Trademark Law Amendment and Related Regulations

Amendments to the PRC Trademark Law (“Trademark Law”) entered into effect in November 2019, and among the more notable changes were those intended to provide authorities with stronger tools for rejecting and invalidating bad faith trademark filings. 

(For an overview of the amendments, see SIPS update: https://sips.asia/tmlawamends.)

Rejection of Bad Faith Applications

The most significant provision in the revised law relating to bad faith filings was the addition of the following language in Article 4:

“Bad faith trademark registration applications not made for the purpose of using the trademark shall be rejected”. 

Shortly before the law entered into effect, the parent organization of the PRC Trademark Office (“TMO”), the State Administration for Market Regulation (“SAMR”), issued Several Regulations on Standardizing the Application and Registration of Trademarks (“Standardization Regulations”), which clarified the power of the TMO to reject bad faith trademark applications on its own initiative, i.e., without the need for third parties to first file oppositions.  (For further information on the Standardization Regulations, see SIPS update from December 2019 here: https://sips.asia/combatingtmpiracy.)  Over the course of 2020, the TMO has in fact begun rejecting applications by bad faith pirates and publishing some of its decisions online.

Interference Letters

To date, the TMO has refused to acknowledge the existence of a formal blacklist of bad faith filers.  However, prior to amendment of the Trademark Law, officials had indicated plans to create a database of bad faith actors intended for sharing among the TMO, the Trademark Review and Adjudication Department (“TRAD”) and the Beijing courts. Presumably, this database is now up and running.

Just how bad faith marks, filers and trademark agents are entered into the database remains ambiguous.  But the TMO has in the meantime encouraged brand owners to file informal reports (equivalent to “interference letters”) with examiners before pending application are examined.  SIPS has filed many such reports over the last two years, bringing the wider circumstances to the examiner’s attention, including the pirate’s history of bad faith filings.  This has resulted in the rejection of a number of applications, thus sparing the rights owners from the expense and uncertainty of filing oppositions and subsequent appeals.

In light of these new practices, SIPS is now recommending that clients monitor the TMO’s online database of registered and pending marks, with the aim of identifying problematic marks well before they are gazetted.  We are also suggesting contacting other victim brands to encourage them to file interferences, oppositions and invalidations as appropriate, with the aim of persuading Chinese authorities to take firmer action in cases that might otherwise be considered borderline.

Publication of Decisions

As noted above, at the beginning of 2020, the TMO began for the first time uploading a portion of the rejection notices issued against bad faith filers to its public database.  These decisions are for now only searchable by inserting the pirate’s name or the relevant application number.

Meanwhile, the TMO began publishing all decisions in oppositions in January 2020.  The TRAD has been publishing all of its decisions since December 2017.

The Beijing IP Court’s decisions are only published once they become final, i.e., either after any appeals to the Beijing Higher People’s Court are decided or where the court’s decisions have not been appealed.

Definition of Bad Faith

The Standardization Regulations also set out a range of criteria for determining when an application or registration may be deemed to have been filed in bad faith.  While the criteria are not particularly clear, the Standardization Regulations indicate that further rules will be issued in due course by the TMO, and it is indeed expected that further clarifications on the definition of “bad faith” will be issued in the first half of 2021, incidental to the updating of the Trademark Examination and Review Guidelines used by the TMO and the TRAD. 

In the meantime, the Beijing Higher People’s Court issued guidelines in 2019 that have proved useful in raising an inference of bad faith.  Among other things, the court’s Trial Guidelines for Administrative Cases Involving the Granting and Verification of Trademark Rights (“Trial Guidelines”) explicitly provide that bad faith will be inferred where (as often happens) a pirate targets different trademarks belonging to a particular trademark owner.

The Trial Guidelines also encourage adjudicators to consider the full prosecution history for a disputed mark, including acts by prior owners – thus making it harder for pirates to disavow acts of the original applicant.

And while not specified in the Trademark Law or recent regulations or judicial guidelines, Chinese authorities have increasingly made note in their decisions for oppositions and invalidations of the failure of pirates to provide evidence to support their assertions of good faith intent – a requirement under the vaguely-worded Article 7 of the Trademark Law, which states:

“When applying for or using a trademark, the principle of good faith shall be followed.”

While not explicitly stated in decisions, there is a clear sense that authorities are sometimes willing to effectively shift the burden of proving good faith (or, if you will, the absence of bad faith), after the victim brand has made a prima facie case showing the pirate’s bad faith. 

