If you are doing business in China, you probably have a strong impression that China has, in the past year, adopted more comprehensive laws and rules on protecting intellectual property (IP) rights.
The new Trademark Law of the People’s Republic of China (the Fourth Amendment) came into force in late 2019. Together with several judicial interpretations and provisions, and administrative regulations newly issued in 2021, the Fourth Amendment has granted trademark rights owners much stronger protection. More entrepreneurs are recognizing the value of trademarks in running a business in China.
The commercial value of brands is reflected in the laws and confirmed by judicial practice, especially when granting damages and imposing sanctions. In the amended law, statute damages are raised up to RMB 5 million (US $783,871), and one to five times punitive damages can be applied in malicious and serious trademark infringement cases.
It is not rare to see the Chinese courts grant damages of more than RMB1 million (US $156,774) in trademark infringement cases. The infringer will also be ordered to bear legal expenses, including reasonable attorney fees, court fees, and other expenses incurred by the rights owner to stop the infringement. Therefore, trademark owners have become more aggressive in enforcing their rights when facing infringements in China.
Serious counterfeit cases may trigger criminal proceedings and the highest sanction is a sentence of 10 years. This rigorous protection has provided very powerful tools to trademark owners and helps to safeguard their business in China.
For the above reasons, companies operating in China will be more willing to invest in building their brands. They will also be more likely to treat their brands as important assets and as business tools to gain market advantage and commercial opportunities. By the end of 2020, there were more than 30 million valid registered trademarks in the country.
Statistics from www.trademark.cn show that in the first quarter of 2021, total new trademark applications reached 2.23 million, an increase of around 37 percent compared with 2020. By the end of June 2021, trademark applications totaled 4.77 million, 9.55 percent higher than the previous year.
Trademark commercialization has also been booming in recent years with more trademark licenses, trademark assignments, and trademark pledges (financial support leveraged by trademark registrations) recorded with the China National Intellectual Property Administration (CNIPA). In 2020, there were more than 50,000 trademark licenses recorded with CNIPA, an increase of over 44 percent compared with the previous year.
More companies and entities are using their trademark registrations not only as brands to identify the source of their goods, but also as important financial tools. According to figures released by CNIPA, total trademark pledge recordals were around 70,000. In the first half of 2021 alone, 698 trademark pledge contracts were recorded, and the amount of trademark pledge financing reached RMB 21.2 billion (US $3.32 billion).
In September 2021, a company in Hainan province obtained a RMB1.56 billion (US $244 million) loan from a bank through trademark pledge financing, which is encouraging news for small and medium-size companies.
To facilitate the trademark pledge recordals and optimize the business value of trademarks, CNIPA amended and optimized the provisions on the procedure for trademark pledge recordal in 2020.
At the same time, CNIPA took various measures to meet the increasing needs of trademark registrations. All the procedures regarding trademarks have sped up in recent years. For example, according to the latest data, the average review time for a new trademark application has been shortened to around four months if there is no rejection or opposition.
On average, trademark renewal and recordal of trademark license agreements each take only two months to complete. Generally, a review decision can be issued in around eight months in trademark rejection cases.
The courts in China are adopting measures to speed up the judicial review time for trademark cases. The courts take an initial review of the cases and sort them according to their complexity. For simple cases with few disputes or merely due to status changes of the cited trademarks, the court will recommend or adopt a summary procedure to conclude the case more quickly.