Newsletter Issue No. 31

News at Chang Tsi & Partners

Chang Tsi & Partners works with AIC on a substantial seizure of infringing products
On behalf of a world-leading manufacturer of kitchen and bathroom products, Chang Tsi & Partners worked closely with the local Administration for Industry and Commerce (AIC) on a successful administrative enforcement action in Suzhou, Jiangsu Province.

As a globally renowned name for kitchen and bathroom fixtures, our client frequently encounters serious trademark infringements in China. Recently, a company in Suzhou was found to be extensively misusing our client's trademark to gain a "free ride" on its reputation. In the AIC raid action against this company, a total of 93,289 infringing products were impounded. Severe penalties will be imposed upon the infringing parties involved in this case. Top

Chang Tsi & Partners' Cases

Cancellation in dispute against the Trademark "A+ & Device & 100% & Chinese Characters"
In February 2004, Chang Tsi & Partners lodged two cancellations in dispute against the trademarks "A+ & Device & 100% & Chinese Characters" under registration numbers 1480731 & 1480732 both in Class 16 (the Disputed Trademarks) respectively.

In the petition to China 's Trademark Review & Adjudication Board (the TRAB), we argued that in actual use, the Disputed Trademarks directly described the qualities and features of the designated goods. The registrations thereof were evidently improper and contrary to the regulations of China Trademark Law.

On May 31, 2010, the TRAB made two decisions respectively on the said two cancellations in favor of our client. The TRAB explicitly pointed out that "100%" and the Chinese Characters in the Disputed Trademarks were descriptive, and that consumers would misunderstand those words as descriptions of the quality of the designated goods. Therefore, the Disputed Trademarks should not have been approved for registrations. According to Article No. 10(1.8), Article No. 41(1) and Article No. 43 of China Trademark Law, the cancellation grounds filed by our firm on behalf of our client were tenable, and the TRAB decided to cancel the registrations of the Disputed Trademarks.

The success of the two cases demonstrates that the claim for indistinctiveness and descriptiveness of a trademark will be a strong argument for cancellation in dispute cases in the future. Top

Industry News

GAC holds meeting to introduce customs protection policy on IP
General Administration of Customs recently launched an introduction meeting about the customs protection policy on intellectual property (trademarks and patents). Ms. Meng Yang, Director of Policy and Law Department delivered the lecture.   

The key points of the lecture are highlighted below:

• Overview of Customs Recordal
  According to Ms. Meng, to date 20,300 IP rights have been recorded with Customs including 13,581 trademarks, 5,975 patents and 744 copyrights. IPR from China accounted for 49% of the total. The remaining 51% consisted of IPRs from owners from foreign countries, with the U.S. leading the list, and Japan coming in second.
• Types of IPR Border Protection
  -- Protection within China 's borders
  Currently, China Customs has two types of IPR border protection: Ex Officio Action and Protection upon Request of an interested party. Ex officio actions constitute the majority of customs protection at the present stage. For protection upon request, the interested party should provide the specific information, such as the name of port, the exporter, the container number and the ETD etc.
  Customs officials prefer protection upon request for the sake of cost efficiency.
  -- International Cooperation
  Ms. Meng points out that if the infringing goods have already left the Chinese port, the destination port can be requested to help seize the infringing goods provided that the specific details of the shipment are in hand. Top

IP work thrives since China's accession to WIPO
June 3, 2010 marks the 30th anniversary of China 's accession to the WIPO (World Intellectual Property Organization). By the end of 2009, there have been 7,220, 000 applications for trademarks in China, and the number of registered trademarks has reached 4,270,000. The annual number of trademark applications for 2009 stood at 830,000. In 2009, China submitted 7,946 PCT applications. As of April 2010, China has received a total of 6,095,949 patent applications.

China has participated in all copyright treaties managed by WIPO since 1980, and its copyright protection legal system has been progressively improving. In particular, the number of registrations of computer software has achieved remarkable growth since the promotion of copyrighting software was launched. In 2009, registration of software in all categories totaled 70,965, representing an increase of 49.75% from last year. Revenue of software sales has risen from RMB 480 billion in 2006 to nearly RMB 900 billion by the end of 2009. Top

China investigates over 50,000 trademark related cases in 2009
On the occasion of the 2nd anniversary of the implementation of Outline on National IP Strategy, officials from Trademark Office of the State Administration for Industry and Commerce (SAIC) revealed that China investigated 51,044 trademark related cases last year, down 9.87% from the previous year.

