China has passed a new trademark law that became effective May 1, 2014. The new law provides additional ways for trademark owners to prevent others from registering their established marks, and also provisions to pursue trademark infringers.
Under the United States’ trademark laws, trademark rights are granted based on first use of a trademark, however, under Chinese trademark law, rights are based on whoever first registers a trademark with the Chinese Trademark Office (CNIPA, formerly the CTO). Under this first-to-register principle, it is not uncommon for third parties to register a company’s established trademark in China, typically prior to the company entering the Chinese marketplace, and then subsequently attempt to sell the trademark registration to the company when the company begins conducting business in China. This is known as trademark hijacking in China, and the new law is designed to deter it. Notably, in some cases, trademarks are hijacked by Chinese business partners assisting the legitimate trademark owner in some capacity.
Specifically, to aid in the deterrence of hijacking, under the new law, a trademark application will be denied when the trademark applied for is identical or similar to another party’s previously used, but not yet registered in China, trademark, if: (1) the trademark applicant has a contractual or business relationship with the true trademark owner, and therefore, knows or should know of that party’s prior use of the trademark, and (2) the actual trademark owner challenges the applicant’s trademark application.
Additionally, the new law provides a list of actions that broadens the definition of trademark infringement. For example, the list details that a person who “purposefully facilitates or assists someone’s trademark infringement activities” constitutes trademark infringement. Thus, under the new law, if someone helps transport counterfeit goods, with knowledge that the goods are counterfeit, the transporter, along with the makers and sellers of the goods, can be subject to penalties for trademark infringement.
The new law also provides for civil damages in three scenarios. First, the amount of compensation for trademark infringement will amount to the actual financial loss to the legitimate owner caused by the trademark infringement. However, in cases where the actual loss to the legitimate owner is difficult to assess, then the compensation will be calculated from the trademark infringer’s profits from the infringement. Lastly, if both the legitimate owner’s actual loss and the infringer’s profits are difficult to assess, then the reasonable royalties for use of the trademark will amount for compensation.
Moreover, the new law provides discretion for severe punishment where a person maliciously infringes another’s trademark. In such a situation, the compensation can be multiplied up to three times the determined loss or reasonable royalty. These damages would include the reasonable costs incurred by the true trademark owner in connection with their efforts to cease the infringement. If any of the three compensation scenarios are difficult to assess, a court may determine the amount of compensation to be up to 3 million Chinese yuan based on the circumstances of the infringement.
The first-to-register system in China creates an urgent imperative for U.S. companies: register your trademark in China before entering the market, not after. Many American businesses have discovered, too late, that a Chinese company — sometimes a former business partner or supplier — has already registered their brand name, logo, or both with the CNIPA. Recovering a hijacked mark is expensive, time-consuming, and often unsuccessful under the pre-2014 framework. The 2014 amendments improve the situation for marks with documented prior use and a qualifying relationship, but the best strategy remains early, proactive registration.
The cost of Chinese trademark registration is modest compared to the cost of fighting a hijacking dispute or rebranding for the Chinese market. U.S. businesses should register their core marks — at minimum, their primary brand name and logo — in China as soon as they anticipate entering the market, even if that entry is years away.
The 2014 amendments also strengthened civil enforcement of trademark rights. The treble damages provision for malicious infringement gives courts the ability to impose meaningful financial penalties on systematic infringers and counterfeiters. China’s trademark enforcement landscape has improved significantly in recent years, with specialized intellectual property courts established in Beijing, Shanghai, and Guangzhou handling complex trademark and IP disputes with greater sophistication and consistency.
That said, enforcement remains challenging in practice, particularly against manufacturers of counterfeit goods operating through opaque supply chains. A comprehensive China trademark strategy combines proactive registration, Customs recordation to intercept counterfeit goods at the border, monitoring of Chinese e-commerce platforms such as Taobao and JD.com, and working with experienced local counsel to pursue enforcement actions efficiently.
The World Intellectual Property Organization’s Madrid Protocol system provides an efficient mechanism for U.S. trademark owners to file for trademark protection in China and over 130 other member countries through a single international application. A Madrid Protocol filing based on a U.S. trademark application or registration allows the applicant to designate China (and other member countries) for trademark protection, with the CNIPA then examining the application under Chinese trademark law. Revision Legal’s trademark attorneys are experienced in Madrid Protocol filings and can advise on whether a Madrid filing or a direct national application is the most effective approach for your business.
If you seek foreign trademark registration, contact the trademark registration experts at Revision Legal at 855-473-8474 or through our online contact form.
For U.S. companies operating in or entering the Chinese market, a practical trademark protection checklist includes: (1) register both the English name and any Chinese-character transliteration of the brand — Chinese consumers and businesses typically use a Chinese-character version of foreign brands, and that transliteration can be registered by a third party if you do not register it first; (2) register in all relevant classes, not just the primary goods or services class — class-shopping by hijackers is common, and coverage in multiple classes provides broader protection; (3) register well before entering the Chinese market, ideally as soon as the brand is adopted; and (4) document use of the mark to support oppositions to conflicting applications filed by hijackers.
Revision Legal works with experienced Chinese trademark counsel to provide comprehensive trademark registration and enforcement services in China, including monitoring of the CNIPA database for potentially conflicting filings, opposition proceedings, and enforcement against counterfeit goods on Chinese e-commerce platforms. If you seek foreign trademark registration, contact the trademark registration experts at Revision Legal at 855-473-8474 or through our online contact form.
Revision Legal is a national intellectual property and internet law firm that represents clients across the United States in trademark, copyright, trade secret, and internet law matters. We are a firm of specialists — not general practitioners who handle IP work as one component of a broad practice, but attorneys whose entire professional focus is on the intersection of technology, creativity, and commerce.
Our attorneys have handled cases at every level of the federal court system, including the United States Court of Appeals for the Federal Circuit, the Sixth Circuit, the Ninth Circuit, and before the Trademark Trial and Appeal Board. We manage trademark portfolios for hundreds of clients, ranging from individual entrepreneurs registering their first mark to publicly traded companies maintaining global trademark portfolios across dozens of countries.
We believe that access to expert legal counsel should not depend on the size of your organization. Revision Legal’s flat-fee service model for routine IP matters — trademark registration, copyright registration, DMCA notices, and standard licensing agreements — allows small businesses, startups, and individual creators to access the same quality of legal representation that larger companies receive, at a price that is predictable and fair. For complex litigation and contested proceedings, we work efficiently to achieve the best possible outcome for our clients while managing costs responsibly.
Whatever your intellectual property or internet law need — whether you are protecting a new brand, enforcing your rights against an infringer, defending against a legal demand, or navigating a complex licensing transaction — Revision Legal has the expertise to help. Contact us today at 855-473-8474 or through our online contact form to discuss your matter.
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