Review of China’s IP protection landscape from 2022–24: part one

Subsequent to the lifting of lockdown and other measures to tackle COVID, the Chinese government issued multiple regulations and notices to improve the economic situation in the country and encourage foreign investment. Intellectual property (IP) protection is one of the most important means to achieve these goals.

From a legislative perspective, the Anti-Unfair Competition Law of the People’s Republic of China (AUCL) has played a very important role in the protection of competitive interests of foreign companies, and a draft revision that was published for public comments on November 22 2022 has attracted attention from foreign companies and the legal community accordingly. From an administrative perspective, the State Council has issued its Opinions of the State Council on Further Optimising the Environment for Foreign Investment and Increasing Efforts to Attract Foreign Investment. The latter emphasises the importance of IP protection of foreign companies and provides for an intensification of administrative enforcement in respect of IP and a crackdown on infringement of the IP of foreign-invested enterprises.

In addition, the Opinions of the Supreme People's Court on the Provision of Judicial Services and Guarantee to Boost Consumption issued by the Supreme People’s Court made a commitment that Chinese courts shall strengthen the protection of IP rights, strictly implement the punitive compensation system concerning the infringement of IP rights, and effectively curb the infringement of IP rights, as well as promote the output and application of scientific and technological innovation achievements by strengthening judicial protection, and support the building of science and technology power.

Along with the rapid development of technology, new types of IP infringement against international and domestic IP owners have attracted great attention among China’s IP community. The new AUCL focuses on tackling those issues, while Chinese courts have been trying to resolve them through new judicial interpretations and judgments.

Among others, the Supreme People’s Court has issued its Juridical Interpretation on Several Issues Concerning the Application of the Law of the People's Republic of China against Unfair Competition, dated March 16 2023. The development of AI technology has caused many new issues relating to IP laws around the globe, and China is no exception.

To deal with these issues, the Cyberspace Administration of China and other Chinese administrative organs have issued multiple administrative measures, including Provisional Measures for the Administration of Generative Artificial Intelligence Services, and Administrative Provisions on Algorithm Recommendation for Internet Information Services, which set forth the obligation to respect IP for generative AI service providers when they process data in training and provide services to users.

The Beijing Internet Court has issued the first court decision in China finding the unauthorised use of content generated by AI technology as infringing. Although the decision is under appeal and yet to come into effect, it has already attracted attention, discussion, and debate in the IP community internationally and domestically, by contrast with different understandings and rulings in other jurisdictions.

The CNIPA has issued a Regulation of Registration and Administration of Collective Marks and Certification Marks and a draft of the Standard of Evidence for Trademark Administrative Enforcement. However, pre-emptive registrations and trademark infringements remain the top concerns for foreign brand owners.

Online distribution and advertisement of infringing products remains one of the most serious concerns for foreign brands. Although the E-Commerce Law of the People’s Republic of China and other IP laws already provided for the mechanism of a ‘notice and take down process’, large e-commerce platforms in China mostly have their own version, and the procedural requirements, particularly the standard on prima facie evidence, are, from time to time, unreasonably high and overly burdensome for foreign brand owners when requiring the removal of infringing goods or information from platforms.

In addition, administrative enforcement bodies are reluctant to take action against online distribution due to the amount of individual online shops, adding to the influence of platforms at a local level. Due to the large number of infringing shops, brand owners feel it is difficult and costly to sue shops individually.

The red-flag principle, which sets forth the responsibilities of platforms where infringements are obvious and recognisable, shall be actively applied to platforms during judicial and administrative processes.

Chinese administrative and juridical authorities fully understand that the pre-emptive registration issue has not only harmed the interests of foreign brands but also those of domestic ones, and it is very costly for the trademark administrative system as a whole. As a result, there are increasingly positive signals from legislative, administrative, and judicial bodies via their notices, opinions, or judgments.

In the meantime, in terms of finding pre-emptive registrations violating, the author notes that, in comparison with the increasing application of absolute grounds under articles 4 and 44 of the Trademark Law of the People’s Republic of China (the Trademark Law) on the basis of public interest or the maintenance of administrative order, the application of articles on the basis of relative grounds – including articles 13, 15, and 32 – remains uneasy. In particular, the ‘well-known recognition’ aspect has become increasingly difficult for foreign brands in recent years.

There is a special restriction against foreign brands concerning well-known recognition and an overly high requirement regarding copyrightability; for example, logos may hamper the effective protection of copyrighted works under Article 32 of the Trademark Law, given the serious situation surrounding pre-emptive registrations in general.

Since the revision of the Trademark Law in 2019, Tahota Law Firm has seen increasingly active intervention by the CNIPA in preliminary examination procedures against applications found to be associated with public order, moral standards, or ideological issues. Such interventions may have a negative impact on the vitality of the trademark system or even the recovery of the economy.

The CNIPA applies the absolute grounds over broadly or even arbitrarily from time to time. Among others, a minor adjustment of a standard typeface in terms of letters or characters in applied marks for an aesthetic purpose may trigger the application of Article 10.1.8 and be found to have an adverse impact and thus be rejected.

