China's legislature on August 30, 2013 passed a new trademark law to crack down on infringement and ensure a fair market for trademark holders. Prior to this amendment China’s Trademark Law had previously been amended twice, once in 1993, and again in 2001.

The following is a list of some changed and new provisions under the new trademark law, in no particular order.

1. Sound marks are permitted.

2. Multi-class application is permitted.  

3. Electronic application is available. The new Trademark Law increases electronic applications based on their original paper filings. 

4. Invalidation. Invalidation is a new legal procedure established by the new Trademark Law. 

5. Damages for trademark infringement. The new law raises the compensation ceiling for trademark infringement to 3 million yuan (approximately 500,000 U.S. dollars), six times the previous limit.  The court may order production records and other information from the infringers when assessing damages and punitive damages are now available. 

6. Well-known Trademarks. The new law offers protection for well-known trademarks, giving owners the right to ban others from registering their trademarks or using similar ones even if such brand names are not registered. However, the words "well-known trademark" shall not be used in promotions or advertising.

7. Examination Period. The new law changes provisions regarding the examination period of applications for trademark registration to make it more efficient:

a). For a smooth and straightforward trademark application (no office action/rejection/opposition arises) before the China Trademark Office, new applications should be published within 9 months from the filing date of an application;

b). The review of an application after a rejection decision from the Trademark Review and Adjudication Board should be concluded within 9 months.  Under some special circumstances, the examination period may be extended to 12 months;

c). Opposition cases should be concluded within 12 months. Under some special circumstances, the examination period may be extended to 18 months;

d). Review of an opposition case should be concluded within 12 months. In some special circumstances, the examination period may be extended to 18 months;

e). Non-use cancelation cases should be concluded within 9 months. Under some special circumstances, the examination period may be extended to 12 months;

f). Invalidation cases before the Trademark Review and Adjudication Board should be concluded within 9 months.  Under some special circumstances, the examination period may be extended to 12 months.

8. Trademark Renewal. Trademarks can be renewed within 12 months prior to the expiration date. 

9. Prior use. Prior to the application date of the registered trademark, if the same/ similar trademark has been used by the third party on the same/similar goods/services and it has certain recognition and influence, the registrant of the trademark cannot forbid the third party’s use of the same/similar mark on its originally designated goods/services, but the registrant can ask the third party to add something to make that trademark distinguishable from the registrant’s trademark.

10. Trade name. The use of another’s trademark in one's company name or trade name is not permitted and may create liability under China’s Unfair Competition Law.

11. Principle of good faith. The new law adopts the principle of good faith during the registration and use of trademarks. Infringement of the trademark rights of others could result in fines worth five times the sales volume resulting from illegal business.  

12. Trademark agencies. The new law added the provision that trademark agencies are not allowed to accept entrustment if they know or should know that their clients are conducting a malicious registration or infringing on the trademark rights of others. Agencies violating the law will face fines and a bad credit record filed by industrial and commercial authorities. Those involved in serious cases will have their businesses suspended.

China is expected to raise the compensation ceiling for trademark infringement to 3 million yuan (about 490,000 U.S. dollars), six times the current limit, and lawmakers said Monday.

In cases of infringement, compensation of up to 3 million yuan shall be paid to the holders of trademark rights, according to the draft amendment to the Trademark Law, tabled for a third reading at the ongoing bimonthly session of the Standing Committee of the National People's Congress (NPC), China's top legislature.

The first draft amendment set the compensation ceiling at 1 million yuan, up from 500,000 yuan under the current law, while the second reading in June raised it to 2 million yuan.

The move aims to better protect exclusive trademark rights and further crack down on infringement, said Xie Jingrong, deputy head of the NPC's law committee, at the session which runs Monday to Friday.

China adopted its Trademark Law in 1982 and made amendments in 1993 and 2001.

As of June 2012, China held the world's largest number of registered trademarks and valid trademark registrations, at 7.17 million and 6.09 million respectively, according to the most recent official statistics.

The Chinese legal system contains a multifaceted apparatus to combat trademark counterfeiting. This apparatus is comprised of relevant laws and regulations, enforcement by multiple administrative bodies, and the ability to bring suit in the People’s Courts. This apparatus is also defined and reinforced by China’s membership in multiple international intellectual property agreements. The following is a brief summary of the key laws, regulations, structures, and agreements for combating trademark counterfeiting in China.

