Revision Dynamics of Chinese Trademark Law

By Ma Qiang,[Trademark]

The Chinese Trademark Law (the Trademark Law) was promulgated on August 23, 1982 and underwent its first revision in 1993. With its entry into the WIPO, China modified the Trademark Law in 2001 in accordance with TRIPS to keep her promises to protect intellectual property, covering among other aspects the qualification for registration of Chinese natural persons, geographical indications, well-known trademarks and juridical examinations. The Trademark Law, after the two revisions, has played an important role in securing the lawful rights of trademark owners, encouraging fair competition, maintaining market order and promoting economic development.

With the fast-growing national economy and increasing foreign investment, more and more businesses have recognized the great importance of the use of trademarks as a competitive tool, resulting in the mounting number of trademark filings. Taking the filing of new trademark applications with the Chinese Trademark Office (CTMO) as an example, the number trademark filings in 2005 were 664,000, which surpassed 700,000 in 2006. In order to meet the registration requirements prior to 2002, it took at most one and half years for a trademark application to mature into a completed registration. Presently the examination period for trademarks takes at least two and a half years, and may take up to three years or longer for filings in big classes such as Class 25. Currently, it will take about 3~4 years for completion of a refusal review and 5~8 years for an opposition review and cancellation before the Trademark Review and Adjudication Board (TRAB). The severe delay in trademark examinations before the CTMO and TRAB has caused serious consequences such as the uncertainty of trademark rights and ambiguity of trademark ownership, resulting in difficulties for the investment and marketing activities of domestic and foreign trademark applicants and an adverse impact on the economy and trade.  

In March 2006, the World Intellectual Property Organization (WIPO) hosted a diplomatic conference in Singapore for the enactment of the Singapore Treaty, which is an updated and modified version of the 1994 Trademark Treaty, both of which are related but distinct from each other. Although the Chinese government subscribed to the final document of the Singapore Treaty, she did not formally join it.  Indeed differences exist between the 2001 Trademark Law and the two international trademark treaties. For instance, both treaties allow “multi-class applications” which was not adopted in the 2001 Trademark Law. Additionally, the Singapore Treaty addresses new types of trademarks, electronic filing procedures and remedial measures for failure to reply before the deadline. Yet the 2001 Trademark Law does not involve the forgoing aspects, and thus is different from the requirements of the two treaties.     

Due to the increasing pressure on the examination process caused by the mounting trademark filings and the inherent defects and gaps existing between the 2001 Trademark Law and the two international trademark treaties, the Chinese State Administration for Industry and Commerce (SAIC) has been preparing a modification of the trademark law and has issued Revision Draft on the 2001 Trademark Law for public opinions in 2006.  According to the draft and other materials available (hereinafter “the Revision Draft”), it is expected that the Chinese Trademark Law will be revised in the following respects: 
1. Expansion in the types of registered trademarks

Art.8 of the 2001 Trademark Law states, “Any visible sign that can serve to distinguish the goods of a natural person, legal person, or other organization from those of another, including any work, design, letter of alphabet, numeral, three-dimensional symbol and color combination, or any combination of the above, may be a trademark for a registration application”. From this provision, “visual perceptibility” is a precondition for trademark registration, which precludes such new-type trade signs such as those involving sound, smell and dynamic marks, as well as any other non-visual marks. 
With the severe competition in the marketplace, the competitive function of a trademark gradually involves more and more business undertakings, consequently causing the generation of new-type trademarks. As long as a new-type trademark can function to identify the source of its products, it can qualify for protection as a registered trademark. The Revision Draft provides that, “Any sign capable of distinction… including words, devices, letters, numerals, three-dimensional signs, of colors as well as the combination of such signs, or any other sign describable in written form, may be registered by filing a trademark application”. This new provision, abandons the old requirement of “visual perceptibility” and expands the scope of registered trademarks, and opens the law door for sound, smell, feel and other new-type marks as well as for single-color trademarks having acquired distinctiveness from actual use. 

2. Abandonment of examination of relative grounds

Under the Revision Draft, the CTMO will no longer examine the relative grounds of a trademark sought for registration but merely review the inherent distinctiveness embodied in the trademark itself.  The conflict between the applied for mark and an earlier mark will be addressed and settled in either opposition or invalidation proceedings initiated by the prior proprietor before the TRAB. Under the 2001 Trademark Law, a CTMO examiner conducts an examination as to both the distinctive characteristics of the trademark applied for and its conflict with the previous trademark. If a trademark is found to be identical with or similar to an earlier trademark, the Trademark Office will issue a refusal. In accordance with the Revision Draft, however, the CTMO will just review whether the trademark falls within the following four situations:
a. prohibited for trademark registration;
b. descriptive as to the designated goods/services;
c. contrary to the shape-and-function irrelevance condition of a 3-D trademark;
d. disclaimer for the non-distinctive part of the trademark. This arrangement of procedures is intended to relieve the examination pressure of the examiners and settle the CTMO backlog problem.

