Trademarks: a framework for protection

Introduction
Unregistered trademarks
Registered trademarks
Procedures
Enforcement
Ownership changes and rights transfers
Related rights
Online issues

Introduction

After many years of accumulating knowledge, particularly since its economic liberalisation, China has established an effective legal system for the protection of trademark rights. The key piece of legislation is the Trademark Law. Other relevant legislation includes:

• the Regulation for Implementation of the Trademark Law;
• the Regulations for Approbation and Protection of Well-Known Trademarks; and
• the Measures for the Implementation of the Madrid System for the International Registration of Marks.

Furthermore, the Supreme People's Court has issued many judicial interpretations on the issues raised by trademark cases.

In order to bring its legislation up to international standards, China has signed various international trademark treaties, such as:

• the Paris Convention for the Protection of Intellectual Property;
• the World Trade Organisation Agreement on Trade-Related Aspects of Intellectual Property Rights;
• the Madrid Agreement concerning the International Registration of Marks;
• the Protocol relating to the Madrid Agreement concerning the International Registration of Marks; and
• the Nice Agreement concerning the International Classification of Goods and Services for the Purposes of the Registration of Marks.

All of these laws, regulations and international treaties combine organically to comprise the legal basis of the Chinese trademark protection system.

Unregistered trademarks

In China, a party cannot enjoy the exclusive right to use a trademark unless it seeks registration. However, an unregistered trademark may be protected if certain requirements are met. Where the unregistered mark is recognised as the specific name of a well-known product, it may fall under the scope of protection of the Anti-monopoly Law. If an unregistered mark is well known, it can be used to prohibit a third party from registering and using a mark that constitutes a reproduction, imitation or translation of the unregistered trademark. Where the mark has been genuinely used and has achieved a certain reputation (which is a lower standard than being well known), it may prohibit a third party's pre-emptive registration in bad faith.

Registered trademarks

Any individual person, legal person or organisation can apply to register a trademark. Applications may be made individually, jointly by two or more persons, or collectively. An individual seeking registration must be engaged in production and business.

An applicant may appoint an agency to handle the filing of its application, but there is no obligation to do so. However, a foreign person or enterprise with no continuous residence or place of business in China must appoint an organisation designated by the state to act as its agent. If an agency is appointed, power of attorney must be conferred. Notarisation and legalisation of the power of attorney and other relevant certificates from a foreign person or enterprise are recognised on the principle of reciprocity.

A sign composed of words, devices, letters, numerals, three-dimensional signs (shapes), a combination of colours or any combination of the above can be registered as a trademark. However, the sign must be visible; thus, a sign which can be only heard or smelt cannot be registered in China. The Trademark Law gives examples of illegal signs that cannot be used or registered, including (i) signs that are identical or similar to the name of the state or a state emblem, and (ii) signs that constitute exaggeration or fraud in the advertisement of goods. The law also prohibits the registration of signs that lack distinctiveness.

Furthermore, a three-dimensional mark cannot be registered if it is a shape that:

• is derived from the goods themselves;
• is required to obtain a technical effect; or
• gives the goods substantive value.

In addition, no sign that conflicts with a prior right can be registered. Such prior rights include an identical or similar prior trademark and a prior copyright, design, personal name or company name.

Procedures

Ordinary procedures
Searches
An applicant must apply directly to the Trademark Office in order to register a trademark in China.

Free searches may be carried out on the Trademark Office website. Alternatively, an applicant may pay the TONG DA Trademark Service Centre, which is affiliated with the State Administration of Industry and Commerce (SAIC), to carry out a more detailed and accurate search. Whether the search is free or not, the result is limited to a list of marks that meet the requirements - it provides no legal opinion and has no legal force.

The fees for a normal trademark search are:

• Rmb60 for a Chinese character or number mark;
• Rmb100 for an English character mark; and
• Rmb120 for a device mark.

These fees are doubled for an urgent trademark search.

Examination
If an application and the correct fee are filed, the Trademark Office starts the procedure with a formal examination. If the formal requirements of the application are met and the application form is filled out correctly, the Trademark Office accepts the application and notifies the applicant in writing; otherwise, the Trademark Office rejects the application and notifies the applicant in writing with an explanation.