The Trademark Law of the People's Republic of China, China’s first modern trademark law, was issued in 1982. The current version was passed in 2001. A third revision has been placed on China’s legislation plan for public opinions and should be considered and passed in the near future. The Trademark Law is supported and expanded by the Regulations for the Implementation of the Trademark Law of China Supreme Court. Trademark rights in China are also supported by the “Law Against Unfair Competition” and the criminal law. The Unfair Competition Law, issued in 1993, forbids counterfeiting registered trademarks and famous marks. The Criminal Law contains several articles providing criminal punishments for serious cases of trademark counterfeiting and other intellectual property offenses.

There are three administrative agencies that typically enforce China’s various laws and regulations on trademark counterfeiting. China’s primary agency for trademark-related matters is the Agency of Industry and Commerce (“AIC”). In addition to overseeing trademark registration, recordation, and licensing, the AIC’s trademark office is the primary means of enforcement against trademark counterfeiting and other infringement. The Administration of Quality Supervision, Inspection and Quarantine (“AQSIQ”) can also bring enforcement actions in cases where counterfeit goods do not meet China’s quality standards. Finally, The General Administration of Customs (“Customs”) can bring enforcement actions against imports and exports that are suspected to infringe recorded trademark rights.

Each of these three agencies can transfer cases of criminal infringement to the Public Security Bureau (“PSB”) for further investigation, which can then transfer serious cases to People’s Protectorate for prosecution. Finally, Chinese law gives trademark rights holders the ability to bring suit in the People’s Courts.

In addition to domestic laws, regulations, and enforcement bodies, China is also a party to several international intellectual property agreements that bear on the trademark protection and the prevention of counterfeiting. Much of China’s modern intellectual property law has aimed to implement the provisions of these agreements. Additionally, the provisions of these treaties theoretically have direct force in Chinese courts for issues upon which Chinese law is silent and should control where in conflict with Chinese law.

China is a party to and is bound by the following relevant international treaties: the World Trade Organization Agreement on Trade-Related Aspects of Intellectual Property Rights, the Paris Convention for the Protection of Industrial Property, the Convention Establishing the World Intellectual Property Organization, the Madrid Agreement and Madrid Protocol; and the Nice Classification (Ninth Edition) for Classification of Goods and Services.

Recently, various organs of the Chinese government have passed and revised laws and regulations that impact the country’s trademark and anti-counterfeiting protections. In 2010, the State Council revised the Regulations of the People's Republic of China on Customs Protection of Intellectual Property Rights (“Customs IP Regulations”), first passed in 2004. The revised Customs IP Regulations clarify customs enforcement procedure and give greater enforcement power to Customs and IP rights holders. In 2011, the AQSIQ promulgated the Provisions on the Procedures of Administrative Penalties Related to Quality and Technical Supervision, which clarify and expand the investigation and enforcement powers of the AQSIQ. Finally, 2011 saw the issuance of the Notice of the Supreme People’s Court, the Supreme People’s Procuratorate and the Ministry of Public Security to Print and Issue the Opinions on Issues Concerning Applicable Laws for Criminal Cases Involving Intellectual Property Right Infringement. This notice clarified several provisions and terms within laws and regulations imposing criminal liability for IP counterfeiting and other violations.

Border measures

In order to assist and guide local Customs offices in uniformly conducting enforcement against counterfeit imports and export, China’s national Customs office has IP rights holders record their IP rights. It is not a prerequisite, however, to record rights in order to receive protection measures from Customs.

The rights holder must submit an application and complete the recording procedure for Customs. The recording is valid for a term of ten years. Trademark rights holders outside of China must file the application for recording by their branch offices set up in China or through an authorized agent in China.

The 2010 Customs IP Regulations list the following Customs protective measures:

Through application by the rights holder, Customs can detain alleged counterfeit goods. When such an application is made, the rights holder shall provide Customs with a security equivalent to the value of the goods. Customs may, on its own initiative, detain suspected counterfeit goods. If Customs detains goods in this manner, it shall inform the rights, who must reply within three days with security equivalent to the value of the goods if the holder wants to delay the detention; or
Customs may confiscate or dispose of counterfeiting on its own initiative.

