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21 February 2017

Peculiarities of Registration and Protection of Exclusive Rights to Trademarks in China

Keywords: intellectual property, means of individualization, exclusive rights, registration of subject-matters of intellectual property, trademark, registration of a trademark, filing an application for a trademark, trademarks in China, registration of a trademark in China, protectability of a trademark, registration and protection of intellectual property in China, protection of exclusive rights to trademarks, unfair competition in China, early termination of legal protection of a trademark in China

The effective protection of trademarks, the designations used for the individualization of goods and services, is one of the components of the business success when expanding it to the markets of China. The entrepreneurs who invest enough of money and time to build up the reputation of their own company should undertake all measures to make the protection of their brand in the PRC without “a vulnerable spot” from the legal point of view.

 First of all, it must be remembered that the Chinese legislation is based on the principle of registering the mark of the applicant, who was the first to file an application. Thus, it is necessary to register trademarks in China before starting any business with their use there, in order to avoid the refusal of registration because of the presence of identical/similar marks and designations registered/applied by third parties, including (and quite often) in bad faith. Moreover, it is necessary to file an application as early as possible, as it takes up to 18 months to carry out the registration process, and the legal protection shall be granted to the mark only after the issuance of a certificate. The standard 6-month period is stipulated to establish a convention priority concerning the date of filing an application in a foreign country, as China is a member to the Paris Convention.

The trademark in China, as in other states, is a designation whose main purpose is to individualize the goods and/or services of a particular manufacturer. In order to be registered, the applied designation must comply with the “standard” criteria for protectability: not to represent or contain the designations that are identical/similar to the official symbols, not to be discriminatory, not to mislead consumers regarding the manufacturer and/or the declared list of goods/services, etc. The trademark must have a distinctive ability. And, of course, the existence of identical/similar marks, which have been registered/filed for registration earlier with respect to the similar goods and (or) services will hinder the registration of a trademark.

There are two ways to obtain the legal protection for a trademark in China: by filing a national application with the Chinese Office or filing an international application under the Madrid system that operates in accordance with the Madrid Agreement Concerning the International Registration of Marks and the Protocol to the Madrid Agreement Concerning the International Registration of Marks, 1989. The Madrid system grants the applicants the opportunity to protect a trademark in several member states of the Madrid Union by filing one application directly to the national office dealing with trademarks of their country.

The period of validity of the exclusive rights to a trademark. Both the national and international registration is valid for 10 years and can be extended unlimited number of times, each time for the period of 10 years. The petition for an extension shall be filed within six months before the expiry of the validity of the mark. It is also possible to extend this period for another 6 months. If during this time the mark is not extended, its legal protection will be terminated.

The language of the application. When using the international system, the application may be drawn up in English, French or Spanish, but the national application shall be drawn up only in Chinese.

The registration process and the scope of the legal protection. In theory, there is no difference between the scopes of the legal protection of the trademark granted as a result of filing a national or international application. There are obvious advantages of filing an international application: first of all, this is a reduction in costs, because when filing a national application, the foreign companies should resort to the services of the Chinese attorneys. Also, it takes less time to carry out the process of registration in China under the international procedure (in the absence of the preliminary refusals), than when the national application is filed.

However, there are some practical considerations in favor of the national application. As a result of a successful registration of the trademark under the national procedure, you will obtain a certificate for a trademark in Chinese, what is especially useful if you decide to take any active steps to protect and attack the exclusive rights on the territory of China. The availability of a certificate in Chinese will simplify greatly and speed up the process of interaction with the local authorities. If you have only an international registration, you will have to address individually to the Chinese Office to verify the fact that you have the rights under the international registration, and this process can last up to 3 months.

China has adopted the International Classification of Goods and Services. However, unlike other countries, in addition to the class division, China also uses the subclass division. Goods and services in subclasses are considered to be identical or similar. When registering a trademark, it is important that the list should contain items from each subclass, which contain goods and services having (potentially) any relation to your business. It is also recommended to include in the list the items from each subclass forming the class of interest to you, even if they are connected with your activities quite distantly. This will not allow your competitors to carry out an unfair registration of an identical or similar mark in the subclass not covered by you and to affect the reputation of your brand negatively.

