Legislation & Policy

Recent Developments in Trademark Prosecution in the PRC

SIPSKnowledge, Legislation / Policy

This report provides updates on a range of encouraging developments relating to PRC trademark prosecution, including in particular:

  • bad faith registration;
  • the use of consent letters;
  • suspension of co-pending cases;
  • non-use cancellations;
  • the recent introduction of electronic registration certificates (in lieu of paper certificates);
  • new risks for defensive filings; and
  • applications for change of agent.
Trends Regarding Bad Faith Registration

The 2019 amendments to the PRC Trademark Law included various provisions intended to address bad faith trademark registration. See SIPS’ memoranda here (April 2019) and here (June 2021).

In the three years since the revised law was introduced, brand owners have generally found it easier to prevail in oppositions and invalidations where the target marks have been filed by trademark “hoarders” that file marks in large numbers or where the pirate’s “bad faith” is otherwise readily apparent. The Trademark Office (TMO) of the China National Intellectual Property Administration (CNIPA) has also taken proactive measures to address such marks by rejecting them during initial examination and invalidating them on an ex officio basis, based both on an unpublished blacklist which CNIPA maintains as well as information submitted by the public.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 (US$13,000), the maximum permitted under relevant regulations, some agencies have had their right to handle trademark matters revoked by CNIPA.

CNIPA recently published the following statistics on actions taken against bad faith filings in 2021:

Applications rejected by TMO 60,000
Withdrawn by applicant 50,000
Rejected due to failure to pay official fees 370,000
Accelerated rejections against squatters 1,111
Registrations invalidated ex-officio by TRAD 1,635
Cases transferred to local MSBs for investigation 1,062 clues
Cases investigated by MSBs 53 cases
Administrative penalties imposed by MSBs 33 cases
Clues submitted to CNIPA: 835
Resulting in ex offico invalidation 982
Resulting in rejection of applications 517

While the foregoing steps are clearly encouraging, there are no signs that trademark pirates or their trademark agencies have been subjected to “social credit penalties” that were promised under regulations issued in 2020. And while there are anecdotal indications that the overall level of bad faith filings has decreased, the phenomenon remains severe due to the windfalls that pirates expect to generate and the lack of more predictable consequences.  So while the chances of success in for victim brands in legal actions have improved since amendment of the law in 2019, registry pirates continue to pose a menace to brand owners that fail to timely register their marks in China.

CNIPA revealed in August 2022 that it is recommending to legislative authorities that the Trademark Law be amended to further deter bad faith filings through a few new measures, including by providing an explicit right for victims to secure compensation from civil courts for the costs incurred in pursuing remedies at the register. However, the legislature (the National People’s Congress or “NPC”) has not yet announced a timetable for the next amendment of the law.

Rejection of Assignment Applications Involving Bad Faith Marks

In April 2021, SIPS reported (here) that the TMO had begun issuing examination notices informing applicants of plans to reject applications to assign marks deemed to have been filed in bad faith by pirates appearing in CNIPA’s unofficial black list. 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.

The TMO’s goal was of course admirable: to discourage bad faith filings by making it more difficult for pirates to profit. However, where the victim brand is the buyer, the TMO’s objections have obviously proved frustrating since they typically result in significant delays and added costs.

Fortunately, the TMO appears to be approving most such assignments these days, based upon evidence of use by the victim brand owner.

But SIPS advises companies seeking to acquire marks from blatant pirates to file their own back-up applications in case the TMO rejects the assignments. We also recommend that assignment agreements include provisions obligating pirates to apply to de-register their registrations or withdraw pending applications in lieu of assignments, so that the pirate marks can be cleared from the register if the assignments are refused.

Negative Trends for Consent Letters

Until mid-2021, CNIPA 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), the CNIPA’s Trademark Review and Adjudication Department (TRAD) and the Beijing courts are now following more conservative policies, with the TRAD rejecting consent letters in almost all appeals and the courts approving them in only a minority of cases. Indeed, at the time of this writing, the Beijing Higher People’s Court appears to be approving marks based upon consents in only about 20% of appeals.

SIPS continues to monitor TRAD and court decisions involving consent letters for signs of a change in policy. In the meantime, trademark applicants are advised to assume the worst. Specifically, we suggest that applicants:

  • assume the final outcomes of any appeals involving consents will take three to four years, and require significant additional costs for two levels of court appeals;
  • seek protection for variations of marks that are more likely to be deemed registrable; and
  • present the TRAD and courts with detailed coexistence agreements in cases involving consents, to help demonstrate that the parties are taking reasonable steps to avoid consumer confusion.
Suspension of Co-Pending Cases

CNIPA and the Beijing courts are continuing to refuse most requests by brand owners to suspend the examination of cases where the outcome is contingent on decisions in co-pending cases, such as non-use cancellations, oppositions and invalidations. As a result, SIPS normally advises clients to refile applications – in many cases multiple times – and to abandon existing applications as a means of minimizing costs that would otherwise be incurred pursuing appeals.

CNIPA appears to be aware of the concerns of the trademark community and mindful of the significant resources being wasted due to its current policies. In August 2022, CNIPA revealed that it was preparing recommendations to the NPC to amend the Trademark Law to specifically permit suspension of co-pending cases. As noted above, there is no timeline announced yet for amendment of the law. As such, we anticipate no changes in the status quo with respect to case suspensions for at least another two years.

