TY - JOUR AU1 - Ferrante, Michele AB - The author Michele Ferrante is the Founder and Managing Partner of Ferrante Intellectual Property (Beijing, Shanghai, Hong Kong). He has extensive experience assisting western brands protecting and enforcing their IP rights in China and has been involved in high-profile litigation, including before the Supreme People’s Court. He is regularly invited to comment on draft legislations and contribute to high-level policy meetings with Chinese and foreign authorities on topics of IP protection. This article This round-up first analyses recent trends in the field of trade marks in China, including the digitalization of justice and administrative practice and the signing of two international agreement with the United States and the EU. The second part of the article discusses recent developments in Chinese law and court practice, including exceptions to the first-to-file rule, punitive damages, cumulation of claims and trade mark infringement in relation to imported parallel goods. I. Introduction In many respects, the past year has been like no other. Notwithstanding the difficulties created by the pandemic, in 2020 China’s IP and trade mark record remained remarkable, with many strands of innovation and growth. Looking merely at numbers, China was, as always, very impressive. The China National Intellectual Property Administration (CNIPA) released its statistics earlier this year: the number of registered trade marks in China in 2020 was 5.7 million, while Chinese administrative authorities examined 149,000 trade mark disputes and concluded 358,000 trade mark review and adjudication cases. In addition, since in China the protection of geographical indications (GIs) is achieved mainly via trade marks, it is worth noticing that, as of the end of 2020, there were 6,085 registered GI trade marks. This round-up consists of two parts. First, it reviews some general trends bearing important consequences on the field of trade marks, notably the digitalization of justice and administrative practice and the signing of two international agreement between China and the United States and the EU, respectively. It then looks at specific and significant developments in Chinese law and court practice,1 namely the nuances and exceptions to the first-to-file rule, the award of punitive damages for trade mark infringement, the cumulation of claims and the tackling of trade mark infringement connected to imported parallel goods. II. General trends A global and very important trend of 2020 was the acceleration in the digitalization of court and administrative practice. In February 2020, at the start of the pandemic, Chinese courts and administrative authorities promptly switched to providing their services online. Such change was rapid and effective and allowed administrative and litigation practice to keep up to speed, including when social distancing measures imposed the shutting down of the physical premises of many public buildings. Indeed, the need to keep users and personnel safe in the pandemic only boosted China’s existing infostructure for online court services, which was already to the fore globally. In February, the Supreme People’s Court (SPC) issued a notice2 which required that ‘courts at all levels guide litigants to file cases or mediate disputes online, encouraging judges to make full use of online systems for litigation, including those for case filing and ruling delivery, to ensure litigants and their lawyers get better legal services and protection’. In the following weeks and months, courts throughout the country adopted a broad array of measures to ensure the processing of cases via online means. The SPC has also promoted the use of a pre-existing system of ‘mobile micro courts’ (移动微法院), exploiting the social media platform WeChat for online hearings. Administrative authorities, and CNIPA in particular, were equally fast and effective in allowing standard procedures, such as trade mark filings, to happen fully online. Alongside the digitalization of services, China’s efforts to boost international economic cooperation have had important effects in the field of IP. In particular, two international agreements signed by China in the past year are worth mentioning for their impact on IP and trade marks. The US–China trade agreement (first phase)3 was signed in early January 2020 and entered into force shortly after. Under the agreement, the US committed to reducing or suspending some of the tariffs imposed on Chinese goods. China committed to significantly increasing its imports of US goods and services and to undertaking structural reforms to its economic and trade regime in respect of many sectors, including intellectual property and technology transfer. The trade agreement has been particularly welcomed for its intellectual property section and the commitments undertaken by China. Notably, such commitments include a renewed attention to providing prompt action against IP infringements, both online and offline, and ensuring criminal action and charges under Chinese domestic law, and ensuring that any reform in the field of GIs protection, undertaken by China in connection with international agreements with other partners, does not undermine market access for US goods. While China has been on the path of reform in the IP sector for a few decades, especially in the field of trade marks,4 the US–China trade agreement shows its willingness to commit to such reform on the international scene and to communicate broadly about it. Another very important international