China

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 and 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 was amended in 1993, 2001, 2013 and 2019.

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 Code;
• the Criminal Law;
• the Anti-unfair Competition Law;
• the Copyright Law;
• the E-commerce Law;
• judicial policy, interpretations and guidelines issued by the Supreme People’s Court (SPC) 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 typical cases published by the SPC; and
• reference cases published by local High Courts, among others.

The present Trademark Law prescribes statutory damages up to Rmb5 million and punitive damages for grave trademark infringement of the amount equating to one to five times the base amount damages assessed in light of one of the following factors:

• actual losses of the plaintiff;
• profits of the defendant; or
• a reasonable multiplication of the trademark licensing fee in cases where it is difficult to determine the plaintiffs’ losses or the defendant’s profits.

The Anti-unfair Competition Law provides statutory damages of up to Rmb5 million for unfair competition acts that violate IP rights.

The SPC urges local courts to hold three-in-one trials for judicial efficiency and consistency if the trademark is simultaneously involved in administrative, civil and criminal lawsuits.

Trademark litigation holds more deterrent power if it can hold 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, the courts have rendered verdicts that have held legal representatives and shareholders jointly or severally liable for infringements perpetrated by their companies – defeating their attempts to evade trademark infringement penalties by abusing the independent legal person status of the company or the limited liabilities of shareholders.

Provisions of the SPC on Online Docketing Services for Parties to Cross-Border Litigation (the SPC Provisions) came into effect on 3 February 2021. The SPC Provisions are aimed at enabling Chinese and foreign parties to enjoy the same convenient and efficient docketing services. They constitute an endeavour to benefit from online technology and tackle the inconveniences resulting from the covid-19 pandemic and online court hearings since the outbreak of the pandemic.

The Interpretation of the SPC on the Application of Punitive Damages in Adjudicating Civil Cases Involving IPR Infringement (the SPC Interpretations) came into effect on 3 March 2021. The SPC Interpretations clarify the conditions under which the courts can impose punitive damages under all major IP laws in China, including the Trademark Law and the Anti-unfair Competition Law. Punitive damages may be awarded if a court finds that an infringement was both intentional and serious.

The SPC Interpretations give courts discretion, based on the circumstances, to impose punitive damages from 100% to 500% of the damages claimed and calculated at the base amount (ie, the amount of the plaintiff’s actual losses, the infringer’s illegal gains or a deemed royalty). The SPC Interpretations confirm that reasonable enforcement-related expenses (eg, attorney’s fees, notarisation expenditure for sample purchases and other investigation costs) must be awarded separately from punitive damages and may not be multiplied.

On 3 June 2021, the SPC issued the Reply on the Issue concerning the Defendant's Request for Compensation for Reasonable Expenses in IPR Infringement Litigation (the SPC Reply). The SPC Reply makes it clear that if, in an IPR infringement lawsuit, the defendant submits evidence to prove that the lawsuit filed by the plaintiff constitutes an abuse of rights and has damaged the defendant’s legitimate rights and interests as prescribed in law, and the defendant requests the plaintiff to compensate for its reasonable expenses (eg, attorney’s fees, transportation expenses, hotel and food expenses paid for in the defence), the court shall support the request. The defendant may also file a separate lawsuit to require the plaintiff to compensate for the above reasonable expenses.

In recent years, trademark squatters have initiated litigation to compel real trademark owners to either pay damages or purchase back trademarks registered in bad faith at very high prices. The courts have gradually developed a consistent practice of dismissing those cases on the basis of abuse of rights by trademark squatters. The SPC Reply is one of the steps taken to deter bad-faith trademark filings, abuse of rights and damages claimed in bad faith.

The courts moved online following the outbreak of the covid-19 pandemic. From 1 January 2020 to 31 May 2021:

• 12.197 million cases were filed online, accounting for 28.3% of the total number of cases filed;
• 1.288 million online hearings were conducted, taking an average of 42 minutes for each hearing; and
• regarding court-referred mediation, 6.513 million cases were mediated online, and 6.1429 million cases were successfully mediated in the pre-trial state.