With regard to Article 10.1.7, the criterion of finding a mark “deceptive, easy to cause the public to be misled over the characteristics such as quality or place of origin of commodities” is overly broad and vague from case to case, and may lack solid evidence where the marks may have multiple meanings and may not necessarily cause deception or misunderstanding among the relevant public.

Tahota Law Firm generally appeals for restraint from the CNIPA in citing this article when the evidence is insufficient to prove whether the marks are deceptive or misleading, as such issues will be more easily resolved during use in a commercial environment via a ‘closer look’ at an invalidation procedure and subsequent court actions. Excessive intervention by an administrative body at a preliminary examination stage may mistakenly exclude applications that are ‘uncertainly’ violating or certainly not violating.

Several judicial organs have addressed the issue. Among others, the Supreme People’s Court tried to correct the trend in its Examination Guideline for Trial of Trademark Grant and Adjudication Cases in 2010. Specifically, Article 2 provides, in practice, that some marks or their elements may be exaggerated but do not cause confusion in everyday experience or the general recognition of the relevant public. Under such circumstances, a people's court shall not rule that the mark is exaggerated and deceptive.

Furthermore, the Beijing High Court, in its Guidelines for the Trial of Trademark Right Granting and Verification Cases, also provided in Article 8.4 that “if the public does not misidentify the quality and other characteristics or origins of the goods or services designated by the trademark in dispute on the basis of their daily life experience and others, this trademark does not fall under the circumstances provided in Article 10.1.7 of the Trademark Law”. However, such efforts have not substantially affected the practice of the CNIPA.

On January 13 2023, the CNIPA released its Draft Revision of the Trademark Law of the People’s Republic of China (the Draft) for public comments, so as to further improve the trademark system, resolve the prominent problems in the trademark area, and promote the development of a market economy. The Draft has been well received by the IP community and international corporations. The main points are summarised and commented on below.

The Draft addresses the issue from several perspectives.

The prohibition against duplicate applications of identical or similar marks with regard to the same or similar goods will help to reduce bad-faith applications in general, while it will also reduce the need for back-up applications by brand owners to supplement their portfolios or avoid the risk of unexpected loss of registration.

The background of a large number of back-up filings arose because the applications of brand owners have been frequently rejected by the CNIPA due to prior pre-emptive registrations. It may take one to three years on average, if not more, for brand owners to invalidate blocking registrations via legal proceedings at the Trade Mark Review and Application Board (TRAB) and two instances of courts. By contrast, a refusal of an application can be made within two to three months at the CNIPA and a year at two instances of courts. As a result, the prohibition may add insult to injury for brand owners that cannot legally review the suspension decision at the TRAB or court actions with regard to refusal decisions, while the last resort of back-up applications could be prohibited under the Draft.

The CNIPA has issued Regulations on the Suspension of Review Cases, which specify seven situations in which suspension is necessary and three situations in which suspension may be considered based on the specific case. Notably, the filing of an invalidation action against blocking registrations, adding that the same registration has been found as violating the absolute ground articles (4.19 and 44) before, is categorised as a situation where the suspension decision can be made under the discretion of an examiner. As a result, in most cases where the blocking registration has not been found as violating before or has merely been found as violating the articles under relative grounds, the filing of an invalidation action will not likely be able to have a suspension decision.

Articles 5 and 22 of the Draft set forth the requirement of an application regarding the intent of the applicant to use the mark. This will help to reduce bad-faith registrations and address the ‘zombie’ registrations that cost unnecessary resources.

The provision will also likely reduce defensive registrations by brand owners, given the serious situation of pre-emptive registrations that force brand owners to register as many marks as possible with regard to unused goods or face serious challenges by bad-faith applicants.

Article 45 of the Draft provides a new mechanism of compulsory transfer of registrations where the registrations are found to violate the articles on the basis of a relative ground; i.e., private rights.

The provision appears not to be applicable if the registrations are found to simultaneously violate the articles under absolute grounds – i.e., order of administration and public interest – while the definition of “other reasons”, “unhealthy effect”, and “cause of confusion” are not clear under Article 46 of the Draft.

Article 83 of the Draft provides that bad-faith applicants shall compensate a brand owner’s loss via civil lawsuits, which includes at least the reasonable cost of the brand owner in taking action to cease the bad-faith applications.

Article 67 of the Draft provides for the administrative punishment against a bad-faith applicant and increases the fines to as much as CNY50,000 to 250,000 from CNY10,000 under the current law.

Articles 36 and 39 in the Draft provide for the shortening of the opposition period from three months to two months. The Draft also abolishes the appeal procedure for the party being opposed and sets out a direct path to administrative litigation. The change aims to simplify the procedure of opposition and the whole trademark registration process.

In addition to the aforesaid revisions of the law, in practice, the CNIPA currently requires that the size of a submitted opposition document shall not exceed 200MB, which scarcely suffices for the needs of such a submission.

The above changes will affect the registration system as a whole. Notably, once applications are allowed to be registered after an opposition proceeding, it would be difficult to pursue liability until the registration is revoked by invalidation proceedings. Given that a large number of bad-faith applicants are not likely to continue procedures if being opposed, the author sees the impact of the changes as generally negative for trademark protection as a whole.

Part two covers copyright and unfair competition, before finishing with a summary of a change to the appeals procedure regarding technology-related disputes