulations on trademark protection across the administrative, civil and criminal spheres include:
- the Civil Law;
- the Tort Law;
- the Criminal Law;
- the Copyright Law;
- the Anti-unfair Competition Law;
- the E-commerce Law;
- judicial policy, interpretations and guidelines issued by the Supreme Court on issues such as jurisdiction, application of laws, conflicts of rights, preliminary injunctions and evidence preservation, among other things, in trademark-related administrative, civil or criminal litigation;
- rules, regulations or guidelines on trademark protection issued by the competent authorities (eg, the Chinese National Intellectual Property Administration (CNIPA), the State Administration for Market Regulation (SAMR), the General Administration of Customs, the Ministry of Public Security and the Supreme People’s Procuratorate);
- guiding cases or referential cases published by the Supreme Court; and
- referential cases published by local High Courts, among others.
In the recent Trademark Law amendments, statutory damages have been increased to Rmb5 million (approximately $700,000) from Rmb3 million (approximately $420,000) and the punitive damages for grave trademark infringement has been raised from three to five times the damages assessed in light of one of the following factors:
- actual losses of the trademark rights holder;
- profits of the infringer; or
- a reasonable multiple of the relevant trademark licence fees when it is difficult to determine the rights holder’s losses or the infringer’s profits.
On 23 April 2019 the Anti-unfair Competition Law was amended, the second amendment since its enactment in 1993 and the first since 2017. The amended Anti-unfair Competition Law features trade secret protection and increased fines and damages for acts of unfair competition, increasing statutory damages for such acts which, among other things, violate IP rights, from Rmb3 million (approximately $420,000) to Rmb5 million (approximately $700,000).
Trademark litigation acts as much more of a deterrent if it can hold the individuals (ie, the masterminds of the infringement, the legal representatives or shareholders of the companies committing the infringing acts) liable for trademark infringement. In recent years, China’s courts have rendered verdicts that have held company legal representatives or shareholders liable jointly or severally for acts of infringement perpetrated by their companies to prevent sophisticated infringers from abusing the independent legal person status of the company or the limited liabilities of shareholders to evade trademark infringement penalties.
In Exxon Mobil, Zhang Zhimin (the legal representative of Beijing Beinong Guoxin Technology Development Co Ltd) and his daughter, Zhang Dandan, were sued as co-defendants for their part in the infringement regarding use of the trademark MOBIL (in both English and Chinese) on pesticides and fertilisers. The appellate court affirmed the trial court verdict and ordered the four defendants to pay damages of Rmb3 million to Exxon Mobil.
Causes of action
Trademark litigation falls into the following categories in terms of applicable laws, procedures, nature and objectives:
- administrative litigation:
- judicial review of decisions or rulings on official refusal, opposition, invalidation and non-use cancellation, among others, rendered by the CNIPA;
- judicial review of other trademark-related specific administrative acts carried out by the CNIPA and the SAMR; and
- judicial review of decisions or rulings on trademark infringement rendered by the local market regulation administration; and
- civil litigation:
- trademark infringement litigation;
- motion for a non-infringement declaratory judgment;
- trademark transfer contract dispute;
- trademark licensing contract dispute;
- trademark agency contract dispute;
- motion for preliminary injunction;
- motion for pre-trial asset preservation in a trademark dispute;
- motion for pre-trial evidence preservation in a trademark dispute;
- cases involving damage liability arising from erroneous motion for preliminary injunction; and
- other trademark-related disputes.
The rights holder may initiate the following actions for trademark protection for unregistered trademarks:
- seeking well-known trademark recognition to stop the infringing trademark use on similar goods or services;
- filing unfair competition litigation to stop the infringing trademark use, as the Anti-unfair Competition Law prohibits use of influential product names, trade dress, trade names, institutional names, personal names (including pen names, stage names and translated names) and distinctive elements in domain names owned by others that are likely to cause confusion; and
- filing copyright litigation if the unregistered trademark is subject to copyright protection.
If recognised as a well-known trademark, the registered trademark can help the rights holder to stop the use of the infringing trademark on dissimilar goods or services.
The following acts carry criminal liabilities:
- passing off registered trademarks, namely unauthorised use of trademarks identical or confusingly similar to the registered trademarks;
- selling goods using counterfeit registered trademarks; and
- illegally manufacturing the labels of others’ registered trademarks or selling such illegally manufactured labels.
Criminal litigation is usually filed by procuratorates after the Public Security Bureau (PSB) (ie, the police) has completed the criminal investigations and handed over the files and evidence to the procuratorates. The PSB may open criminal investigations on its own initiative or in response to complaints filed by the rights holders or after the cases have been handed over to them by the Market Regulation Administration. The rights holder may file a complaint to the local PSB, requesting it to commence a criminal investigation. While criminal litigation is pending, the rights holders may consider filing an incidental civil litigation aimed at claiming damages.