Regarding the security, in addition to paying the security before the enforcement application, the rights holder may also provide a general guarantee valid for one year (minimum Rmb200,000) to Customs to cover detention applications. The implementation of the general guarantee rule has substantially improved the efficiency of applications for the detention of suspected infringing goods.

AIC action

The rights holder can invite the local AIC office to take enforcement actions when the counterfeiting is of a trademark registered in China. AIC enforcement can also be initiated by the owner of a well-known trademark, even if it is unregistered in China. The local AIC office where the counterfeiting happens has administrative enforcement jurisdiction. Compared to court enforcement, AIC actions are quite efficient, less costly, and thus welcomed by rights holders against counterfeiting in China.

The AIC can issue administrative punishments, which can include:

an administrative advice against possible infringers;

a disciplinary warning;

a fine;

detention and/or confiscation of counterfeit goods;

confiscation of illegal gains, unlawful property, or items of value;

suspension of production or business; or temporary suspension or rescission of business permits or licenses or administrative detention.

AIC can take actions not only toward trademark counterfeiting but also toward unfair competition. Sometimes rather than simply counterfeiting the trademark, the infringer forges the rights holder’s enterprise name, contact details, and related information or produces a misleading advertisement showing that the infringer has some kind of special relationship with the rights holder. Under the above situation, the rights holder can apply for AIC to start action against such unfair competition.

AQSIQ action

In China, AQSIQ is also responsible for cracking down counterfeit goods because some counterfeit goods do not meet Chinese quality or security standards. The AQSIQ’s new Procedure Rules for Administrative Punishment of Quality and Technology Supervision is expected to play an important role in the fight against counterfeiting. However, because this regulation just entered into force in 2011, it will take time for officers and rights holders to fully understand and utilize this government enforcement regulation.

Compared with litigation, the above administrative actions have many advantages. First, once counterfeiting has been established, the local administrative authorities can take immediate action, whereas litigation takes a considerably longer time. Second, the formality of documents required for an administrative action is less complicated than that required for litigation, and the cost involved in completing an administrative action is usually much lower than the cost of litigation.

Criminal prosecution

If an AIC action reveals preliminary evidence that counterfeiting meets the criminal level and constitutes a crime, the AIC will report to the PSB. The PSB will then take over and decide whether to initiate criminal procedure. When the judge in a civil trial finds the counterfeiting meets the criminal level, the judge should also transfer the civil case to the criminal division to initiate the criminal hearing.

Pursuant to Article 213 of the Criminal Law, using an identical trademark on the same goods without the permission of its registered owner shall, in cases of a serious nature, be punished with imprisonment of up to three years, and/or a fine; cases of a more serious nature, are punishable by imprisonment of between three and seven years, and a fine.

The following meet the criminal level for counterfeiting:

where the amount of illegal business is worth more than Rmb50,000 or the illegal gains are more than Rmb30,000;

where more than two registered trademarks are infringed and the amount of illegal business is worth more than Rmb30,000 or the illegal gains are more than Rmb20,000; or other circumstances of a serious nature.

Infringements of a more serious nature include:

where the amount of illegal business is more than Rmb250,000 or the illegal gains are more than Rmb150,000;

where more than two registered trademarks are infringed and the amount of illegal business is worth more than Rmb150,000 or the illegal gains are more than Rmb100,000; and other circumstances of an especially serious nature.

Since the PSB usually gives priority to more serious crimes than counterfeiting, Chinese law grants rights holder remedies even without PSB involvement. When the PSB refuses to accept a counterfeiting complaint, the rights holder can initiate the criminal procedure by himself through the court if the rights holder holds evidence. When the PSB is reluctant to accept the complaint, the rights holder can also apply to the procuratorate to execute the power of supervision over police, in order to urge PSB to step into the case.

On the other side, the rights holder can also file additional pleading to claim civil damages for the injury caused by the counterfeiting conduct, either during the criminal procedure or independently.

Civil enforcement

Article 52 of the Trademark Law provides that the following acts constitute an infringement of the exclusive right to use a registered trademark:

using a mark that is identical or similar to a registered trademark in respect of identical or similar goods without the authorization of the rights holder;

selling goods with the knowledge that they bear a counterfeit trademark;

counterfeiting or making, without authorization, representations of a registered trademark or selling such representations;
replacing a registered trademark and reselling goods without the authorization of the rights holder; or causing in other respects prejudice to the exclusive right of another person to use a registered trademark.

