Reflections on the 4th Revision of Trademark Law

Du Ying,[Trademark]

In April 2018, the 4th revision of the Trademark Law was initiated by official declaration of the Trademark Office of the State Administration for Industry and Commerce for public comment. The declaration points out that this revision “was to deeply carry out the spirit of 19th CPC National Congress, to strengthen innov a t i o n , prot e c t i on and exploitation of intellectual properties, and to materially improve the quality and efficiency of examination of intellectual property of trademarks,”1 by which the historic mission and main purposes are clearly delineated.
 
Backdrop of 4th revision of the Trademark Law
The history of China’s intellectual property regime is a process from “being forced to use it” to “using it for our own purposes,” that is, a process from involuntary implant to voluntary policy arrangement.2 The current Trademark Law of modern China was enacted in 1982, and implemented on March 1, 1983. In the 80’s of the 20 century, China acceded respectively to the Paris Convention for the Protection of Industrial Property, and Madrid Agreement Concerning the International Registration of Marks. For streamlining with international practices, and for the needs of the market economy development, the Trademark Law had its first overhaul in 1993, and the second in 2001, motivated for and aimed at compliance of the undertakings for the accession to the World Trade Organization. The first two revisions carried apparent attribution of “involuntariness” and “outside pressure.” But the third revision of the Trademark Law in 2013 was made “voluntarily” out of the present need in China. Following the policy footing of the third revision, the current revision will still be oriented by China’s present problems, and truly a metamorphosis of the intellectual property regime from involuntary legislation under foreign pressure to an initiative one.
 
What are the background and the main task of the current revision? In view of the author, the fundamental purposes of the third revision have been accomplished, expanding the subject matter of trademark, explicitly providing the time limit for reviewing trials, curbing overprotection famous mark, and unifying the infringement test, all for good practical results. Yet changes have emerged since the third revision in terms of China’s economic development, market environment, and the current status of IP protection, to which the current revision will provide response.
 
1.To cope with transformation of government functions and deepening of deregulation reform to facilitate trademark registration
In recent years, the Chinese government has been calling for changes in administration philosophy and methods, stressing on reduction of government interference in the market, lowering of administrative cost for market operation, and increase of market players’ vitality and innovativeness, with the most immediate result as the facilitation reform in trademark registration by reduction of the registration fee on one hand, and simplified process, quicker examination, and ease and efficiency of trademark registration on the other.
 
2.In response to China’s economic reform upgrade from, emphasis on speed to laying stress on quality leading to brand-building
In 2017, the number of trademark applications in China reached 5.748 million, a 55.7% increase from 2016. By year end of 2017, effective trademark registrations reached 1492, on top of the world for 17 consecutive years,3 but indigenous international brands are few and far between, a considerable distance from a strong trademark nation. For this reason, the design for trademark legal system should also push for internationalization of domestic brands. The 4th revision of the Trademark Law is to guide the building of trademark brands from the perspectives of regime and rule design.
 
3.Strengthening trademark protection by calling for honesty and good faith in business philosophy to build healthy market environment
The 2013 revision of the Trademark Law strengthened trademark protection from all perspectives, such as enlarging scope of trademark rights, fortifying relief for trademark infringement, etc., yet problems of free riding and trading on other’s business reputation still largely linger on, destroying the fair competition and honest market environment. This 4th revision needs to give consideration from the perspectives of mind-induction as well as systematic constraint.
 
Main problems targeted by the 4th revision
The problems faced by this revision are two-faceted in both substantive and procedural prongs. Substantively, it needs to resolve designing rules to crack down on bad faith registration of trademarks, while procedurally it needs to improve systems of examination for registration and opposition to increase examination efficiency.
 
1.Remolding of trademark use requirement in registrations scheme
China follows the trademark registration scheme, which is in line with traditions of China’s trademark legal system and international trend,4 and has the benefit of low costs.5 China’s first-to-file model with use requirement is only used as supplement, however, overlooks the substantive contents of trademark rights, leading in reality to the problem of trademark warehousing. Back in 2001, the Trademark Law clearly prohibited bad-faith trademark squatting of other’s mark under prior use having certain reputation, but bad-faith registration, trademark warehousing and profiteering have been rampant. From a positive point of view, this reflects societal recognition of the value of trademarks, and heightened awareness of trademark protection by market players. But on the negative side, “registering a mark without using it” reflects the absence of honesty of the market players, which runs counter to the fundamental designs of the trademark regime. For this reason, the 4th revision of the Trademark Law needs to readopt the trademark use requirement to put the system back on track.
 