E-Certificates

On October 12, 2021, CNIPA formally announced that from January 1, 2022, the TMO will only issue electronic copies of trademark registration certificates, and hard copies will no longer be printed. Going forward, enforcement authorities and online trade platforms handling take-down work are now accepting e-certificates in lieu of paper copies.

Since 2018, CNIPA has gradually increased its reliance on electronic notices, and currently most official documentation is issued to parties in electronic form, including filing receipts, approval certificates for renewals, certifications of registration (required for enforcement of International Registrations), name and address changes, and refusal notices.

Restrictions on Change of Agent Applications

Under a revision of CNIPA’s trademark examination guidelines issued in early 2022, owners of trademark registrations are now formally prohibited from changing their agent of record. CNIPA has not publicly explained the reason for this change, but very likely it is motivated by resource concerns.

CNIPA has offered a work-around for foreign registrants (although not local rights holders), by allowing them to apply for a change of the contact details for the agent of record, effectively allowing a new agent to take the place of the prior agent. Meanwhile, for pending applications, the TMO continues to allow the filing of applications for change of agent.

Trademark owners seeking to purchase marks from registry pirates will need to keep the foregoing practices in mind when negotiating transfer agreements, particularly where assignments are initially made to an investigator’s front company registered in China.

Non-Use Cancellations

Non-use cancellations have been one of the best and least expensive ways to clear the deadwood on the registry and to remove bad faith registrations. A trademark becomes potentially vulnerable to cancellation for non-use if it has been registered for more than three years. In the past, the TMO would maintain the registration for all goods covered by a trademark in a cancellation action targeting the entire registration, even if the registrant can only prove use with respect to other non-similar goods.

This practice changed in early 2022. Now the TMO will no longer maintain the entire registration if the registrant is only able to prove use on certain items. Instead, the TMO will order the deletion from the registration of goods for which use has not been proved, while leaving the registration intact for those where use has been proved.

In addition, in mid-2022, the TMO began requiring petitioners to include in their cancellation arguments prima facie evidence of non-use. Previously, petitioners merely needed to allege non-use. However, acceptable evidence can be limited to mere web searches.

Defensive Filings at Risk?

Where a trademark applicant files a relatively large number of applications at the same time, the TMO has recently begun requesting that the applicant provide evidence of use, or a statement of intent to use, together with corresponding supporting evidence. This change in practice is no doubt intended to deter bad faith filing by warehousers, but it also affects legitimate brands that seek defensive protection. As such, it is now advisable to file defensive applications in smaller batches.

2021 – Trademark Filings in China

CNIPA recently issued the following statistics on trademark in 2021.

Highlights
Total valid trademark registrations in China: 37 million (+23.4%)
Applications filed: 9.45 million (+1.1%)
Registrations approved: 7.74 million (+34.3%)
Applications filed by domestic applicants: 9.19 million (+0.8%)
Percentage filed by domestic applicants: 97% (-0.3%)
Applications filed by foreign applicants: 0.26 million (+11.6%)
Percentage filed by foreign applicants: 3% (+12.5%)
Geographical indications approved: 2,490 (+4.1%)
Collective + certification trademarks approved: 6,562 (+7.8%)
Additional Data
Service marks
Applications 3.22 million (+7.3%)
Trademark examination
Applications examined 10.57 million (+20.3%)
Average timeline for examination 4 months
Average timeline for registration 7 months
Trademark registration
Registrations approved for domestic applicants 7.55 million (+35.3%)
Percentage registered by domestic applicants 97.5%
Registrations approved for foreign applicants 190,000 (+5.2%)
Percentage registered by foreign applicants 2.5%
Publication rate 56.9%
Refusal rate 15.2% partial
27.8% total
Total valid trademark registrations
Valid registrations held by domestic applicants 35.32 million (+24.4%)
Percentage held by domestic applicants 94.9%
Valid registrations held by foreign applicants 1.92 million (+7.7%)
Percentage held by foreign applicants 5.1%
Trademark opposition
Opposition applications accepted 180,000 (+31.1%)
Formality examination completed 170,000
Formality examination duration 2.5 months
Opposition examination completed 160,000 (+10.1%)
Opposition examination duration 11 months
Percentage of oppositions supported 38.6%
Percentage of oppositions partially supported 10.4%
Percentage of oppositions rejected 51%
Opposition decisions published 160,000
Trademark review and adjudication
Invalidations accepted 430,000 (+28.8%)
Invalidations decided 380,000
Rejection appeal cases accepted 380,000
Rejection appeal cases decided 310,000
Current Timeline for Prosecution Matters

The following chart indicates the time required for most standard trademark prosecution matters in China. Over the last year, timelines have generally accelerated by a month or so for trademark applications, appeals of rejected applications, non-use cancellations, and oppositions.

Procedure Timeframe for Completion
Trademark Office
Official filing receipt for new application 1 month from application date (e-filings)
2 to 4 months (paper filings)
Notices of amendment 1.5 to 2 months from application date
Notices of refusal or approval 3 to 4 months from application date
Publication of application 5 to 8 months from application date
Non-use cancellations 7 to 11 months from application date
Cancellations based on genericness 7 to 8 months from filing date
Oppositions 6 to 10 months where no response by applicant
10 to 12 months where applicant responds
Change of name / address 1 to 2 months from application date
Change of agent 1 to 2 months from application date
Registration renewal 1 month from application date
Assignments 3 to 7 months from application date
Certified copies of registration certificates 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 2 months from application date
Trademark Review and Adjudication Division (TRAD)
Application appeals 5 to 8 months from appeal 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 invalidations 7 months from response filing date