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By Peter Leung
March 24 — The last round of changes to China's Trademark Law is resulting in extra legal costs for foreign companies, a rightsholders group argues.
At issue is what happens to trademark applications that survive opposition proceedings before the China Trademark Office (CTMO).
Previously, the party that lost the case against the trademark would appeal, and the trademark would remained unregistered.
But under current practice, the trademark is immediately registered if it survives the opposition. The party that lost its case, instead of appealing, has to try to get the trademark cancelled at China's Trademark Review and Adjudication Board (TRAB).
The change, in effect for nearly two years, was intended to stop third parties who were using bad-faith oppositions and other delaying tactics to squeeze trademark applicants, particularly foreign ones, for settlements. But some rightsholders said one unwanted effect is higher legal fees.
Challenging a denied opposition can now cost double compared with an appeal under the old law, the U.S.-based Trademark Working Group (TWG) wrote in a submission as part of the U.S. Trade Representative's Special 301 process on intellectual property issues in foreign countries. The letter stated that a typical invalidation proceeding before the TRAB typically costs $4,000 to $15,000 today, compared with $2,000 to $7,500 under the old system. The change took effect in May 2014.
The challenge procedure is particularly important for international companies because they make up a majority of those opposing bad-faith trademark registrations, Paul Kilmer, a partner at Holland & Knight who focuses on international IP and the author of the TWG letter, told Bloomberg BNA.
Because the challenge is a new proceeding, rather than an appeal, evidence has to be resubmitted and arguments have to be briefed again, he said. Also, evidence in Chinese legal proceedings already often faces more complex notarization and authentication requirements than in other countries such as the U.S., and evidence submitted to the TRAB must meet a higher standard than at the CTMO.
However, George Chan, IP partner at Simmons & Simmons LLP in Beijing, told Bloomberg BNA that the TRAB's higher evidence formality requirements should not necessarily result in significantly greater costs if a party simply complies with them from the start of preparing their opposition case. The TRAB's requirements weren't increased by the new law.
“Even though the CTMO may be less stringent with evidence formality requirements than the TRAB, it’s important to bear in mind that proceedings before the CTMO can be unpredictable, and a subsequent invalidation action filed with the TRAB may be required to deal with an objectionable trademark application,” he said. “For this reason, it may be best to complete the necessary evidence formality requirements at the outset.”
Joe Simone, founder of Simone IP Services in Hong Kong, told Bloomberg BNA that the TWG's overall numbers are generally consistent with his experiences, though parties can spend less than the TWG estimates by adopting different tactics and, perhaps, employing smaller firms.
“The costs depend on who you use and how you handle cases, and whether you send investigators to each pirate,” he said. “If you do, you will be not only building your registry case but determining whether the pirate is using the mark – thus helping to build an infringement case.”
Complicating the issue are concerns over how the CTMO handles original opposition proceedings.
Opposition examiners have very large caseloads and are under a lot of pressure, Kilmer said. As such, they sometimes hand down decisions that can be seen as mechanical and “superficial.”
In some cases, the CTMO will ask if the marks are almost exactly the same and if the goods and services are almost identical, he explained. If they aren't, the opposition is usually rejected.
“It's not uncommon to get a one-page decision that is very conclusory,” Kilmer said. “This written decision can be really perfunctory, and it doesn't give you a lot to go on.”
By contrast, the TRAB tends to examine cases more closely and has handed down some very good decisions. If you are confident that the bad faith registrant will not use the trademark, it's sometimes cheaper and better to let the mark register and then try to invalidate it, rather than opposing the registration in the first place, Kilmer said.
Simone told Bloomberg BNA that he also sometimes suggests this strategy, as long as there is no risk that a bad-faith filer will start using the mark. Usually, serial bad-faith applicants won't use registered marks in commerce, he said.
Chan, though, said that he does not recommend skipping the opposition, “in part because you are passing up an opportunity to defeat the application.” There could also be strategic reasons to oppose, such as delaying a trademark's registration, despite doubts about the CTMO coming to the right decision, he said.
In the end, the real problem may not be the change in law but the sheer volume of bad-faith registrations, Simone said. He estimates about 80% of his cases involve bad faith.
“It’s an expensive affair when it’s all added up – both for brand owners and for the CTMO and TRAB as well,” he said.
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TWG letter is available at: http://src.bna.com/dxO.
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