The 3rd revision of the Trademark Law laid emphasis on trademark use when dealing with relief for compensatory damages in para. 1 of Article 64, only on the condition that infringement claim has been asserted, with limited effect for containing bad faith registration of marks. The widely discussed and more effective measures are the pre facto, interim and post facto measures. The pre facto measure is to require that the trademark registrant provide evidence or declaration of use or intent to use when filing application; the interim measure is to require that evidence of actual use be furnished during registration or at renewal; the post facto measure would invalidate a bad faith registration, or finding for noninfringement due to bad faith registrant’s trademark misuse.6
 
2.Reformoftrade mark examination scheme and opposition proceedings
Currently, trademark examination faces multi-faceted pressure, as examiners face tremendous workload with increasing applications, while work cycles are repeatedly shortened, making the examination work more difficult. The State Administration explored the big data solution for mark comparison, yet it could not replace human examination within a short time for the time disparity and technology limitation. Procedural simplification has become necessary, and it appears that the solution lies with elimination of relative grounds for examination, which is consistent with the private property right attribute of the trademark,7 which saves the time for trademark registration process. But the opposing view believes that this method will cost more for asserting trademark rights, and encourage bad faith registration. Whether examination on relative grounds will be eliminated, whether it will alleviate examiners’ workload, and whether subsequent procedural mechanisms may be set up, such as search report system, observation by third party system and the settlement system, ect., all depend on furthur investigation.
 
Trademark examination efficiency also relates to reform of the opposition scheme. Every revision of Trademark Law relates to opposition, as, e.g., the 2013 revision made significant changes to the scheme as to the grounds for application by the applicant who may request invalidity if not satisfied with a trademark registration, whereas the opposition proceeding upon implementation resulted in injury to opponents’ interest with drastically increased invalidation cases, and large scale of rampant bad faith oppositions.
 
From a global perspective , moreover, there are several modes of registration examinations: (1) absolute grounds examination + opposition before registration which is adopted by European Union, the United Kingdom and France; (2) absolute grounds examination + opposition after registration, represented by Germany; (3) all grounds examination + post facto opposition, represented by Japan and Taiwan of China; (4) all grounds examination + prior opposition, as adopted by China, which is the most complicated and time-consuming of all trademark examination procedures. It needs to be discussed upon this revision whether the currently acceptable absolute grounds examination + prior opposition or full scale examination + post facto opposition should be adopted.
 
A few relations need to be adjusted
While the above substantive and procedural issues need to be resolved, the following relations also need to be adjusted.
 
1.Based on China’s status quo in relation to learning from other countries good experiences
As previously stated, the 4th revision of the Trademark Law will ultimately address China’s needs to resolve practical problems, but it does not mean to reject in the revision process good practices and experiences from other countries, which will be overall evaluated in conjunction with the background system in the learning process. For example, in restructuring trademark use scheme, full consideration will be given to the limit of American practice. The United States adopts a unitary first-to-use scheme, which grounds the right on use, rather than on registration.8 For this reason, in borrowing from the rules, careful analysis must be made on the coupling relations.
 
2.Relations between guaranteeing quality and increasing efficiency
In the 3rd revision of the Trademark Law, t i m e l y requ i rement o f examination was added, mandating time limit for new applications to be 9 months without extension; all decisions by the Trademark Office on cancellation of registration, TRAB rejection on review, invalidation of absolute grounds, and withdrawal on review must be made within 9 months, or no more than 12 months.
 
For more complicated cases on relative grounds, it is no more than 18 months. In October 2017, the Trademark Office shortened the examination cycle from 9 months to 8, and further to 6 months by 2018. Under the circumstances of shortened examination cycles and continuous increase of applications, procedural reforms for this revision is of vital importance.
 
3.Relations between trademark examination authorities, review and adjudication authorities, and the judicial authorities
China practices dual scheme of IP protection in which, as administrative authorities for IP, the Trademark Office plays an important role in prosecuting and enforcing trademark rights. The ultimate trademark issues rest with the TRAB whose decisions will still be reviewable by courts. Therefore, trademark registration examination relates to three authorities of Trademark Office, the TRAB, and the court. The 3rd revision simplified the opposition scheme, channeling what could have been dealt with by the opposition proceedings to invalidation process resulting in increased invalidity review cases giving further pressure to the TRAB for responding to review lawsuits, as well as pressure to the courts for handling administrative trademark registration cases. Whether examination on relative grounds should be canceled, and how to lay out opposition proceedings must be carefully studied to balance the above triangular relations.
 