The Rules on Online Litigation of the SPC (the SPC Rules) came into effect on 1 August 2021. The SPC Rules were enacted to further regulate online litigation. They also clarify the procedures for other online litigation activities, such as online filing and responding, electronic records, electronic case files, online criminal hearings and online enforcement.

The Trademark Examination and Review Guidelines (the CNIPA Guidelines), updated by the CNIPA, came into effect on 1 January 2022. Trademark attorneys can cite the case examples in the guidelines in their submissions to the CNIPA in reviews, oppositions and invalidations etc. The update of the CNIPA Guidelines also constitutes an effort to combat and reduce bad-faith trademark filings.

The SPC issued Guidance on the Proper Adjudication of Issues Involved in Covid-19-Related Cases on 20 April, 13 May and 8 June 2021. The guidance provides direction to local courts on overcoming challenges resulting from the pandemic and how to handle issues involved in covid-19-related cases (eg, application of punitive damages, force majeure, suspension of statute of limitations, extension of litigation, asset preservation and extension of time limits for submitting evidence obtained outside China and notarised and legalised documents).

The Standards for Judging General Trademark Violations issued by CNIPA (the CNIPA Standards) came into effect on 1 January 2022. The CNIPA Standards offer guidance to the administrative trademark law enforcement authorities on regulating trademark use, trademark filings in bad faith, etc, and on imposing sanctions.

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 other things, rendered by the CNIPA;
  • judicial review of other specific trademark-related administrative acts performed by the CNIPA and the SAMR; and
  • judicial review of decisions or rulings on trademark infringement rendered by the local market regulation administration (MRA); and
• civil litigation:
  • trademark infringement litigation;
  • trademark ownership disputes;
  • motion for a non-infringement declaratory judgment;
  • trademark transfer contract disputes;
  • trademark licensing contract disputes;
  • trademark agency contract disputes;
  • motion for preliminary injunction;
  • motion for pretrial or interlocutory asset preservation in a trademark dispute;
  • motion for pretrial of interlocutory evidence preservation in a trademark dispute;
  • cases involving damage liability arising from erroneous motion for preliminary injunction or abuse of rights by the plaintiff; and
  • other trademark-related disputes.

To protect unregistered trademarks, the right holder may:

• seek well-known trademark recognition to stop the use of the infringing trademark on similar goods or services if the cited and infringed trademark has been used but not registered  in China;
• seek well-known trademark recognition to stop the use of the infringing trademark on dissimilar goods or services if the cited and infringed trademark has been registered and used  in China;
• file unfair competition litigation to stop the use of the infringing trademark, as the Anti-unfair Competition Law prohibits the 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
• file copyright litigation if the unregistered trademark is subject to copyright protection.

The courts have rendered verdicts that hold that the sale of parallel imported goods constitutes trademark infringement if there are substantive changes in product packaging or differences in terms of quality or trademark use between the authorised goods and the parallel imports. The courts have also rendered verdicts that outline the criteria for determining infringement regarding trademark use related to original equipment manufacturer (OEM) goods that are produced in China and intended only for exportation, without sale in China.

Criminal litigation

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 the 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 right holder or after the cases have been handed over to them by the MRA. The right holder may file a complaint to the local MRA or the PSB, requesting them to commence a criminal investigation. While criminal litigation is pending, the right 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. The court may act as a mediator or direct the parties to work with the court-designated external mediators or mediation centres. The SPC has been urging the courts to rely on alternative dispute resolution (ADR) mechanisms to deliver quality and efficiency in IP protection. During civil litigation proceedings, the courts will always ask the plaintiffs and defendants whether they want to settle the disputes through ADR.

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 litigation unless the right holder files an incidental civil litigation in combined criminal-civil proceedings, 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): these courts have no jurisdiction as first-instance courts over trademark-related litigation unless designated by the SPC.
• 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 the first-instance courts for civil trademark litigation. 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 by courts otherwise designated by the SPC.
  • 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. Its judgments can be appealed to the Beijing High People’s Court.
• High people’s courts in each province and autonomous region that is a directly governed municipality (eg, Beijing, Shanghai, Tianjin and Chongqing): these courts are the first-instance courts that hear civil cases where the claimed damages reach the threshold set by the SPC or there is a 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 SPC: the SPC 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 the SPC 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 SPC guidelines.