agreement in the field of trade marks is the EU–China agreement on GIs, signed at the end of 2020, which is still in the ratification phase.5 Building on a years-long cooperation between the EU and China, the GI agreement aims at establishing a clearer framework for the mutual recognition and protection of GIs.6 The two systems of protection vary considerably and this has led to loopholes and inefficiencies in the protection of GIs on the territory of the other partner. At its core, the agreement poses the principle that, in respect of all GIs it lists, China and the EU guarantee to all interested parties the legal means to prevent any misuse of the same. As such, the framework provided by the agreement goes in the direction of allowing mutual understanding and increased transparency for GIs protection, but it nonetheless falls short of establishing an automatic mutual recognition mechanisms of the GIs registered in the other country. As a consequence, the need to follow relevant domestic practices in China and the EU still stands. In China, European GIs owners will still have to register their GIs according to the Chinese system, which relies mainly on collective trade marks, while benefitting of the general framework and recognition provided by the Agreement. III. Legislative changes and relevant cases a. The ‘first-to-file’ principle still stands The past year has seen some important legislative changes that have had and will continue to have a great impact on China’ trade mark law landscape. At the end of 2019, China’s Trademark Law underwent amendment and, in particular, the protection against bad faith trade mark applications was greatly enhanced.7 CNIPA followed up with guidelines in 2021, along with technical and practical changes that have made the Chinese system more resilient against bad faith attempts to register a trade mark. These changes have made the hijacking of trade marks more difficult than it used to be. Nonetheless, except for cases of bad faith, China remains a ‘first-to-file’ system, where the prominent role of registration over use, and the presumption that the first registrant is the rightful owner, can hardly be reversed. A high profile case from the past year came as a timely reminder of such rule. In September 2020, the Beijing High People’s Court ordered Amazon to stop using the ‘AWS’ acronym in China and pay a substantial amount of damages to a Chinese software company, which had registered the ‘AWS’ trade mark first and was thus its rightful owner. The decision may surprise those who are not familiar with the Chinese system, as Amazon’s AWS logo is known and easily associated with Amazon by consumers. Yet, to the exception of cases of illicit hijacking, in China previous registration takes precedence and rights owners need to be aware of this. b. Towards a more comprehensive assessment of similarity While the first-to-file rule still stands, our firm had the privilege of handling a number of important cases that have consolidated the possible exceptions and highlighted the nuances of the rule, strengthening the protection of established western brands operating in China. A first successful decision came from the SPC with respect to the trade mark of an Italian luxury clothing fashion house. In the judgment, the SPC upheld our argument that, in assessing whether two registered trade marks are similar, besides the overall visual appearance of the two trade marks, other factors should be taken into account, such as the well-known status of the trade mark allegedly infringed, as well as the bad faith of the infringer. In the case, a Chinese company selling clothing material had successfully registered and widely used a trade mark comprising a combination of Chinese characters, which incorporated the registered brand of our client. The administrative authorities and the first and second instance courts (Beijing) had considered that the two trade marks were not similar enough to create confusion among the public. Despite the preceding negative judgments, we filed a petition for retrial with the SPC. In order to convince the SPC of the similarity between the two trade marks, besides arguing on the overall visual of the two trade marks, we submitted that both the Italian fashion house’s high reputation and the defendant’s bad faith were to be factored in the assessment of the similarity. As the SPC sided with us, the judgment importantly established that the assessment of similarity shall be comprehensive and consider multiple elements, such as the distinctiveness and popularity of the infringed trade mark, the degree of attention of the relevant public with respect to the class of goods at hand, and the subjective intention of the applicant of the trade mark in dispute. Undoubtedly, this SPC judgment will have a profound influence on future cases in which similarity between trade marks is at issue. c. Cross-class protection of well-known trade marks Another nuance and possible exception to the Chinese rigid first-to file system concerns the cross-class protection that can be afforded to well-known trade marks. Our firm successfully achieved such protection before the Beijing IP Court for a European luxury brand’s trade mark against a Chinese company having registered a similar trade mark in class 10 (‘artificial breast; condoms; sex dolls; massage apparatus; vibromassage apparatus; medical apparatus and instruments, etc’).8 A first administrative opposition failed and the registration of the trade mark was confirmed by CNIPA. On appeal before the Beijing IP