Alternative dispute resolution
Mediation and arbitration
Trademark disputes can be resolved through mediation in civil litigation in China. If the plaintiffs and defendants agree to mediate a settlement agreement, the court may act as mediator or direct the parties to work with the court-designated external mediators or mediation centres. Heavy and increasing caseloads have put the courts under severe strain. The Supreme Court has been urging the courts to rely on alternative dispute resolution mechanisms to deliver quality and efficiency in IP protection.
Arbitration serves to resolve civil trademark disputes, provided that the parties agree in writing to the arbitration.
Mediation and arbitration are generally not employed in trademark administrative and criminal litigations unless the rights holder files an incidental civil litigation in a combined criminal-civil proceeding and the parties choose to mediate a settlement agreement on the civil claims over damages.
Litigation venue and formats
The courts in China have four levels of hierarchy:
- Basic people’s courts (ie, the people’s courts at district or county level):
- Such courts have no jurisdiction as first-instance courts over trademark-related litigation unless designated by the Supreme People’s Court.
- Intermediate people’s courts, including the specialised IP courts in Beijing, Shanghai and Guangzhou:
- Each city has at least one Intermediate People’s Court, which are first-instance courts over civil trademark litigations. Cases involving well-known trademark recognition can only be accepted by an Intermediate People’s Court in the capital of a province or autonomous region, by the IP courts or courts otherwise designated by the Supreme People’s Court.
- The Beijing IP Court has exclusive jurisdiction over all first-instance administrative litigation on judicial review of decisions or rulings on official refusal, opposition, invalidation and non-use cancellation, among other things, rendered by the CNIPA and its judgments can be appealed to the Beijing High People’s Court.
- High people’s courts in each province and autonomous region which are directly governed municipalities (eg, Beijing, Shanghai, Tianjin and Chongqing):
- Such courts are the first-instance courts hearing civil cases with the claimed damages reaching the threshold set by the Supreme People’s Court or having socio-legal impact on their jurisdiction. They also hear appeals of first-instance judgments of intermediate people’s courts and retrials of cases heard by intermediate people’s courts, either at first or second instance.
- The Supreme People’s Court:
- The Supreme People’s Court rarely hears first-instance cases. It hears appeals of first-instance judgments by high people’s courts and (most often) retrials of cases heard by high people’s courts, either at first or second instance. The IP Tribunal of Supreme People’s Court has exclusive jurisdiction over appeals from courts all over China regarding technology-related cases.
Some basic people’s courts and intermediate people’s courts have cross-region jurisdiction over IP-related cases according to the Supreme People’s Court guidelines.
Forum shopping is not available for administrative litigation.
Courts at the defendants’ domicile, locations of occurrence of the infringing acts and/or where the infringing products are stored, seized or detained by administrative authorities (eg, the Market Regulation Administration, the Customs Office or the PSB) have territorial jurisdiction over infringement cases. Locations of occurrence of the trademark infringing acts are where infringing acts or the outcomes of infringing acts take place.
Specialised IP courts and IP tribunals have more expertise and experience in handling IP disputes. Courts in more economically developed provinces and areas (eg, Zhejiang and Jiangsu) are more pro-intellectual property and tend to grant higher damages. It is recommended that the plaintiff file the trademark litigation at the specialised IP courts or IP tribunals.
It is also an effective strategy to identify all the players involved in the trademark infringement (eg, the mastermind of the infringing acts, the owner or licensor of the infringing trademark, the manufacturer, the distributor, the warehouse landlord and the internet service provider (ISP)) and select the court most preferred by the plaintiff to file the litigation.
Internet courts in Beijing, Hangzhou and Guangzhou have jurisdiction over disputes arising from online infringement and transactions. Almost all proceedings (including filing complaints and evidence, service and even trials) at the internet courts are conducted online for the convenience of all parties involved in the trials.
The Supreme Court’s opinion is that only the courts at the defendants’ domicile or the location of the server of the e-commerce trading platform (ie, the ISP) have jurisdiction over litigation against the internet-based trademark infringement.
Jury versus bench
In China, trademark litigations are usually heard by a collegiate bench of three (most frequently) or five members. At the trial court, the collegiate bench may comprise judges only, or judges together with one or two people’s jurors. People’s jurors are not included in a collegiate bench at the appellate courts.
Damages and remedies
The following remedies are available in trademark infringement litigation:
- injunction (both interim and permanent);
- damages (including punitive damages); and
- public apologies or declarations aimed at undoing the negative affect of the infringing acts.
Damages for trademark infringement are calculated with reference to one of the following factors:
- actual losses of the rights holder;
- profits of the infringer; or
- a reasonable multiple of the relevant trademark licence fees when it is difficult to determine the rights holder’s losses or the infringer’s profits.
The Supreme Court has directed the courts to use market value as a benchmark for determining damages in IP litigation and award punitive damages to ensure that the damages in total are commensurate with the market value of the IP rights in dispute.
In light of the present practice and trend for the courts to award substantial damages of millions of renminbi, the rights holder should consider adjusting its IP protection strategy and rely more on litigation to obtain stronger protection in China. Meanwhile, the legitimate brand owners should also be more cautious in trademark use in order to avoid trademark infringement suits and the ensuing large damages.
