China’s New Trademark Law: Another Sign of Economic Maturity

China has just rolled out an updated trademark law, and it means business. New measures modernize and streamline the application process and significantly beef up protections for rightful trademark holders against infringement. The reforms are important for anyone doing business in China. They’re also the latest sign of the country’s ongoing transition toward economic maturity.

Streamlining and Protecting

The updated law, which will go into effect in May of 2014, modernizes and streamlines the trademark registration process in several ways. Applicants can now register online and marks on sounds will be available for the first time.. Meanwhile, the class of eligible challengers to an application has been narrowed and challengers will no longer have the right to an appeal, moves that clear the way for smoother registrations.

The most important shift in the spirit of the law is a more vigorous approach to protecting legitimate copyright holders. It calls for trademark seekers to act in good faith, explicitly requiring them to abide by the principles of “honesty and integrity,” and making it easier to extract damages for bad faith registrations. The law now explicitly considers aiding in trademark infringement to be an infringement unto itself.

It also drastically increases the penalties for infringements. The ceiling on damages is now capped at the equivalent of $500,000 — six times the old limit. The formula for damages has also gotten more severe, with fines up to five times the amount of violating revenues and the possibility of even stiffer penalties for serial offenders. The most serious infringements can now result in the suspension of an entire business.


What it Means

The law signals that China, long a violator of intellectual property norms, is getting more serious about protection.

According to the original form of Chinese communist ideology, strong protections for intellectual property were anti-egalitarian, and therefore abhorrent. That attitude began to shift as China’s economic regime became more moderate, and modern China enacted its first trademark law in 1982.
As a poor country with little IP output of its own, China long found it advantageous to flout strong protections for intellectual property. As its economy moves beyond low-end manufacturing, however, China finds itself with more and more of its own homegrown intellectual property, and a growing incentive to get more serious about protection. The Xinhua report on passage of the trademark law was sure to note, “As of June this year, China held the world's largest number of registered trademarks and valid trademark registrations, at 8.17 million and 6.8 million respectively.”
In this respect, China is following in the footsteps of the U.S., which ran afoul of European IP norms in the 19th century. Today both countries generate the world’s most valuable intellectual property and both are concerned with enforcing its protection. The new trademark law is yet another indicator that China’s economy is entering a new phase.

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