Court, we submitted that the brand owner’s prior trade mark had become well-known in China for clothing before the filing date of the defendant’s mark. Therefore, since the disputed mark constituted an imitation of a well-known trade mark, its registration would weaken its distinctiveness. A key factor in our argument was also the nature of the goods designated by the defendant’s mark. We submitted that allowing a similar mark to designate products like ‘sex dolls’ would greatly undermine the market reputation of the European well-known trade mark and damage its owner’s interests. The Beijing IP Court upheld our reasoning, judging that the defendant’s trade mark was an imitation of the well-known trade mark, and its registration would mislead the relevant public into believing that there was a certain relationship between the two, which would damage the interests of the luxury brand owner. Interestingly, the Beijing IP Court factored in the nature and characteristics of the goods, and despite the significant differences between the class of goods where the well-known status had been acquired and the goods designated by the infringing trade marks, allowed the cross-class protection. It is further important to highlight that the well-known-status of a trade mark in China is a rigidly defined category9 and that providing proof that a trade mark fulfils this test is procedurally demanding. In this case, the proof that the European luxury brand’s trade marks had been well-known in China required thousands of pages of evidence, including audit reports, store leasing contracts with tens of shopping malls, honours and awards obtained in China, market research report, media reports, celebrity endorsement contracts, and a great number of prior judgments recognizing the fame of the brand issued by the SCP, the Beijing Higher People’s Court and other lower courts. d. A wider scope for punitive damages for violations of IP rights One of the major legislative changes of 2020 was the promulgation of the new civil code, which entered into force on 1 January 2021.10 Among a vast array of provisions, the Civil Code introduced the general principle that punitive damages should be available to rights owners for violations of IP rights. Article 1185 of the Civil Code provides: ‘In case of an intentional infringement of another person’s intellectual property rights, where the circumstances are serious, the infringed person has the right to request for corresponding punitive damages’. Before the entry into force of the Civil Code, punitive damages were available in specified circumstances for trade mark infringement: under Article 63 of the Trademark Law, punitive damages can be granted when the defendant is in bad faith and the infringement is serious, for an amount equal 1–5 times the calculated damages. Against this backdrop, Article 1185 of the Civil Code expands the scope of punitive damages, and requires less stringent conditions to be fulfilled: the infringement must be serious and intentional, rather than ‘in bad faith’, as provided under the Trademark Law. In its set of binding guidelines on the application of punitive damages in civil litigation for infringement of IP rights,11 the SCP clarified the interpretation of the ‘intentional infringement’ requirement, and in particular explained that such standard is broader and encompasses the defendant acting in bad faith as stipulated in the Trademark Law. In early 2021, the SPC also released a set of model cases12 that will support the consistent application of the new provisions of the civil code on punitive damages by courts around the country. Interestingly, the majority of the released cases concerned infringement of trade marks. While the detailed analyses of this set of cases is outside the scope of this round-up, a few general principles emerging form the SPC’s selection can be mentioned. Firstly, the decisions released do not seems to shy away from awarding exemplary punitive damages. Secondly and in reverse, it is very important that claimants clearly formulate their requests for an amount of damages and then supply extensive evidence and a proper calculation method that must be sound and transparent. In particular, as punitive damages will be calculated as a multiple of the loss incurred by the claimant, it will be crucial to show the exact amount of such loss. Thirdly, all conditions for the award of punitive damages must be thoroughly supported by evidence, with an evidentiary standard that will be overall demanding. In particular, courts will look at the subjective element as well as at the seriousness of the breach, and will take into consideration all circumstances of the case at hand, such as the length of the infringement and the well-known status of a trade mark. It is also worth mentioning that one of the claimants which secured punitive damages in one of the released model cases was Adidas, for an amount equal to three times the calculated loss. This seems to be a clear signal for established western brands' claims for punitive damages that are clearly formulated and thoroughly supported by evidence will be allowed by courts. e. An option to cumulate claims for trade mark infringement and unfair competition As a general principle, in Chinese judicial practice, the cumulation of claims in trade mark infringement and unfair competition is rare. Usually, when a claim for breach of trade mark is upheld, courts will consider that there is no need to further carry on an analysis regarding an additional claim in unfair competition. Nevertheless, this