Injunctive relief can be an interim injunction or permanent injunction. Interim injunctions are difficult to obtain. When granting an interim injunction, the court will consider the following factors:
- the plaintiff’s likelihood of prevailing on the merits;
- a demonstration of irreparable injury to the plaintiff if relief is not granted;
- the threatened injury to the plaintiff is demonstrated to outweigh or equal whatever damages the proposed injunction may cause the defendant;
- the balance of interest and hardships between the plaintiff and defendant;
- whether the injunction may harm public interest; and
- whether the plaintiff has posted a bond.
Evidencing the case
Investigations and first steps
Investigations are necessary and can be vital for formulating a trademark litigation strategy and tactics, as well as building a stronger case against the defendants. Investigations are conducted for numerous reasons, including:
- collecting facts and evidence to support the litigation;
- spotting the strength and weakness of both the plaintiffs and defendants; and
- formulating the trademark litigation strategy and tactics, including:
- identifying the business pattern of the trademark infringers and all players involved in the infringement;
- determining the defendants to be sued and the court where to file the litigation;
- setting the objectives of the litigation;
- taking precautionary steps before the litigation so as to anticipate and fend off the litigation-triggered counter-attacks from the defendants; and
- adopting a well-balanced litigation strategy.
Legal counsel should always be closely involved throughout the investigations when working with internal investigators or external professional investigators by offering input into the investigation plan and overseeing investigations to ensure that evidence obtained complies with the rules of evidence in terms of subjectivity, legality and relevance. Relevant and particularly important and key evidence (eg, infringing goods, websites and transaction documents) must be notarised, as notarised evidence is viewed as having more probative strength than non-notarised evidence. It is important for legal counsel to review and ensure the legality of the evidence obtained during the investigations because evidence procured through dubious or illegal means, as trap orders or entrapment, may be excluded or result in compromising the litigation.
Survey evidence is not mandatory. It is often challenged for being untruthful, unscientific biased and/or manipulative. In practice, survey evidence has been filed with the court in hard cases for reference purposes. The Supreme Court has accepted survey reports as evidence in retrial cases. The referential value of survey evidence for the judges to determine cases should not be ignored.
Use of expert witnesses
Expert witnesses are permitted in trademark litigation cases and are often engaged to provide expert opinions on difficult or controversial issues, especially in cases of first impression. Sometimes, courts may also host seminars or request experts to submit opinions for consideration. Economic experts can also be helpful in ascertaining payable damages. Expert opinions may not be cited by the judges; however, the referential value for the judges to determine the cases should not be underestimated.
The following defences can be raised when facing trademark infringement charges:
- no trademark infringement;
- no likelihood of confusion because there are no similarities in terms of trademarks per se or the goods and/or services;
- the plaintiff’s trademark is invalid or to be declared invalid due to its non-compliance with the Trademark Law;
- legitimate use;
- fair use;
- prior trademark use;
- legitimate product source and no knowledge of trademark infringement;
- prior rights use (eg, use of prior trade names, copyrights or design rights);
- authorised or licensed use;
- exhaustion of trademark rights;
- laches and/or loss of statutory limitations;
- no infringement in original equipment manufacturer (OEM) cases where all the OEM products are exported only to a foreign country or region and the mark used on the goods is owned or duly registered by the party, which has ordered the OEM products, in the destined country or region;
- safe harbour for ISPs;
- lack of standing to sue or be sued;
- lack of jurisdiction; and
- unclean hands and/or abuse of rights.
In retrials as guiding cases, the Supreme Court has dismissed trademark infringement lawsuits on the grounds that the cited trademarks were registered by the plaintiff in bad faith and trademark infringement litigations were filed in bad faith against legitimate trademark users, meaning that such litigations are an abuse of rights.
A domestic party may file an appeal within 15 days of receipt of a first-instance judgment, while a foreign party may file an appeal within 30 days. Parties may still file new and supplementary evidence to the appellate court.
The appellate court will review both factual and legal issues. It usually takes six to eight months for the appellate court to render its judgment, which is then final and effective.
The plaintiffs or defendants may apply for a re-trial of effective judgments within six months of the effective date. The upper courts will review and decide whether to accept the re-trial applications. For a re-trial application to be accepted, it usually requires new and substantial evidence that could overturn the effective judgment or clear mistakes in procedural issues, factual findings or application of law.
In rare circumstances, the people’s procuratorates have powers to supervise adjudication of civil cases and may do so ex officio or by request.
Any party can appeal before a higher-level court if dissatisfied with a trial court judgment or certain other decisions such as the court’s refusal to accept the case, a rejection of a trademark filing or an objection to jurisdiction. The time limit for appealing a trial court judgment is 15 days for a domestic party or 30 days for a foreign party. Other trial court decisions must be appealed within 10 days for a domestic party or 30 days for a foreign party.