We would like to ensure that you are still receiving content that you find useful – please confirm that you would like to continue to receive ILO newsletters.
10 September 2018
Article 10bis of the Paris Convention,(1) together with the Agreement on Trade-Related Aspects of Intellectual Property Rights, forms the cornerstone of China's legislative framework on the protection of commercial signs. This legislative framework comprises:
The legislature had been planning the recent amendments to the Anti-unfair Competition Law since China's accession to the World Trade Organisation. During the four drafts that followed, substantial changes were made concerning important issues such as the theft of trade secrets. However, as regards the principles set out in Article 10bis of the Paris Convention, most of the main concepts and principles of the original 1993 text have been maintained.
This update analyses Article 17 of the new law from the perspective of Article 10bis of the Paris Convention and, by way of a comparison with the corresponding provisions of the Trademark Law, examines how the new law will redefine the legal landscape for protecting commercial signs in China.(2)
Article 17 of the Anti-unfair Competition Law reads as follows:
A business operator, which violates the provisions of the law and thus causes damage to others, shall bear civil liability according to the laws.
A business operator whose lawful rights and interests are damaged by Unfair Competition Acts may bring a lawsuit before a people's court.
The amount of compensation for the business operator that has been harmed by the Unfair Competition acts shall be assessed in accordance with the actual damages it has suffered from the infringement; if it is difficult to assess the actual damages, the amount of compensation shall be equivalent to the profit that the infringer has earned through the infringement. The amount of compensation shall cover the rational expenses paid by the business operator for stopping the infringing act.
Where a business operator violates the provisions of Article 6 and Article 9 of the law, yet it is difficult to determine the amount of loss suffered by the infringed from the infringing act or the amount of the infringer's profit obtained from the infringing act, the people's court shall make a decision on the amount of compensation not higher than RMB 3 million yuan, by taking into account the seriousness of the infringement.
The Anti-unfair Competition Law does not specifically elaborate on which kind of act constitutes a violation of Article 6 of the law: fabrication or sale. Therefore, both activities are covered by the prohibition. As a result, the forfeiture of the illegitimate products listed in Article 18 in case of a breach of Article 6 is expected to apply to cases of both production and circulation. If such speculation is affirmed in practice, the Anti-unfair Competition Law would be better situated to rein in infringing products in circulation than the Trademark Law. The Trademark Law's provisions concerning the so-called 'innocent seller' principle – as implemented by the Implementation Rules of the Trademark Law – have revealed a shortcoming of the enforcement system: illegal stock seized in the hands of a seller cannot be forfeited and, even though it is deemed to be infringing, it will inevitably return to the market.
As regards damages awards, Article 17 of the new Anti-unfair Competition Law essentially follows the same calculation principles set out in the Trademark Law: first, an estimation of the plaintiff's losses is calculated, followed by a calculation of the illegal profit made by the defendant. The new law introduces the same statutory limit of Rmb3 million (which is provided in the Trademark Law). This is the maximum amount that a judge may award when it is difficult to estimate the losses or illegal profit.
Unfortunately, the new Anti-unfair Competition Law does not include the other modes of calculation provided for in Article 63 of the Trademark Law – namely:
The original text of Article 20 of the Anti-unfair Competition Law was succinct, making a mere reference to losses or illegal gains. This is why, in Article 17 of its Judicial Interpretation on Unfair Competition 2007, the Supreme People's Court expressly referred the judges to the calculation method provided for in the Trademark Law (which, at the time, already included the concept of statutory damages). It remains to be seen whether the courts will, based on this interpretation, still be free to follow the calculation methods provided for in the revised Trademark Law 2013 and make use of the punitive damages provided therein.
As regards unregistered trademarks, the remedies granted by the Trademark Law and the Anti-unfair Competition Law are different. In accordance with the Trademark Law and pertinent judicial interpretations, the owner of an unregistered well-known trademark may request the cessation of the offending mark's use, but cannot claim damages. As the Anti-unfair Competition Law is concerned only with signs that constitute 'business identifiers', it makes no difference whether such signs are registered or unregistered. Thus, the owner of an unregistered trademark might prefer to claim protection over 'a sign of certain influence' in order to obtain damages. However, one of the newly published Supreme People's Court top 10 cases of 2017, XinHuaZiDian (新华字典), concerned a statutory damages award of Rmb3 million in the case of an unregistered well-known mark.
In this regard, a clear reference to the Trademark Law would have been useful.
For further information on this topic please contact Hui Huang or Paul Ranjard at Wanhuida Peksung by telephone (+86 10 6892 1000) or email (email@example.com or firstname.lastname@example.org). The Wanhuida Peksung website can be accessed at www.wanhuida.com and www.peksung.com.
(1) The countries of the Union are bound to assure to nationals of such countries effective protection against unfair competition.
(2) Any act of competition contrary to honest practices in industrial or commercial matters constitutes an act of unfair competition.
(3) The following in particular shall be prohibited:
1. all acts of such a nature as to create confusion by any means whatever with the establishment, the goods, or the industrial or commercial activities, of a competitor;
2. false allegations in the course of trade of such a nature as to discredit the establishment, the goods, or the industrial or commercial activities, of a competitor;
3. indications or allegations the use of which in the course of trade is liable to mislead the public as to the nature, the manufacturing process, the characteristics, the suitability for their purpose, or the quantity, of the goods.
(2) This update is part of a series that examine the new Anti-unfair Competition Law in view of Article 10bis of the Paris Convention and the Trademark Law. For previous updates in the series, please see:
The materials contained on this website are for general information purposes only and are subject to the disclaimer.
ILO is a premium online legal update service for major companies and law firms worldwide. In-house corporate counsel and other users of legal services, as well as law firm partners, qualify for a free subscription.