China revises its trademark law to combat bad faith trademark filings
China is taking steps to strengthen its Intellectual Property laws. On April 23, 2019, the China National Intellectual Property Administration (CNIPA) enacted revisions to the country's trademark law to combat trademark filings which have been used to wreak havoc and extract wrongful payments from the rightful brand owners. The China trademark law has been amended to prohibit the registration of a trademark "without genuine intention to use."
The new Chinese trademark law also provides that trademark attorneys and agents have to inquire regarding their client's intention in filing a trademark application. The new law allows trademark examiners to conduct assessments of new applications to identify whether they may be part of an illegal filing pattern. This should assist in spotting and ultimately rejecting fraudulent trademark applications. When it has been determined that a trademark application filing is being made in bad faith, the attorney or agent is encouraged to refuse to file the application.
We believe that these recent amendments should reduce the need for brand owners to oppose and attempt to cancel such marks. Oppositions and cancellation proceedings in China have been very costly for brand owners.
The International Trademark Association (INTA) reports that over 7 million trademark applications were filed with the China Trademark Office in 2018. A large number of such applications are filed by entities attempting to receive payment from the true brand owner. These wrongful filings have a significant negative impact on brand owners requiring them to take action at substantial costs, both financially and operationally.
The trademark law changes increase potential damages for infringement based on direct evidence of willful infringement. In addition, the new trademark law now provides for increased statutory damages, when no direct evidence of damages is offered. Damages for willful trademark infringement under the trademark law change has been increased, now up to five times the actual damages proved by the trademark owner. Statutory damages have been increased to an amount up to RMB 5 million (currently $750,000 USD).
The new trademark law now provides that all counterfeit goods and all molds, including the materials used for such production, shall be destroyed upon the trademark owner's request. The amended trademark law sets forth that counterfeit goods shall not be put back into commercial circulation after removal of the infringing trademark. This was previously a low cost way an infringer could work around a settlement agreement or judgment in China, to the frustration of rightful trademark holders.
The current amendments to the trademark law support the belief that China is changing their perspective on intellectual property protection. Such change is important for Chinese citizens, as well as for foreign entities doing business in the country.
We will continue to monitor intellectual property laws in China and worldwide for our clients. Please watch for additional information as these changes evolve.
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Though Intellectual Property (IP) disputes are not uncommon in the pharmaceutical industry, the scale and prominence of this litigation are of rare magnitude.