February 10, 2020
China’s law reform unequivocally prohibits fraudulent trademark applications for the first time. Kolster’s Partner Jani Kaulo explains what the change means for European companies in China.
China has revised its trademark law. A total of six articles were amended to better reflect the challenges facing trademarks. The most significant change is Article 4, which, for the first time, unequivocally prohibits trademark registrations filed in bad faith. Previously, the concept of ‘bad faith’ for fraudulently applying for a trademark was completely absent from the law.
“This article is intended to cover, for example, situations where the same company has applied for the registration of dozens of trademarks completely outside its own industry or in several different industries. Thus, it is apparent from the application that a genuine purpose for the trademarks is lacking”, says Kolster’s Partner Jani Kaulo.
According to Kaulo, the article amendment indicates that China is moving in the right direction with regard to weeding out trademark hijackings. However, the wording used at the end of the article on the purpose of the trademark limits the law’s scope of application considerably.
“The article now only prohibits trademark applications with no intention to use the trademark that is being applied for. By contrast, trademarks registered in bad faith that are introduced and used to later demand compensation from the ‘rightful’ owner of the trademark are excluded from the wording.”
The criteria for a trademark registered in bad faith are not defined in China’s law.
“In the European Union, there are four clear criteria from legal practice that are used to assess whether a trademark is fraudulent, but there is still very little of such legal practice in China. This makes it challenging for authorities and the court system to apply the new provision, and it remains difficult for trademark owners to invoke the article on bad faith.”
Trademark hijackers are also aware of the new law and may change their operations.
“Hijackers can spread their registrations out to several interlinked companies, making it more challenging to prove the provision on the purpose of the trademarks”, Kaulo says.
According to Kaulo, the new law provides tools mainly for large European and American companies with brands and trademarks that are known around the world. Also, the increase in the maximum compensation in court implemented with the law reform will mainly benefit well-known global brands.
“An unknown European company that is small on the Chinese scale will not benefit as much from the law. The company may not have used its own trademark in China, and the trademarks are often unknown to the Chinese public. Even a highly imaginative logo or word mark may be hijacked in such a way that it is still not possible to deal with the hijacking effectively under the law, unless it can be demonstrated that the applicant lacks the intention to use the trademark”, Kaulo says.
Trademark infringements in China concern not only foreign companies, but also local businesses.
“The willingness of the Chinese to tackle infringements has clearly increased. Despite the shortcomings of the law, the direction is the right one. With more legal practice and further reform of China’s trademark law, the status and protection of trademark rights in China will improve.”
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