Following the formal examination, the Trademark Office conducts a substantial examination to determine whether the trademark application complies with the law. The examination includes (i) verification of conformity with the legality, distinctiveness and non-functionality requirements, and (ii) an examination of whether the trademark application for which protection is sought is identical or similar to prior trademarks.

Preliminary approval and publication
If the examination reveals that the trademark application complies with the law and that there is no prior conflicting trademark, the Trademark Office preliminarily approves the trademark application and the pending approval is published in the Official Gazette.

Registration
If no opposition is filed in the three months following publication, the registration is approved. A certificate of trademark registration is issued and the trademark is published. The period of validity of a registered trademark is 10 years from the date of approval of its registration.

Renewal
If the registrant intends to continue to use the registered trademark beyond the period of validity, an application for renewal must be made in the six months before the expiry date. If no application is filed within that period, a grace period of six months may be allowed. The period of validity of each renewal of registration is 10 years.

Special procedures
Refusal
If a trademark application is refused, the Trademark Office notifies the applicant or its agent of the decision. If the applicant wishes to appeal the refusal, it must file an application for review with the Trademark Review and Adjudication Board within 15 days. The board operates as an appeal tribunal for all Trademark Office decisions.

Opposition
Any person may, within three months of publication of a preliminarily approved trademark, file an opposition against the trademark.

If no opposition has been filed within the three-month period, the Trademark Office issues a decision approving the registration. A party that is dissatisfied with the decision may apply to the board for re-examination within 15 days of receiving the notification.

Invalidation
Invalidation may occur when:

• the trademark is found to fall under one of the absolute grounds for refusal;
• the trademark registration is found to have been obtained by fraud or other improper means; or
• the trademark conflicts with a prior right.

The invalidation procedure may be launched by the Trademark Office on its own initiative or by the board on request. When a trademark is invalidated, it is deemed never to have existed.

Revocation for non-use
Once a trademark is registered, the registrant must use it. The Trademark Office will cancel a registered trademark if the mark has not been used for three consecutive years, calculated from the date of registration or, if the trademark was approved for registration following an opposition, calculated from the date of publication of the opposition adjudication. If the trademark owner or another interested party objects to the Trademark Office's decision, it can appeal to the board within 15 days.

Judicial review
If either the trademark owner or an interested party is dissatisfied with a decision concerning refusal, opposition, invalidation or revocation, it may commence legal proceedings in court within 30 days of receiving notification of the board's decision.

Enforcement

If a rights holder learns of an act that violates its trademark rights, it may seek relief.

Administrative procedures
SAIC procedures
The SAIC may take action against a trademark infringement on its own initiative or at the request of the trademark owner or an interested party.

If the SAIC is satisfied that an infringement has been committed, it may order the infringer to cease the infringing acts immediately. In principle, the SAIC is required systematically to confiscate and destroy the infringing goods and any tools used to manufacture the infringing goods or labels. The SAIC may also impose fines; the amount of the fine depends on the value of the illegal business and cannot exceed three times that amount. If the fine cannot be easily calculated, the SAIC may fine the infringer a fixed amount of up to Rmb100,000.

Customs procedures
Trademark rights can be protected by Customs during both import and export. A trademark rights holder may record its trademark right with the General Administration of Customs to put the latter on notice for infringing goods. However, although recordal allows Customs to take action ex officio, it is not essential in order for a trademark to be protected by customs procedures.

Customs will confiscate suspect goods if they are deemed to infringe trademark rights. If the confiscated goods are deemed suitable for public welfare, Customs will transmit the goods to the relevant public welfare utility. If the trademark owner wishes to purchase the goods, Customs may transfer the goods to the trademark owner in return for adequate compensation. If the infringing goods are not fit for public welfare purposes and the trademark owner does not wish to purchase them, Customs may auction the goods after removing the infringing characteristics. In the event that the infringing characteristics cannot be removed, Customs must destroy the confiscated goods.

Administrative litigation
A decision taken by the SAIC or Customs may be reviewed by instituting legal proceedings before the appropriate people's court within three months of notification of the decision. Applications for review are filed increasingly frequently and are usually initiated by a defendant challenging a finding of infringement or the amount of a fine. Such cases are handled by the administrative section of the courts.