Forum shopping

Forum shopping is not available for administrative litigation.

Courts at the defendants’ domicile, the locations of occurrence of the infringing acts or the locations where the infringing products are stored, seized or detained by administrative authorities (eg, the MRA, the customs office or the PSB) have territorial jurisdiction over infringement cases. The 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, Beijing, Shanghai, Guangzhou, Shenzhen, Wuhan, 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 SPC’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

Trademark litigation is usually heard by a collegiate bench of three (most often) 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

Available remedies

The following remedies are available in trademark infringement litigation:

• injunctions (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 plaintiff;
• profits of the defendant; or
• a reasonable multiple of the relevant trademark licence fees when it is difficult to determine the right holder’s losses or the infringer’s profits.

The SPC has directed the courts to use market value as a benchmark for determining damages in IP litigation and to award punitive damages to ensure that the damages in total are commensurate with the market value of the IP rights in dispute. Repeat infringers are subject to paying punitive damages. In response to requests from the plaintiff, the court may also impose punitive damages on defendants committing intentional and serious trademark infringement.

In light of present practice and the trend for courts to award substantial damages of millions of renminbi, as well as punitive damage in some cases, the right holder should consider adjusting its IP protection strategy and relying more on litigation to obtain stronger protection in China. Legitimate brand owners should also be more cautious in trademark use to avoid trademark infringement suits and the ensuing large damages.

Injunctive relief

Injunctive relief can be an interim 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;
• demonstration that the threatened injury to the plaintiff outweighs or equals 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 well-conceived and effective trademark litigation strategies and tactics, as well as building a stronger case against the defendants. Investigations are conducted for multiple purposes, including:

• collecting facts and evidence to support the litigation;
• spotting the strengths and weaknesses of both the plaintiffs and the defendants to help the right holder build a strong litigation and an adequate and stronger future trademark portfolio; and
• formulating a well-informed trademark litigation strategy and tactics, including:
  • identifying the business pattern of the trademark infringers and all players involved in the infringement, particularly the mastermind of the infringement;
  • determining the defendants to be sued and the court where the litigation will be filed;
  • setting the objectives of the litigation;
  • taking precautionary steps before the litigation to anticipate and fend off litigation-triggered counter-attacks from the defendants; and
  • adopting a well-balanced litigation strategy.

Legal counsel should always be closely involved throughout investigations when working with internal investigators or external professional investigators by offering input into investigation plans and overseeing investigations to ensure that the evidence obtained complies with the rules of evidence in terms of subjectivity, legality and relevance. Relevant and particularly important 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. Legal counsel must review and ensure the legality of the evidence obtained during investigations because evidence procured through dubious or illegal means (eg, trap orders or entrapment) may be excluded or compromise the litigation.

Survey evidence

Survey evidence is not mandatory. It is often challenged for being untruthful, unscientific, biased and manipulative. In practice, survey evidence has been filed with the court in hard cases for reference purposes. The SPC and local courts have accepted survey reports as evidence. 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. Courts may also consult experts for their opinions on difficult issues. 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.

Available defences

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 or services;
• the plaintiff’s trademark is invalid or declared invalid owing 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 or loss of statutory limitations;
• no infringement in 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 that 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 or abuse of rights.

The SPC has dismissed trademark infringement lawsuits on the grounds of abuse of rights (ie, the cited trademarks were registered by the plaintiff in bad faith and trademark infringement litigation was filed in bad faith against legitimate trademark users).

Appeals process

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 nine months for the appellate court to render its judgment, which is final and effective. The time frame for court proceedings will be longer if one of the parties is a foreign entity or national.

The plaintiffs or defendants may apply for a retrial of effective judgments within six months of the effective date. The upper courts will review and decide whether to accept retrial applications. For a retrial 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.