IP Enforcement

PRC Trademark Prosecution Update

SIPSIP Enforcement, Knowledge

East IP provides updates on the latest developments in trademark prosecution in China, including news on the planned amendment of the PRC Trademark Law, strategies for dealing with bad faith filers, suspensions of appeals, consent letters, pendency and more.

  • The increased risk of refusals on absolute grounds;
  • The near-total rejection of consent letters as a basis for overturning refusals due to conflicts with prior marks;
  • The granting of suspensions by the Trademark Review and Adjudication Department (“TRAD”) in appeals of refused applications until related disputes over prior rights are resolved, and more predictable suspensions by the courts in such cases (up to one year);
  • The rejection of applications for assignment of marks from assignors that have a history of excessive filings and assignments to multiple third parties;
  • An increased level of support from local courts in civil actions against bad faith filers that use pirated marks – including one recent decision in which the victim brand owner was awarded compensation of over US$ 1 million;
  • Continued support for brand owners’ efforts to address bad faith registration, with the PRC Trademark Office (“TMO”) proactively refusing applications by parties with a history of mass bad faith filings;
  • A draft revision of the PRC Trademark Law that may be submitted to the Standing Committee of the National People’s Congress for review later this year, but is not expected to be enacted until at least 2026; and
  • Accelerated examination of various types of cases by the TMO, particularly with respect to non-use cancellations.
1. Increased Rejections on Absolute Grounds

Over the past year or so, the Chinese trademark authorities (including the TMO, the TRAD and the courts) have increasingly relied on absolute grounds, e.g., Articles 10.1.7 (marks that are deceptive or misleading), 11.1.2 (marks that are descriptive) and 11.1.3 (marks that lack distinctiveness) of the PRC Trademark Law to refuse applications for trademark registration. It is widely understood that this development is part of a broader policy aimed at reducing the vast number of trademark registrations in China.

Under Chinese law, marks that have been refused on descriptiveness or non-distinctiveness grounds pursuant to Article 11 may still be used as unregistered trademarks. Such marks might eventually qualify for registration on the basis of acquired distinctiveness. However, the standard for proving acquired distinctiveness in China is extremely high – and in some cases, similar to that required for recognition of well-known trademark status. To meet this standard, an applicant must provide a large volume of evidence to prove its extensive use and promotion of the mark over a long period of time in China. In addition, the applicant must submit satisfactory evidence showing that the mark enjoys a reputation sufficient to create a direct correlation between the mark and the applicant in the minds of Chinese consumers.

For further background, see our earlier firm memo here.

Status of Enforcement Campaign

In May 2023, the China National IP Administration (“CNIPA”) announced a new campaign to penalize the use of trademarks deceptive or misleading. Immediately afterwards, fears arose within the trademark community that marks deemed inherently unregistrable by the TMO would be subject to investigation by local administrative enforcement authorities – the Market Supervision Bureaux (“MSBs”) – resulting in fines and orders to cease the use of such marks.

Fortunately, there have been no signs that local MSBs have actually pursued any enforcement actions, and there is good reason to believe they will not do so.

But East IP is closely monitoring for changes in the status quo.

In the meantime, trademark owners are advised to keep the risks of enforcement in mind. But we are generally not recommending refraining from use of such marks, particularly if there is a sense that the TMO’s rejection was unreasonable.

Any penalty decisions by local MSBs are subject to appeal to a higher level MSB as well as to local courts.

See our earlier firm memo on this topic here.

2. Consent Letters

Until mid-2021, the TRAD and the Beijing courts typically accepted consent letters as grounds for permitting similar marks to coexist on the register. However, as we reported previously (see here and here), these authorities are now following more conservative policies, with the TRAD rejecting consent letters in almost all appeals and the courts approving them in only a small minority of cases.

As such, in practical terms, consent letters and co-existence agreements should no longer be seen as viable options for overcoming conflicts posed by prior marks.

That said, East IP recommends that trademark owners pursue appeals based upon consent letters in appropriate cases, and based upon the possibility that government policy will be revised during the next few years.

3. Suspension of Pending Appeals

In June 2023, the TRAD adopted internal rules permitting the suspension of the appeals of refused applications on the basis that a proper resolution must await the results of cancellations, oppositions or invalidations against cited marks.  See East IP memo on this development here.

Shortly after the issuance of the TRAD Suspension Regulations, the Beijing Intellectual Property Court (“BIPC”), the first-instance court for trademark rejection appeals, also announced its own new pre-docketing practice (“BIPC Pre-Docketing Practice”) allowing suspensions in such cases for a period of up to 12 months.

Since last year, the TRAD and courts have consistently implemented its suspension policies, thereby allowing trademark owners to avoid the cost and inconvenience of filing multiple “back-up” applications to keep a foothold on the register while awaiting resolution of related disputes over prior rights.

The BIPC Pre-Docketing Practice only applies where:

  • the refusal appeal is based solely on relative grounds (i.e., citations of prior marks), and noton absolute grounds (e.g., descriptiveness, non-distinctiveness, negative impact on social morality, etc. – refusals which have recently become more commonplace);
  • the plaintiff has taken action against the cited mark(s) before the issuance of the TRAD’s decision; and
  • the status of the cited mark(s) will substantively affect the disposition of the disputed mark.

In relation to point (a) above, the BIPC Pre-Docketing Practice will not apply in cases where a mark was refused on both absolute and relative grounds.