Civil procedures
There are no specific trademark or IP courts in China. Trademark infringement cases are usually heard by the IP Tribunal or one of the civil adjudication tribunals. The plaintiff must file a complaint with the competent court, which may accept or reject it. If the complaint is accepted, the court decides on a date for a court hearing, during which evidence is examined and discussed by the parties. The judgment is delivered within a few months of the hearing, depending on the complexity of the case. There is no time limit for the trial of cases involving a foreign element.

The court may:

• order the cessation of the infringement by means of an injunction;
• confiscate the infringing goods, as well as the materials, tools and equipment used to produce them; and
• order the payment of damages.

If necessary, the court may also deliver an order of injunction or preservation to cover evidence or property.

The amount of damages for infringing a trademark is calculated according to:

• the losses suffered by the IP owner;
• the profits gained by the infringer from the infringement; or
• an amount of damages not exceeding Rmb500,000 where it is difficult to determine the illicit profit that the infringer has earned or the loss suffered by the injured party.

Expenses that an IP owner incurs in stopping an infringement (eg, attorney fees) can be included in damages.

Criminal procedures
Generally, criminal cases are brought before the court by a bill of indictment of the People's Procuratorate. In the event of suspected criminal activity, Customs and the SAIC may also transfer a case to the Public Security Authority for determination, after which the case will be transferred to the People's Procuratorate for public prosecution. Trademark holders can also initiate criminal proceedings directly before a court without involving the police or the People's Procuratorate. However, if a case is considered to present a serious danger to public order and state interests, it should be initiated by the People's Procuratorate.

Once the police have concluded that the infringement may be qualified as a crime, the case is transferred to the People's Procuratorate for examination. If the qualification as a crime is confirmed, the People's Procuratorate changes the suspects' status from 'detained' to 'arrested' and begins the prosecution until the persons concerned are brought to the Criminal People's Court.

The penalties for trademark crimes include (i) up to three years' imprisonment or a fine (or both) where the circumstances of the crime are deemed serious or the sales volume is large, or (ii) between three and seven years' imprisonment where the circumstances are deemed extremely serious or sales are very extensive.

Ownership changes and rights transfers

A trademark, whether registered or pending registration, may be assigned. When applying for assignment of a registered trademark, the registrant must assign all identical or similar trademarks registered in respect of the same or similar goods. The assignor and assignee must conclude a contract for the assignment and must jointly file an application with the Trademark Office. The assignee guarantees the quality of the goods in respect of which the registered trademark is used. The assignment of a registered trademark must be published after approval. The assignee enjoys the exclusive right to use the trademark from the date of publication.

A registered trademark may also be licensed to a third party. The trademark licensing agreement must be submitted to the Trademark Office for recordal. The licensor retains the right to supervise the quality of the goods for which the licensee uses its registered trademark; therefore, the licensee must guarantee the quality of such goods.

Where a registered trademark is used in respect of goods that have been poorly manufactured or are of inferior quality, such that consumers are deceived, the SAIC will order rectification of the situation within a specified period and may circulate a notice of criticism or impose a fine. In addition, the Trademark Office may cancel the trademark registration.

Related rights

Trademark rights and other rights, such as patent rights and copyrights, may overlap and different types of IP right may coexist in the same work. For example, a work that enjoys copyright protection can also be registered as a trademark if it meets the requirements for trademark registration. Equally, a design which enjoys a patent right can also be registered as a trademark and vice versa.

Furthermore, different types of IP right can complete each other. Even if an IP rights holder has not obtained a prior registered trademark, its copyright may be used to protect a device trademark that has artistic merit. However, the trademark right is the only type of right that can be owned permanently, provided that the rights owner renews it.

Online issues

In 2002 the Supreme People's Court released a judicial interpretation on the issues regarding the application of law in civil cases involving trademark disputes. According to the court, if a party registers certain words that are identical or similar to another party's registered trademark as a domain name and then carries out electronic commerce in the goods using this domain name, this will be recognised as trademark infringement if the domain name is likely to cause confusion among the relevant public. China also has dispute resolution policies regulating its top-level domain, which allow a rights holder to prevent the unauthorised use of its trademark in domain names.

For further information on this topic please contact Huang Hui at Wan Hui Da Law Firm & Intellectual Property Agency by telephone (+86 10 6892 1000), fax (+86 10 6894 8030) or email (huanghui@wanhuida.com).

An earlier version of this update was first published in World Trademark Review Yearbook 2009/2010.