China Trademark Law and Anti-Unfair Competition law amendments approved

The Standing Committee of the National People's Congress (NPC) approved the amendments to eight laws including the Trade Mark Law, Anti-Unfair Competition Law and Administrative Licensing Law on 23 April 2019.  The amendments to the Trade Mark Law will be effective from 1 November 2019.  The rest are effective immediately upon announcement.

Trade Mark Law

The main changes to the Trade Mark Law are aimed at tackling bad faith filings and hoarding.  Bad faith applications that are filed without an intention to use will be rejected by the Trade Mark Office.  Lacking the purpose of use has been added as an absolute ground for opposition and invalidation filed by any party.  Applicants of bad faith filings will face administrative penalties such as a warning or fine.  For trade mark lawsuits filed in bad faith, the court can punish the parties who brought the lawsuits.  The amendments also significantly increase the statutory compensation to Renminbi (RMB) five million (approximately USD 740,000).  The changes to the laws are positive and in favour of brand owners.

Trade mark agents who know or should know that the applications are not for the prescribed purpose should not accept the authorisation to act for the applicants.  If any agent violates this article, a record will be added to the database of the Industry and Commerce.  For serious cases, the Trade Mark Office and Review and Adjudication Board will refuse to accept the cases handled by such agents.  If an agent violates the principle of honesty and credibility and harms the interests of the entrusting party, the agent should face civil liability and punishment the industry association.

The amendments also add heavy punishment for infringers.  For malicious infringements, the compensation shall be determined as one to five times of the losses suffered by the trade mark owners or profits of the infringers.  In addition, the statutory compensation is also raised from RMB three million to five million.

For trade mark lawsuits, the court shall order the destruction of goods bearing the counterfeit trade marks following the request of the trade mark owner, except in special circumstances.  For the materials and tools mainly used to manufacture goods bearing a counterfeit registered trademark, the court shall order their destruction, without any compensation; or in particular cases, the court shall prohibit these materials and tools from entering commercial channels, without any compensation.  The goods previously bearing a counterfeit registered trade mark shall not enter commercial channels even though the trade mark no longer appears on them.

 

Anti-Unfair Competition Law

The amendments to the Anti-Unfair Competition Law are mainly with respect to trade secret protection.  The definitions of trade secrets and the relevant infringing activities have been broadened and specific rules relating to trade secret civil litigation have been enacted.  Statutory damages have increased to RMB 5 million which is consistent with the Trade Mark Law.

Trade secrets used to relate only to technology and business information.  The new law has extended the definition to other commercial information in addition to what was previously covered.

The new law includes the infringing activities that any party, either an individual or entity, who has been engaged in teaching, inducing, assisting others in obtaining, disclosing, using or allowing others to use the trade secrets should be considered an infringement.  This means those who facilitate the trade secrets infringement will also be pursued.

For a long time, the trade secret holder has struggled to file lawsuits as they often lacked the evidence to prove their “trade secret” or another party’s infringement.  The new law aims to address this issue by adding clauses to reduce the rights holders’ burden of proof.

If the trade secret holder has prima facie evidence to prove they have taken steps to protect their trade secret and reasonably demonstrate their trade secret has been infringed upon, the suspected infringer should prove the claimed trade secret is not that which is defined under the law.

In addition, if the trade secret holder has prima facie evidence to show their right has been infringed upon, the suspected infringer is liable to prove they have not conducted such infringing activities.  The prima facie evidence includes: a) the suspected infringer has the channel or opportunity to obtain the trade secret or the information they have used is substantially similar with the claimed trade secret; b) the trade secret has been disclosed, used or has the risk of being disclosed or used; and c) any other evidence that can show the trade secret has been infringed upon.

The speedy approval of the amendments to two important laws demonstrate that China is reinforcing the protection of Intellectual Property alongside its economic development.  It is predicted that some ambiguous terms in the laws will be clarified in the Implementation Regulations.

A further analysis of the impact of these changes will follow shortly.