Despite the temporary settlement before the CTMO as a consequence of the abandonment of the relative-ground examinations, it will certainly bring about faster and increasing opposition actions and disputes and transfer the pressure from the CTMO to the TRAB, which will delay the currently slow review and dispute proceedings. Also, the contradictions between a prior registered trademark and a later identical and similar trademark will become much clearer than before, thus causing the emergence of growing civil conflicts such as those involving the “Caile” case widely known to the public.

3. Transfer of oppositions from CTMO to TRAB

Under the regulations of the 1982 and 1993 Trademark Law, a trademark opposition may undergo two administrative proceedings with the CTMO and TRAB respectively, the latter of which will issue a final decision.  As for the obligations to TRIPS, the 2001 Trademark Law established two judicial review procedures before Beijing No.1 Intermediate People’s Court and then subsequently to Beijing High People’s Court. 

In this regard the Revision Draft provides, the CTMO will publish a trademark for four months if finding no absolute grounds for refusal, which will mature into a registration if no one files an opposition procedure. In this circumstance, the registration date of the trademark will be backdated to the publication date. This revision combines the current opposition and review into one-level opposition before the TRAB.  

Strictly speaking, the current Chinese trademark opposition procedure is not very scientific or precise.  Under current practices, an opponent, after initiating the proceeding with the CTMO, will not know whether and when the opposing party files any reply or evidence and has no chance to check and question the same. With the simplification of opposition procedures provided by the Revision Draft, despite the unclear implementation regulations, opposition, as one of the integral part of the cases before the TRAB, will be subject to the Rules for Trademark Review and Adjudication. The procedural rights of the parties will be secured in this regard. 

4. Clear definition and division of cancellation, opposition and invalidation

Provided by the 2001 Trademark Law regarding determination of disputes concerning registered trademarks, the CTMO shall cancel a trademark in case it is in violation of the relevant legal regulations or registered by deceitful or other illegitimate means; any unit or individual may request the TRAB to make a ruling to cancel such a registered trademark. CTMO may cancel a registered trademark if it violates the relevant regulations thereof or the registration itself is acquired by deceptive or other improper means. The law also prescribes that one may petition to cancel a registered mark in other statutory situations. It is obvious here that the division of “cancellation” and “dispute” is imprecise, resulting in a confused use of the two concepts in practice.

The Revision Draft divides trademark opposition, cancellation and invalidation procedures in a clear and distinct manner. Opposition against a published trademark, as a procedure initiated by the trademark owner or by any other interested party before the TRAB, is intended to guarantee the legitimacy of trademark registration through the observation of the entire society. Invalidation is the legal procedure instituted by an interested party, in which a registered trademark will be annulled by order of the TRAB due to its illegitimate nature. Cancellation of a registered trademark is subject to disposal by the CTMO, which will, ex officio or upon request by an interested party, cancel a registered mark either unused for three years or used in an improper manner.                 

Invalidation is a new legal procedure established by the Revision Draft, and includes three types:
1) invalidation based on absolute grounds, referring to violation of the regulations on prohibitive or descriptive trademarks, 3-D marks and marks registered by deceitful means, which indeed removes the administrative power of the CTMO to cancel ex officio these types of improperly registered trademarks;
2) invalidation based on a prior trademark or a geographical indication, referring to the conflicts between the trademark in question and a prior registered trademark, well-known trademark or a trademark owned by the licensor of the registrant, or conflicts with a geographical sign, in which cases a prior trademark owner or any other interested party may petition with the TRAB to invalidate the mark, or even request assignment to itself;
3) invalidation based on another’s earlier rights or bad-faith registration, referring to those initiated by trademark owners or interested parties of name rights, portrait rights, copyrights, patent rights and other civil rights or contravening the good faith doctrines embodied by the laws. 

5. Establishing civil and administrative trial routes

The 2001 Trademark Law set up judicial review procedures for decisions concerning refusal review, opposition review, non-use cancellation and disputes brought by the TRAB. A losing party may sue the administrative body issuing an unfavorable decision at the courts, which will then examine the case in accordance with the Chinese Administrative Procedure Law. Recognizing that the legal authority for the judicial review for trademark cases falls into the sphere of administrative law, the defendant in these administrative cases is the TRAB itself, notwithstanding the fact that the conflicts in an opposition or dispute case exist between the parties themselves. With reference to the trademark trial systems of some foreign jurisdictions, the Revision Draft definitively divides the cases into a refusal review case and an opposition/invalidation case, the former of which will be subject to the Administrative Procedural Law with the TRAB as the defendant, while the latter is subject to the Civil Procedure Law with the adverse party being the defendant. 

