China legal update: Trademark Law and Anti-Unfair Competition Law Amended for Better Protection of the Right Owners

I. Legal News

Eight Laws¹ including the PRC Trademark Law and PRC Anti-Unfair Competition Law were amended on April 23, 2019 at the 10th Meeting of the Standing Committee of the 13^th National People’s Congress. All the amendments will come into effect immediately except for the Trademark Law, which will come into effect on November 1, 2019.

These amendments, together with the recently issued Foreign Investment Law, are said to be released in effort to improve the business environment. Among the revised provisions, we highlight the Trademark Law and the Anti-Unfair Competition Law for you to have a better understanding.

1. New Regulations on Malicious Application for Registration and Harsher Punishment in the Trademark Law

As the provisions regulated in the current Trademark Law are not strong enough to prevent a malicious trademark application, trademark squatters are consequently widespread in China. Once a malicious trademark has been registered, pursuant to the law, one can file an objection; however, in practice, to win the case, the applicant has to collect substantial evidences. In order to regulate malicious application for trademarks registration, a series of new provisions are added/amended in the Trademark Law, for example:

(1)  Any malicious application for registration of a trademark not for the purpose of use shall be rejected;

(2) A trademark agency shall not accept the entrustment when it knows or should have known that the applicant’s intent is to file malicious application not for the purpose of use; otherwise, the trademark agency may be faced with an administrative fine amounting up to RMB 100,000 subject to the severity of the circumstances;

(3) In case the afore-mentioned malicious trademark application passed the preliminary examination, one can raise an objection to the Trademark Office within three months from the date of announcement of preliminary examination;

(4) In case the afore-mentioned malicious trademark was successfully registered, the Trademark Office can cancel it by itself. Also, one can request Trademark Review and Adjudication Board to cancel such malicious trademark; and

(5) The punishment for infringement of such rights has been enhanced. Previously, for seriously malicious trademark infringement, the amount of compensation was up to three times of the amount determined in light of calculation on actual losses of right owner. Currently, it has been raised up to a maximum of five times the amount. When it is hard to determine the right owner’s actual losses or the infringer’s interests obtained due to the infringement, the People’s Court may decide a compensation of an amount up to RMB 3 million before, now it is raised into RMB 5 million.

From the above, we can see that the wording added in the new law is that “malicious application not for the purpose of use” shall not be registered, instead of directly adding “malicious application”. Thus, it is an important point for us to monitor what is “not for the purpose of use”.Further clarifications are still needed, for example, it is not clear on what kind of evidence needs to be submitted to prove the trademark registration is “malicious” and “not for the purpose of use”.

2. Enhanced Protection of Commercial Secrets in the Anti-Unfair Competition Law

To better protect the right owners’ commercial secrets, many important provisions are revised in the Anti-Unfair Competition Law. We hereby list three eye-catching ones:

(1) Burden of Proof

Previously, it was hard for a right owner to prove an infringement act has been committed by the alleged infringer as the burden of proof shall be borne by the right owner. In the new law, the burden of proof can be switched to the alleged infringer on the condition that the right owner provides some preliminary evidence and makes “reasonable indications”. This is a major change in the Law and further explanations should be further released as to the interpretation of such condition.

(2) Electronic Intrusion

With respect to improper means to obtain the commercial secrets, “electronic intrusion” (such as email, USB disk) was added in addition to the traditional means such as “theft”, “bribery”, etc.

(3) Civil liabilities and administrative liabilities have been enhanced.

For civil liabilities, the potential compensation has been raised to up to five times the amount of the actual losses of the right owner or the interests obtained of the infringer. Similar to the Trademark Law’s revision, the People’s Court may decide a compensation of up to RMB 5 million when it is hard to determine the actual losses or the interest obtained (previously RMB 3 million).

For administrative liabilities, administrative penalties have been enhanced: illegal gains may be confiscated, and any infringements on commercial secrets shall be fined from RMB 100,000 to RMB 1 million, while in serious circumstances, the fine shall range from RMB 500, 000 to RMB 5 million.

(http://www.npc.gov.cn/npc/xinwen/2019-04/23/content_2086193.htm)

II. Hot topic

The second Belt and Road Forum on International Cooperation (“Forum”) is held in Beijing (from April 25 to 27, 2019). The forum is the highest-level platform of international cooperation under the Belt and Road (B&R) framework, said Wang Yi, the State Councilor and Minister for Foreign Affairs. The theme for this year is “Belt and Road Cooperation, Shaping a Brighter Shared Future.” To date, leaders including heads of state and government from 37 countries will be attending the roundtable summit in the Forum. It is expected that a communique will be issued after the roundtable summit, showing the political consensus of leaders all over the world to jointly build the B&R.

It is said that last year’s Forum provided a fruitful result that a total of 68 countries and international organizations has signed B&R cooperation agreements with China. There are some innovative arrangements to be decided in the second Forum this week, such as setting up sub-forums focusing on practical cooperation, and holding a conference specifically organized for the business entrepreneurs.

According to a report² titled “The Belt and Road Initiative: Progress, Contributions and Prospects” issued ahead of the Forum, China’s direct investment in B&R countries surpassed $90 billion, realizing a turnover of $400 billion in foreign contracted projects from 2013 to 2018. Chinese businesses made a total of $15.6 billion in non-financial direct investment in B&R countries, growing by 8.9 percent year-on-year and accounting for 13 percent of China’s total non-financial foreign direct investment (FDI) in 2018. The report also cited a World Bank study that the transportation network proposed by the initiative can lead to a 4.97 percent increase in total FDI flows to B&R countries. In addition, it is said that as B&R countries has generated huge demands on industrial cooperation, China has boosted market-oriented cooperation with relevant countries and has signed agreements with more than 40 countries detailing the cooperation programs with regional organizations such as the ASEAN and African Union.

(http://www.beltandroadforum.org/)

① The Decision adopted by the Standing Committee of the 13^th National People’s Congress introduces revisions to the Construction Law, the Fire Protection Law, the Electronic Signature Law, the Law on Urban and Rural Planning, the Law on Vehicle and Vessel Tax, the Trademark Law, the Anti-Unfair Competition Law and the Administrative Approval Law.

② Office of the Leading Group for Promoting the Belt and Road Initiative, “The Belt and Road Initiative: Progress, Contributions and Prospects”, see:
< http://www.xinhuanet.com/english/download/TheBeltandRoadInitiative
ProgressContributionsandProspects.docx. >

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