Fines against Bad Faith Filers and Their Trademark Agents

The amendments to the Trademark Law and the new Standardization Regulations grant Market Supervision Bureaus (“MSBs”) the power to issue warnings and impose administrative fines against trademark pirates and their trademark agents.

To date, there are reports of several cases in 2020 in which local MSBs in Shanghai, Beijing, Zhejiang Province and Shandong Province imposed fines against bad faith filers, as well as trademark agents.   More such cases are likely to be forthcoming in 2021.

All but one of the fines issued to date involved applications for COVID-19-related trademarks.  The only non-COVID-related case took place in Wenling City in Zhejiang Province in May 2020, following a complaint by a victim brand owner.  In its decision, the MSB noted that the pirate had filed 78 trademark applications – an excessive number given that the company had not yet commenced trading.  As such, the Wenling MSB concluded that the applications had been made in bad faith.  After the case was reported up to the TMO, 67 of the pirate’s applications were rejected and the MSB imposed a fine of RMB7,000 (~US$1,000) against the pirate.  It also asked the Zhejiang Provincial MSB to liaise with authorities in Guangdong Province to investigate and punish the trademark agency that had acted for the pirate.

Under the Standardization Regulations, fines up to RMB30,000 (~US$4,600) are possible where the pirate has generated illegal profits.  Absent such profits, the maximum is RMB10,000 (~US$1,500).  In addition, trademark agencies that knew or should have known that a client is filing trademark applications in bad faith may be fined up to RMB100,000 (~US$15,000) and the relevant authorities can stop accepting applications filed via the agency.

Under the Standardization Regulations, following the imposition of the foregoing fines, penalty data should be inserted to the PRC’s national enterprise credit information system, which can then lead to eventual “social credit penalties”.  (For an overview of China’s social credit penalty system as it relates to IP violators, see: https://sips.asia/socialcreditsip)

Risk for Defensive Filings?

As the revised Trademark Law and Standardization Regulations appear on their face to outlaw the filing of large numbers of applications for marks that are not intended for use, questions have been raised as to whether defensive applications and registrations by reputable brand owners may be vulnerable to new risks of invalidation.

Indeed, in one case recently handled by SIPS, the TRAD decided to invalidate a defensive registration of a trademark covering non-core goods, based on a petition filed by a bad faith pirate.  The TRAD’s decision (now on appeal to the Beijing IP Court) was based on an incorrect conclusion that the registrant had “obviously” registered in bad faith, which was in turn based on the registrant’s history of filing for over 1,600 marks.   Informal enquiries with higher-level TRAD officials confirm that the decision was an aberration and that there is no policy in place intended to attack defensive trademarks held by reputable companies.  Still, the risk of further attacks against defensive registrations by bad faith actors is clearly heightened now.

Towards a Common Law?

In July 2020, China’s Supreme People’s Court (“SPC”) issued the Guiding Opinions on Unifying the Application of Laws and on Strengthening Searches for Similar Cases (Trial Implementation) (“”), which encourage judges to search for relevant case decisions and refer to them when issuing their judgments.  The Guiding Opinions also encourage litigants to bring such cases to the court’s attention in their pleadings, and SIPS and other firms have begun doing so on a more systematic basis in appeal cases before the Beijing IP Court and Beijing Higher People’s Court.

Technically, under China’s Civil Law system, only decisions formally designated by the SPC as “guiding cases” are deemed legally binding.  But the Guiding Opinions reflect a trend under which the SPC is encouraging courts to carefully consider prior decisions as a means of ensuring more consistent results in cases involving similar facts and questions of law.

(For more on the Guiding Opinions, see SIPS memo: https://sips.asia/precedentsopinion).

Michael Jordan Case – Redux

One of the most famous examples of trademark piracy in recent years has been the registration and use of the surname part of Michael Jordan’s Chinese name, pronounced QIAO DAN (乔丹), by a local company now calling itself Qiaodan Sports Co., Ltd.  Qiaodan Sports has, for around 20 years, used not only the Chinese name QIAO DAN (乔丹) but also a logo that is remarkably similar to that of the renowned American basketball player.

In retrial decisions issued in 2016, the SPC invalidated two of Qiaodan Sports’ registrations for QIAO DAN in Chinese (乔丹) and commented on the company’s obvious bad faith intent.

