When you are about to start your business, one of the key issues you should bear in mind is to protect your Intellectual Property rights (IP) –even more if you are about to do it in China (PRC)–. Not only because of the language issues that your company will face, but also because of the complexity of the Chinese trademark system.
Back to May 2014, China implemented a new regulation (“Trademark Law”) that was supposed to be a major step in enhancing the PRC’s IP system. It is important to take into account that this Law had suffered just two amendments since it was passed in 1982 (1993 and 2001). Therefore, because of the huge and fast development of the Chinese market, this third amendment was considered to be a core issue in making one of the world’s largest market an even more attractive destination for foreign investors, taking advantage of the many benefits of doing business here. Accordingly, the main aims of this Law were:
(i) To strengthen the legal protection of trademarks within its border in line with international standards by ensuring fair competition –the damaged limited is now USD 480,000 per infringement, six times more than the prior maximum– and adding provisions on the principles of honesty and integrity –trying to reduce the bad faith filing–.
(ii) Meanwhile, it was supposed to provide applicants with a more efficient registration procedure, which would allow the multi-class filing system and shortening the time-spans for different trademark proceedings (9 to 12 months, depending on the nature of the process).
Almost two years after it came into force, it is the right time to analyse how the new implementations have been effectively applied. Or have not. The reality is that the efficient system stating that all trademark applications will receive a substantive review within nine months, is not that efficient. That is just not happening. During the first half of 2015, trademark registrations were delayed for months due to problems with the launching of a new computer system in the Trademark Office. Now it is happening again, but because of the Trademark Office is running out of paper. This is China, and even though it sounds like a bad excuse, these issues are commonplace. When it comes to the higher protection that this new Law tried –or is trying– to implement, it affects mainly those well-known trademarks. As it is known, the main value of this kind of mark is promotions/advertising. The new Law forbids using the words “well-known trademarks” in promotions, so it does not make any sense for the trademark owners to ask for a certification of the mark as a “well-known trademark”. In regards of the damaged limited, in practice, this amendment lacks of deterrence. The court will not award any party with such high amount of compensation for trademark infringements. Last but not least, the multi-class application is being seen as an ineffective system because of its complexity and lack of regulation.
In conclusion, it is a matter of fact that the Chinese Government is willing to broad their mind to international standards, adapting its laws and implementing new regulations that could help foreign-investors to bring their money into the PRC. However, the reality is that because of its need of practice, its methods and the shortage of the examiners, they are still not able to meet these international standards when it comes to IP issues. Therefore, foreign investors without an advisor with the required know-how of Chinese Law and culture will probably suffer more than a simple headache.