general rule can be reversed and our firm had the privilege to handle a case where a court upheld such cumulation.13 f. New ways to tackle trade mark infringement relating to parallel imports goods One of the most controversial practices is the possibility to import into China goods that are legally marketed abroad, without the consent of the right holder. China applies a strict version of the principle of international exhaustion of rights and in most instances allows the import of so-called ‘parallel goods’. In the past year, a series of decisions14 released by the Guangzhou court have been reported reaffirming that the import of non-counterfeit goods, legally marketed abroad, is not illegal in China, provided that the imported products comply with China’s compulsory certification requirements and the importer does not modify, in any way, the imported product. In such cases, the express permission of the trade mark owner to import and market the goods on Chinese territory is not required. While this rule appears established, recently our firm has handled a growing number of cases where we successfully challenged its application and could stop the import of parallel goods. In one interesting case, we successfully obtained damages on behalf of a client from two long-term infringers which had been selling parallel imported products.15 In the case, there was no doubt that the products were, indeed, genuine and complied with any applicable Chinese regulation; however, the infringers were selling such products in stores that used the claimant’s trade mark on the signboards, interior wall, windows and on the exterior wall of the shopping mall. In addition, the infringers had used a packaging displaying a different brand when handing out the sold products to their customers. The judgment interestingly establishes that there can be trade mark infringement even though the sold products are genuine, and that unauthorized stores as well as practices that may confuse consumers can be challenged on the basis of trade mark infringement. Notably, when selling genuine products imported from abroad, the use of a brand’s registered trade marks alongside the unauthorized affixing of the infringer’s own trade marks on the products may constitute trade mark infringement. The sanctions awarded in this case were also worthy of note. The amount of compensation granted was higher than the average of similar cases in China, based on the type and seriousness of the infringement. In addition, the infringer had to publish a statement clarifying that the concerned stores were not authorized by the brand owner, which in the court’s mind was necessary to actually stop the infringing activity, properly inform the consumers and ultimately protect the brand’s reputation. Footnotes 1 Readers who are less familiar with the Chinese legal system should know that Chinese courts publish only a very small number of cases every year. In this round-up, we refer to cases of which we have personal knowledge, either because they have been handled by our firm, or because they have been published by the authorities. More information on each of the mentioned cases is available with the author. 2 Notice “法〔2020〕49号最高人民法院关于新冠肺炎疫情防控期间加强和规范在线诉讼工作的通知”, available at http://www.court.gov.cn/fabu-xiangqing-220071.html (in Chinese, last access 20 June 2021). 3 The Economic and Trade Agreement between the United States and China (‘Phase One Trade Deal’) was signed in Washington on 15 January 2020. 4 On this issue, see also: Michele Ferrante, ‘Enhancing the Protection of Trade Marks against Bad-faith Applications in China: Practice and Legislative Change’ (2020) 15 (6) Journal of Intellectual Property Law and Practice 450. 5 Agreement between the European Union and the Government of the People’s Republic of China on cooperation on, and protection of, geographical indications (signed on 14 September 2020). 6 On the agreement, see also Michele Ferrante, ‘Food for Thought: The EU–China Agreement on GIs’ (2021) 16 (4–5) Journal of Intellectual Property Law and Practice 295. 7 See Ferrante (n 4), footnote 3. 8 Case no (2020) Jing 73 Xing Chu No 8033, 15 September 2020 in Chinese, accessed 20 June 2021. 9 art 14 Trademark Law. 10 Full text available at: in Chinese, accessed 20 June 2021. 11 Interpretation of the Supreme People’s Court on the Application of Punitive Damages to the Trial of Civil Cases of Infringement of Intellectual Property Rights (最高人民法院关于审理侵害知识产权民事案件适用惩罚性赔偿的解释) (法释〔2021〕4号). 12 ‘Interpretation of the Supreme People’s Court on the Application of Punitive Damages in the Trial of Civil Cases of Infringement of Intellectual Property Rights’, (最高人民法院关于审理侵害知识产权民事案件适用惩罚性赔偿的解释》已于3月3日发布) in Chinese, accessed 20 June 2021. 13 Case no (2020) Su Minzhong No 738, 28 December 2020 in Chinese, accessed 20 June 2021. 14 See reports at accessed 20 June 2021. 15 Case no (2020) Zhe Min Zhong No 701, 27 September 2020 in Chinese, accessed 20 June 2021. © The Author(s) 2021. Published by Oxford University Press. All rights reserved. This article is published and distributed under the terms of the Oxford University Press, Standard Journals Publication Model (https://academic.oup.com/journals/pages/open_access/funder_policies/chorus/standard_publication_model) TI - China 2020 trade mark round-up JF - Journal of Intellectual Property Law & Practice DO - 10.1093/jiplp/jpab117 DA - 2021-08-11 UR - https://www.deepdyve.com/lp/oxford-university-press/china-2020-trade-mark-round-up-Zchq00G0f7 SP - 1 EP - 1 VL - Advance Article IS - DP - DeepDyve ER -