4.Relations of Trademark Law and other IP laws, the Unfair Competition Law, and other laws on civil affairs
On the substantive side, the Trademark Law, the copyright law, and the Patent Law are all stand-alone legislations for IPRs with shared commonalities as intrinsic attributes, and with provision importing in the application process of the laws as, e.g., in the conflict process of rights, consideration needs to be given to the provisions of other stand-alone laws. Procedurally, both trademark and patent prosecutions relate to divided responsibilities and cooperation between the administrative authorities and judicial authorities. Therefore, coordination is needed between the revision of the Trademark Law and the designs and rule contents of other stand-alone IP laws. The pending problems of the newly revised Unfair Competition Law also need to be considered.
 
Currently, the Civil Code is being compiled. From the macro perspective, whether and how IP [sic] should be codified need further exploration.9 From the perspective of systematic importing and rule designing, how civil code recognition of rights and interest should be reflected in the Trademark Law? When the Trademark Law gives insufficient provisions, whether it could be supplemented by civil liabilities? At the moment, the Supreme People’s Court (SPC) provides a solution of giving no protection in specific cases for trademark squatters by misusing their trademark rights. Can civil liabilities for compensatory damages be imposed, as a further step, on bad faith squatters and bad faith opposition requesters? These all need to be considered.
 
Additional comments
In the age of digital economy, further achievements could be made by using the new technology such as big data and AI to increase efficiency in trademark registration examination, and to strengthen trademark protection, promoting brand building. Therefore, promoting AI and digitization in trademark registration, protection and services is also within consideration for the Trademark Law revision. Meanwhile, this revision coupled with institutional implementation. Previously, protection of geographic indication are the responsibilities of three separate departments, which were respectively, the General Administration of Quality Supervision, Inspection and Quarantine (GAQSIQ), Ministry of Agriculture, and the premerger Trademark Office, which led to confusion of right holders, inconsistency in application and enforcement proceedings, and different legal nature and effects. After the institutional reform, the Trademark Office and GAQSIQ have been merged into State General Administration for Market Supervision so that the Trademark Law may, upon consideration, play some role in coordinating protection of geographic indication.
(Translated by Zheng Xiaojun)
 
References:
1. DU Ying, Social Progress and Trademark Views: the Past, Present and Future of Trademark Regime [M], Beijing: Peking University Press, 2012.
2. Trademark Law of United States [M], Translation by DU Ying, Beijing: Intellectual Property Press, 2013.
3. Trademark Law of Germany: German Laws Protecting Trademarks and Other Indicia [M], Translation by FAN Changjun, Beijing, Intellectual Property Press, 2013.
4. France: Intellectual Property Code (Law Part) [M], Translation by HUANG Hui and ZHU Zhigang, proof-read by ZHENG Chengsi, Beijing, Commercial Press, 2017.
 
 
1 See, Trademark Office Public Notice for Comments on Trademark Law Revision, at http://www.ctmo.gov.cn/tzgg/201804/t20180402_273481.html, last visited July 22, 2018.
2 Wu Handong, Balance of Advantages and Disadvantages: A Scientific Analysis of the Policies for Intellectual Property Regime, Journal of Legal Studies [J], 2006 (5): 6
3 5.748 Million Trademark Applications Filed in China, a 50% Increase from the Year Before, at http://www.chinanews.com/cj/2018/01-18/8427846.shtml, last visited July 22, 2018.
4 ZHANF Yumin, A Study of Trademark Registration and Securing of Right Procedure: In Pursuit of Balance of Efficiency and Justice [M], Beijing, Intellectual Property Right Press, 2016, 59-61.
5 DU Ying, The Law of Trademarks [M]. Beijing: Peking University Press, 2016: 76.
6 See, Supreme People’s Court exemplary case No. 82: WANG Suiyong v. Shenzhen Ellassay Fashion Co.
7 LIU Yun, WANG Hua, Revisit to the Trademark Opposition Scheme Speaking about the Private rights, Beijing University of Posts and Telecommunications (Social Science Ed.) [J], 2015(17):
35-40.
8 LI Mingde, American Intellectual Property Law [M], Beijing: Law Press, 2014: 531.
9 DU Ying, Consideration on the “Codification” of Intellectual Property, Northen Legal Studies [J], 2018 (3): 21-29.
 

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