In the event of such infringement, the rights holder can file a civil lawsuit of trademark infringement against the suspected infringer before the court.

In China, civil IP cases are usually started in the intermediate court, and a party is allowed to appeal to a province-level high court if it does not accept the judgment of the first instance. Because of the rapidly rising number of the IP lawsuits being brought before Chinese courts, the Chinese Supreme Court has granted jurisdiction to hear civil IP cases, including trademark infringement disputes, to over one hundred district-level courts. Thus, many district courts in the downtown of large cities, such as Beijing, Shanghai, Guangzhou, and Shenzhen, have jurisdiction to hear the trademark infringement disputes.

As to the timeframe for an infringement case, according to Civil Procedure Law, the first instance of the case must be completed within six months after filing but it can be extended for another six months if the case is complicated and approved by the president of the trial court. The length for the appealing case in the second instance is the same as the time for the first instance. Therefore, for a trademark infringement case, it usually takes from about six months to two years to complete the entire process.

Remedies

According to Article 21 of the Interpretation of the Supreme Court on Several Issues Concerning the Application of Law in the Trial of Trademark Civil Disputes, the rights holder is entitled to the following remedies:

immediate cessation of the infringement;

confiscation of the counterfeit goods, materials, moulds, and representations of the forged trademark; and
compensation for damage.

There are three ways to calculate damages:

the profits lost by the plaintiff due to infringement, which are calculated by multiplying the reduced sales volume of the products by the unit loss per infringing product;

unjust enrichment by the defendant due to infringement, which is determined by multiplying the sales volume of the infringing products by the unit profit per infringing product; and
where damages cannot be determined by the methods mentioned above, statutory damages determined by the court up to a maximum of Rmb300,000 in regular cases and Rmb500,000 in cases with severe consequences or serious circumstances.

The rights holder shall also be entitled to recover reasonable expenses incurred during the course of enforcement, such as expenses for investigation, transportation, collection of evidence, statutory attorneys’ fees, and notarization fees with all official receipts towards the above expenses.

Anti-counterfeiting Online

When it is found that the infringer registered a domain name that is identical or confusingly similar to the rights holder’s name or mark, the rights holder can submit a dispute complaint before China International Economic and Trade Arbitration Commission Domain Name Dispute Resolution Centre (“DNDRC”). If DNDRC finds that the name was registered in or is being used in bad faith, then DNDRC will compel the infringer to return the name to the rights holder. The rights holder can also move for resolution before the court.

When the counterfeiting goods are offered by online sellers on a platform that is operated by an independent electronic business provider, such as www. Alibaba.com or www. Taobao.com, the rights holder can first send a lawyer warning letter to the business provider. After receiving the warning letter, the provider must take down the counterfeit goods offer in a reasonable time. If the provider refuses or delays in taking down the counterfeit foods, the rights holder can file a lawsuit against both of the seller and the electronic business provider before the court.

Preventive measures/strategies

The rights holder should provide the right certificate when initiating an action with the AIC. The AIC does not have as stringent requirements for evidence and procedures as the court does, and the procedure of authentication for documents is not required. The lawyer for the rights holder needs to prepare the administrative complaint bill and introduce the counterfeiting situation and the preliminary evidence.

Before initiating litigation, the rights holder should begin investigation, in order to collect accurate information about the suspected infringer, shareholders, the place where the infringement happens, and the scale of infringement. Chinese courts are very strict on examining the documents for the filing of the case. The investigation must be adequate before initiating judicial enforcement, in order to ensure the court does not have grounds to refuse to accept the case. Investigation can also help the lawyer to choose a proper litigation venue for the rights holder.

Measures in the exhibition

Recently, some infringers in China have overtly promoted counterfeits during exhibitions. The rights holder can take effective and powerful measures to protect his rights.

First, the rights holder must do detailed preparation, including conducting analysis on possible competitors and counterfeiters and maintaining well-prepared certificates of trademark and rights, as well as the documents for the power of attorney; Second, if counterfeits are found in an exhibition, the rights holders can contact the exhibition’s IP office or the local AIC office to step in. The AQSIQ office can also be contacted, depending on the factual situation. Third, the exhibition offers a good opportunity for the rights holder to collect the evidence of counterfeiting in order to file the suit.