China TM Law&Anti-Unfair Competition Law Amendments Approved

Carol Wang

Amanda Yang

22 Apr 2019

Trade Mark Law

The Standing Committee of the National People's Congress (NPC) approved the amendments to eight laws including the Trademark Law, Anti-Unfair Competition Law and Administrative Licensing Law on 23 April 2019.

The amendments to the Trademark Law will be effective from 1 November 2019. The rest are effective immediately upon announcement.

The main changes to the Trademark Law aim at taking action against bad faith filings and hoarding. For the bad faith filings that are filed not for the purposes of use will be rejected by the trademark office. 

Lacking the purpose of use has been added as the absolute grounds for opposition and invalidation filed by any party. Applicants for the bad faith filings, will face administrative penalties such as a warning, fine etc. For trade mark lawsuits filed in bad faith, the court can punish (the parties raise the lawsuits). The amendment also highly raised the statutory compensation to RMB five million. 

The changes to the laws are positive and in favour of trademark owners.

For trade mark agents who know or should know the applications to be filed are not for the proscribed purpose, the agents should not accept the authorization from the applicants. If the agents violate this article, the records will be added to the industry and commerce’s database.

For serious cases, the trademark office and the review and adjudication board will refuse to accept the cases handled by these agents. If the agents violate the principle for honesty and credibility and hard the interests of the entrusting party, the agents should be liable for civil responsibility and punishment by the industrial association.

The amendments also add heavy punishment on infringers. For the malicious infringement, the compensation shall be determined for one to five times of the losses suffered by the trademark owners or gains of the infringers. In addition, the statutory compensation is also raised from RMB three million to five million (around USD 0.45 million).

For trademark lawsuits, the court shall order to destroy the goods bearing the counterfeit trademarks following the request of the trade mark owner, except for special circumstances. 

For the materials and tools mainly used to manufacture the goods bearing a counterfeited registered trademark, the court shall order to destroy them, without any compensation; or in particular cases, the court shall prohibit the said materials and tools from entering commercial channels, without any compensation. 

The goods bearing a counterfeit registered trade mark shall not enter commercial channels even though they do not bear the said trade mark any longer.

Anti-Unfair Competition Law

The changes to the Anti-Unfair Competition Law, are mainly with respect to trade secret protection. It has broadened the definitions of trade secrets and the relevant infringing activities, increased the statutory damages up to RMB 5 million, which is entirely consistent with the  Trademark Law as well as specified in the civil procedure rules regarding trade secrets.

The trade secrets used to refer to technology and business information. The new law has extended this to other commercial information in addition to what was previously covered.

The new law adds the infringing activities that any party, either individual or entity, who have been engaged in teaching, inducing, assisting others in obtaining, disclosing, use 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 were often lacking evidence to prove their “trade secret” or another party’s infringement. The new law seems to address this issue by adding the clauses to facilitate the right holders’ burden of proof.

If the trade secret rights holder has the 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 in the law.

In addition, if the trade secret rights 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.

Clearly the quick amendment of the two important laws have demonstrated China is reinforcing the IP protection alongside with its economic development. It is predicted that some ambiguous terms in the laws will be further construed in the implementation regulations.

We will producing further analysis of these changes very soon and will share them with you.