Subsequently, Qiaodan Sports attempted to enforce rights in its surviving QIAO DAN (乔丹) trademarks (marks that had already been registered more than five years and were therefore outside the normal time limit for invalidation), targeting Amazon’s Beijing affiliate in a civil action.  In August 2020 the Beijing IP Court ruled in Amazon’s favor, and commented as follows on the limits of protection for bad faith registrations:

“… The principle of good faith guarantees that parties have the right to exercise and dispose of their own civil rights and to exercise their litigation rights within the scope of the law.  On the other hand, its premise requires that parties use their rights in good faith and prudently, and without harming third party interests or the collective public interest.  Where any actions violate the purpose and spirit of the law, [or] their purpose is to harm the legitimate interests of others, [or they result in] obtaining and exercising rights in bad faith, or they disrupt the order of fair competition, then they are an abuse of rights and their related claims should not be protected and supported by law…”

Reviewing Qiaodan Sports’ trademark filing history, the court concluded that “… it is difficult to say that Qiaodan Sports’ actions were proper when it obtained the trademark rights involved in the current case…”  Moreover, the Beijing IP Court noted that since “certain defects” existed in Qiaodan Sports’ registration of the trademarks it was seeking to enforce, its exclusive trademark rights should also be subject to certain limitations.

More recently, there have been press reports that in its decision of December 30, 2020, the Shanghai No. 2 Intermediate People’s Court noted that the purpose of Qiaodan Sports’ trademark filings was to cause the public to be deceived or to allow the public to be deceived.  In addition to Qiaodan Sports’ registration of QIAO DAN (乔丹), the court also noted that Qiaodan Sports had registered Michael Jordan’s old shirt number (“23”) and the Chinese names of his two sons (Marcus Jordan and Jeffrey Jordan).  

In the face of Qiaodan Sports’ bad faith and its continued ownership of the older registrations for QIAO DAN (乔丹), the court apparently felt it was necessary to take measures  “… to counter the idea in the minds of the public that there are connections between the plaintiff [Michael Jordan] and the defendant [Qiaodan Sports]…”  To that end, the court is reported to have ruled as follows:

  • Qiaodan Sports must publicly apologize to Michael Jordan in newspapers and on the internet, making it clear that Qiaodan Sports has no connection with Michael Jordan;
  • Qiaodan Sports must stop using the mark QIAO DAN in its trade name and enterprise name;
  • Qiaodan Sports must add “differentiating identifiers” if it makes any use of its QIAO DAN registrations (something that could perhaps render its original registrations vulnerable to cancellation for non-use in due course);
  • Qiaodan Sports must pay Michael Jordan RMB300,000 (~US$46,000) in compensation for “emotional distress” in accordance with the PRC Tort Law; and
  • Qiaodan Sports must also pay Michael Jordan’s reasonable litigation expenses of RMB50,000 (~US$7,700 – a modest, but symbolically useful gesture).

Future Directions

Although the foregoing positive developments mean that trademark owners now have more weapons to tackle trademark piracy, it remains the case that trademark piracy is rampant.  This will likely continue to be the case until there are painful financial consequences for engaging in trademark piracy and the Trademark Law is amended to grant trademark owners compensation for legal and investigation costs.  

Although the Wenling MSB fine against a pirate is encouraging in its way, RMB7,000 (~US$1,000) is hardly a significant deterrent.  The TMO’s rejection of 67 out of 78 trademarks filed by the pirate probably hurt it more, but the TMO will need to take such forceful action more consistently for the message to get through to the pirates.

Through its work with industry associations and with individual clients, SIPS is continuing with efforts to persuade Chinese authorities to adopt further changes in law and practice to address bad faith piracy, including in particular with respect to the following:

  • Accelerating and consolidating decision-making in appropriate cases, particularly where pirates have commenced use of the victim’s mark or threatened legal action as a means of securing excessive compensation through a forced transfer or licensing;
  • Allowing victim brand owners to recover legal and investigation costs from bad faith pirates, perhaps by recognizing such filings as a form of unfair competition; 
  • Allowing local MSBs to impose administrative fines against bad faith pirates;
  • Eliminating the five-year time bar on the filing of invalidations where the mark was deemed to have been filed in bad faith (currently only possible where the victim’s brand is deemed “well-known” or where the pirate is an obvious warehouser); and
  • Encouraging adjudicators to accept notarized evidence of oral admissions by pirates secured through private investigators (even if only as corroborating evidence).