It is also interesting to point out the peculiarities of the legal protection of the “famous” trademarks in China. In Russia, upon the application of the right holder filed to Rospatent, his trademark may be recognized as famous in the Russian Federation, if “as a result of an intensive use at the date specified in the application it has become widely famous in the Russian Federation among the particular consumers with respect to the applicant's goods.” The legal protection shall be granted to a famous trademark on the basis of the decision of Rospatent, and the mark shall enter a special List of Famous Trademarks.

In China, the situation is quite different. The right holder can obtain the status of being famous for a trademark only during the opposition or judicial proceedings. There is no official register of famous trademarks, and the recognition of such status occurs in each particular case and in each particular situation: individually, by administrative or judicial authorities. There are only two grounds that allow applying for the recognition of the trademark as famous: the probability of confusing or misleading the consumers.

As soon as the judicial or administrative authority of China recognizes that the trademark is famous and makes a decision in favor of its right holder, the right holder may use this decision in a particular case in future proceedings to obtain certain advantages: for example, he will be able to demand higher compensation for the unlawful use of his trademark by any other person, and will also have “at hand” a weighty argument about the status of being famous when filing the protests in the applications of other persons for identical/similar designations. In spite of the capabilities of such a procedure, it is complicated for the right holders, especially foreign, to obtain the status of being famous for their trademarks. L'Oreal and Gillette have managed to do it, but Louis Vuitton has failed to do so.

The question of an unfair registration of trademarks is very acute in China. A large number of foreign applicants can not register their marks in China, as they discover that identical/similar marks have already been registered in the name of some other person. Very often such registrations are carried out only with the purpose of selling the foreign company's mark at an overvalued price. In any case, the trademarks trade in China is legal and highly developed: in China, there is a developed online platform for the sale of trademarks, the operation of which is approved by the Chinese authorities.

Unfair registrations restrict greatly the abilities of foreign companies to do business in China, to enter the Chinese market or even to export the goods from China, because the unfair holder of the trademark can achieve the realization of the customs procedures in such manner that any goods marked by it will be stopped at the border and will not leave the territory of the state.

The fight against an unfair registration in China is very complicated because in the PRC the trademarks (except those that have been still recognized as being famous) are in fact not protected if they are not registered. And it is quite difficult to do something with the already registered trademark, as the registration is a formal process, which is often not accompanied by the market research and the possibilities of misleading the consumers in the result of the registration. However, the entrepreneurs should still try to protect their rights, rather than to reconcile themselves with the existence of the marks with an unfair registration, which limit their opportunities to do business in China so severely. Of course, it will be necessary to collect a lot of evidence, but the arguments about an “unfair registration” are becoming weightier in the Chinese courts. And in case of obvious unfair practices, all judicial proceedings can last more than 6 months, what is a relatively short period.

In any case, it is necessary to monitor permanently such unfair registrations. The Chinese companies in the field of intellectual property provide monitoring services to their clients, tracking the applications filed for identical/similar trademarks. As such applications can be filed in Chinese, it is highly recommended to carry out monitoring by the native speakers. Also it is necessary to resort to the assistance of the Chinese attorneys at determining the possibility of preventing the registration of such marks.

One of the ways to deal with unfair trademark holders is to initiate an early termination of the legal protection in connection with the non-use. As in other states, the Chinese legislation imposes on the right holder the obligation to use this mark after its registration. If the trademark has not been used for 3 years, its legal protection may be terminated prematurely.

Summarizing all the aforesaid, the following advices regarding the registration and protection of trademarks in China can be given:

 1. It is desirable to file the applications for trademarks in China as early as possible, and when composing the list, it is necessary to take into account the characteristic for China division of classes into smaller subclasses.

 2. It is better to try to register the mark for the maximum number of goods/services, even remotely related to the activities of the applicant, and to add obligatory the items related to the sale, advertising, and packaging of the goods to the list.

 3. It is necessary to register in China both the original marks, that have become famous in the country of registration of the company and/or in the world, and the marks in Chinese, specially adapted for China by such a way, that it will be possible to avoid registering similar marks by competitors, and also to provide a stable basis for promoting your brand in China and creating the necessary reputation among the consumers.

4. For certain designations, it is possible to try to create several “layers” of protection. Especially it concerns the three-dimensional designations, which can also be protected by obtaining a patent for an industrial design.

5. If the only way to obtain the legal protection for your designation in China is to purchase it, it is better to contact the mark seller through the Chinese agent, as this will help to reduce the price.

 6. Several ways of protecting the rights can be used to achieve the optimum result: an administrative procedure, civil proceedings or even a criminal prosecution.

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