4. Rejection of Assignments

 As reported here, in April 2021, the TMO began issuing examination notices informing applicants of its intent to reject applications to assign marks that it has determined were filed in bad faith by pirates who have been placed on an unofficial blacklist. Such assignments are typically filed either where a pirate has agreed to transfer a mark to another pirate or warehouser, or where the buyer of the mark is a victim brand or an undercover investigator acting on a brand owner’s behalf.

In cases where the TMO has issued such examination notices, assignors are required to provide evidence of use or intent to use within 30 days after receiving notice.

If an assignor fails to provide valid evidence of use or intent to use, the TMO will reject the assignment application. Administrative appeals to CNIPA are very unlikely to succeed in overturning the TMO’s rejection.

The fact that the TMO is now looking more carefully at parties’ filing histories is clearly a positive development, as this should help deter bad faith pirates from filing en masse for other parties’ marksBut brand owners seeking to purchase marks from pirates should keep in mind the risk of refusal by the TMO when developing their strategies.

If, for tactical reasons, a brand owner elects to file trademark applications through a front company, it is strongly advisable to file through a company that is “clean”, i.e., one that does not have a significant record of trademark applications, particularly for third-party marks.

5. Civil Decisions against Bad Faith Filers

As reported in our recent firm memo here, Chinese courts have begun awarding substantial civil damages against bad faith registry pirates, including compensation of the legal costs of victim brands in pursuing registry actions, subject to a showing that the pirate has used the victim’s mark and/or that the pirate has taken enforcement measures that have interfered with the victims’ legal use of its brand.

The leading case in this regard involved a logo used on Coppertone sunscreen from 2018 (see our earlier case note here). More recent cases include those involving the brands Brita (see here), In-Sink-Erator (see here), Pearlosophy, as well as UFC and STAUD (disputes handled by our firm).

In 2023 and March 2024, Chinese courts issued four additional decisions involving the marks Santak, Shikang, Super Dry, and ReFa. While the holdings in these cases do not appear to break new ground, the compensation in these cases was significant. Just as importantly, these decisions suggest that future civil case against registry pirates will be handled by Chinese courts in a similarly positive fashion.

These new decisions also provide reason for victims of trademark piracy to consider filing civil actions at an earlier stage of disputes, and with the goals of perhaps achieving quicker settlements.

While encouraging and helpful, it is unlikely that the latest round of civil decisions will have an overwhelming deterrent impact on new bad faith filings. This is mainly because civil liability is now limited to cases where the pirates use the victim’s trademark and/or interfere with sales of genuine products. While the policy makers are considering amending the PRC Trademark Law to eliminate these conditions and thereby allow recovery of legal costs from pirates, the National People’s Congress is not expected to amend the law any time soon.

6. Draft Revision of the Trademark Law

In January 2023, CNIPA issued a draft revision of the PRC Trademark Law for public comment. See here  for our White Paper summarizing key changes proposed in the draft law and proposing further amendments to the draft by CNIPA.

On May 9, 2024, China’s General Office of the State Council issued the State Council 2024 Legislative Work Plan. The Plan indicates plans to submit a draft revision of the PRC Trademark Law to the  Standing Committee of the National People’s Congress.  However, enactment of the revision is unlikely to occur until 2026 at the earliest. 

7. Rejection of Bad Faith Applications

Since 2021, both the TMO and the TRAD have taken proactive measures to reject the bad faith applications during initial examination and invalidation on an ex officio basis, based both on an unpublished blacklist which the CNIPA maintains as well as on information submitted by the public.

Further, CNIPA has also begun imposing fines more routinely against trademark agencies that have assisted bad faith filers, typically in response to petitions from victims of bad faith registration. In addition to receiving fines of up to RMB100,000 (approximately US$14,000), the maximum permitted under relevant regulations, some agencies have had their right to handle trademark matters revoked by CNIPA.

CNIPA has not published comprehensive statistics on actions taken against bad faith filings.  But the following are those which are currently publicly available.

Actions 2021 2022 Jan-June 2023
TMO rejections based on bad faith 482,000 including:

– 60,400 for TM hoarding;
– 1,628 for harming public interest

372,000 249,000
Assignment rejections 3,522 173
Ex-officio cancellations of TMs by TMO 1,729 2,629
Oppositions and appeals 30,000 6,102
Invalidations 56,000

 

8. Changes in Pendency
Procedure Timeframe for Completion
Trademark Office
Official filing receipt for new application 1 month from application date (e-filings)
2 months (paper filings)
Notices of amendment 1 to 1.5 months from application date
Notices of refusal (examination) 3 to 5 months from application date
Publication of application 5 to 8 months from application date
Non-use cancellations 4 to 6 months from filing, assuming registrant files defense
7 to 10 months from filing where responses by paper
9 to 12 months from filing for International Registration
Cancellation based on genericness 7 to 8 months from filing date
Oppositions 10 to 11 months from opposition filing date
Change of name / address 1 month from application date
Change of agent approval 1 month from application date
Registration renewal 1 to 2 months from application date
Assignment 3 to 5 months from application date
Certified copy of registration certificate 2 months from application date
Notice to defend against opposition 5 to 6 months from the response filing date
Re-issuance of registration certificate 1 month from application date
Withdrawal of registration / application 1 to 2 months from application date
Trademark Review and Adjudication Division (TRAD)
Application appeals 6 to 8 months from filing date
Invalidations 11 to 12 months from filing date
Non-use cancellation appeals 7 months if no response
11 to 12 months from appeal filing date
Evidence exchange in invalidation 6 to 10 months from response filing date