Amendments to Chinese Trademark Law: Combatting Bad Faith Applications

The amended Chinese Trademark Law could solve one of the major obstacles in the enforcement of trademark rights in China: trademark squatting, the bad faith registration of trademarks with the intention to sell them later at a high price to the owner of the original trademark. The central new paragraph in Paragraph 4 of the Trademark Law is that applications for registration in bad faith which are not intended for use will be refused. The amended law will enter into force on November 1, 2019.

Expectations are high that this amendment will make it easier to combat trademark squatting. However, it will hardly be possible for the Trademark Office to determine whether a trademark is applied for in bad faith or for legal use – unless it is a simple copy of an already existing and relatively famous trademark.

The Rules to Strengthen the Administration of Trademark Application Activities are intended to assist the Trademark Office in this assessment. They oblige each applicant to prove the necessity of registration. If no planned use can be proven, the Trademark Office must reject the applications. Repeated applications and the filing of a high number of applications within a short period of time will also be rejected. The problem is that the Regulation contains many unclear provisions. For example, there is no definition of what types of evidence are accepted for the necessity of trademark registration. It may therefore still be up to the right owner to cancel the unlawfully registered trademark.

The second and also very important change is the increase of the compensation amount. The compensation for trademark use in bad faith can now amount to five times the damage suffered by the right holder (previously: max. three times). The upper limit for compensation has also been raised from RMB 3,000,000 (EUR 386,000) to RMB 5,000,000 (EUR 643,000), which is not only good news for right holders but also an important message in general: The fight against trademark infringement is taken seriously. After the last amendment of the Trademark Law, when the maximum compensation limit was raised from RMB 500,000 to RMB 3,000,000, the amount of compensation granted has increased significantly. In 2018, our cases showed that the courts often grant higher compensation.

Photo: Clay Banks / Unsplash

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