Complying with this statutory change, the TRAB, in the opposition and invalidation proceedings, shall consider the actual civil conflicts between the parties and assess the confusion caused by the actual use of the marks in question in the marketplace where some trademark applicants and registrants have altered the mark filed or commercially registered it with the consequence of causing actual confusion and disturbance to the market. With the clarification that opposition and invalidation proceedings are indeed preliminary proceedings to settle civil disputes between parties, both may collect and submit actual evidence to support their respective arguments, which are indeed of key importance to judge the legitimacy of the questioned trademark regardless of the registered form of the trademark itself. 

6. Introduction of Trademark Exhaustion

Trademark exhaustion means that a trademark proprietor, after putting the goods into the commercial market, cannot claim trademark rights specifically with respect to the particular goods to interfere with the free circulation of the trademark. Under this doctrine, the owner has no right to intervene with the commercial flow of goods unless the quality and other features thereof undergo a substantial change.  The Revision Draft provides that, “A trademark owner or licensee, after putting the products affixing the registered trademark into market circulation, shall not claim trademark rights for the same unless for the prevention of deterioration or impairment of the products or other proper reasons”. The purpose of establishing this doctrine is to set reasonable limits for the exercise of trademark rights, allowing for lawful disposal by any party concerning the particular products bearing the trademark in question. 

Although the provision does not address parallel importation in a direct way, the wording appears to be in compliance with the international exhaustion doctrine. It is expected that the Chinese courts will follow the provision to develop a judicial practice permitting parallel imports with the exception of quality and packaging defects of the goods or other appropriate prohibitive reasons. As a consequent arrangement, the Supreme People’s Court and the General Customs are anticipated to establish guidelines for the implementation of this provision to unify the different practices before the authorities nationwide.

7.Multi-class application and divisional application/registration

From the very beginning of trademark legislation, China has adopted the system requiring one application per mark in one class, in which the same applicant can only file applications respectively in various intended classes according to the classification guidelines. The Revision Draft changes this to allow “multi-class applications” by providing that, “If an applicant intends to register the same trademark in different classes, it may file one application for all the classes”. In light of this provision, an applicant may file divisional applications: “The applicant may request divisional examinations for the application.  The application date shall apply to each application after the division”. 

The “Multi-class application”, as prevailing in the US, EU, Japan and other countries, is an important part of the Singapore Treaty with benefits for both the applicant to acquire trademark rights based on its business needs and for the CTMO to examine the applications. It is also a real commercial interest of the applicant or registrant to divide an application or registration so as to realize such business purposes as separate licensing activities. The “Multi-class application” and “division application/registration” are natural consequences of the modern development of the application system for registered trademarks. Yet the specific implementations thereof are subject to the detailed regulations under the law.

8. Addition of pre-refusal pleading procedure 

The Revision Draft provides a pre-refusal pleading procedure, granting an opportunity for the applicant to question a refusal that may be made by the CTMO. According to the revision, the CTMO, upon finding lawful grounds for the refusal, will give the applicant a thirty-day period for arguments. It is compatible with the requirements of the Singapore Treaty, according to which the applicant shall have a chance to set forth arguments prior to the refusal. The procedural arrangement, provided as an old practice under the 1994 Trademark Law, is now considered to be pertinent to the prosecution of trademark rights for the applicant and in compliance with international trademark treaties.   

It is still unknown whether the applicant can utilize this procedure to file evidence. Due to the function and duty of the CTMO to examine whether a trademark can be registered, the use of evidence sufficient to establish the acquired distinctiveness should be acceptable. From the perspective of legal rationality, the procedure for examining the use of evidence to establish a “secondary meaning” shall be set before the CTMO during the examination rather than the TRAB in the review proceeding. 

The Revision Draft also covers some other changes such as the extension of the reasonable time limit for filing a review refusal procedure, opposition decision and non-use cancellation decision. It, however, does not give the applicant a chance to extend the time limit according to the Singapore Treaty.

With the current Revision Draft, the Chinese trademark prosecution and protection system will undergo phenomenal changes. Although there is still much room for improvement in the proposed draft, the overall scientific legal framework for protecting trademark rights is in accordance with the tenet and sprit of trademark legislation. 

Ma Qiang, Doctor, Law School of Renmin University

(The English version of the article is provided by the author.)

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