Applications for trademark registration totaled 830,500 in 2009, up from the previous year by 18.96% and reaching a new record high. By the end of 2009, the total number of trademark filings stood at 7,222,500, of that number 4,278,800 were trademark registrations and 3,404,500 were effective registered trademarks. For the year, China topped the world in terms of trademark applications, applications examined and effective trademark registrations.

According to officials, China will step up the protection of renowned and famous trademarks in 2010. The Trademark Office will make full use of China 's dual-track regime combining administrative and judicial protection to improve inter-departmental trademark enforcement.

In addition, the Trademark Office will reinforce collaboration with related departments such as the Ministry of Commerce in an effort to gradually establish prompt communication mechanisms with the trademark authorities and judicial organs of other countries and regions in order to strengthen the protection of Chinese trademarks overseas. Top

More than 30,000 IPR cases concluded in China in 2009
The Supreme People's Court (SPC) released its 2009 Annual Work Report on July 13, 2010. This is the first time SPC has ever publicized its annual work report.

According to the report, 36,140 civil, criminal and administrative cases involving Intellectual Property Rights (IPR) were concluded by courts of all levels in 2009, up by 29.65% from previous year. Among all IPR cases concluded, 30,509 were IPR civil cases, up by 29.73% from the previous year. Among all the IPR civil cases concluded, 15,180 involved copyright infringement, 4,524 involved patent infringement, 6,975 involved trademark disputes and 1,287 involved unfair competition cases including false advertisements. Top

China's patent filings rose by 9.6% in first half of 2010
According to the latest statistics from the State Intellectual Property Office (SIPO), the Chinese patent authority received a total of 467,000 patent applications in the first half of this year, with the amount rising by 9.6% compared with the same period last year. In terms of types of patents, there were 164,000 applications for inventions, 165,000 applications for utility models and 138,000 applications for designs.

There were 239,000 service patent applications which accounted for 58.2% of the domestic patent applications, a 17.7% increase from the same period last year. There were 171,700 non-service patent applications which accounted for 41.8% of the domestic patent applications, a decrease of 0.2%.

By the end of June 2010, the SIPO had received a total of 6,285,000 patent applications and granted 3,442,000 patents. Top

China supports SMEs' applications for patent protection overseas
Many of China 's governmental departments are cooperating to support the SMEs in applying for patent protection in foreign countries, and provide the safeguards of policy, laws and finance for the maintenance of Chinese enterprises' IPR overseas.

China has set up about 50 overseas IPR maintenance centers across the nation. In order to solve the problem of SMEs accessing sufficient capital, China 's department of finance will allocate RMB 100 million in special funds to aid SMEs to apply for foreign patents.

On Sept 15th 2009, the Ministry of Finance issued "The Interim Measures for the Administration of Special Funds for Subsidizing Foreign Patent Applications." It stipulates that the special subsidies will be limited to domestic small and medium-sized enterprises, public institutions and scientific research institutions in foreign patent applications made under the Patent Cooperation Treaty (PCT) with the State Intellectual Property Office acting as the receiving office.

The special funds shall be mainly used to subsidize the domestic applicants in paying fees when making foreign patent applications. These include the official fees paid at the application stage and within three years from the year of patent granting to the relevant patent examination institutions, the search fees paid to the patent search institutions and the service fees paid to the agencies. Top

China cracks down on online piracy
Chinese authorities launched a three-month nationwide campaign on July 21st to crack down on illegal pirating on the Internet.

The campaign will last until the end of October. Internet websites based in China that are found selling pirated books, DVDs, or other publications, as well as those providing links to pirated music, software, and movies, could be blocked and shut down. The authorities will monitor websites dealing with online businesses of publications, especially those which contain online games, literature, popular TV programs, movies and music.

Selling or uploading pirated publications to the Internet related to the ongoing Shanghai World Expo and upcoming Guangzhou Asian Games will also face severe penalties. Top

First civil anti-piracy consortium founded in Beijing
The first civil anti-piracy coalition formed in China , the Anti-Piracy Consortium, was founded in Beijing on July 15th. It is reported that the consortium consists of one hundred AV businesses and one hundred singers and film composers that insist on distributing legal goods.

The aim of the Anti-Piracy Consortium is to curb piracy actions by lowering the price of legal products. The consortium will join hands with one hundred media companies, one hundred copyright entities, one hundred associations and one hundred businesses dealing with legal AV products to reduce the price of legal products in one hundred cities across the nation. Top

Legal Updates

Examination standards for trademarks incorporating “ 中国 ” (the Chinese characters for “China”) or starting with “ 国 ”(the Chinese character for “Nation”)
On July 28th, 2010, China Trademark Office of the State Administration for Industry and Commerce released further instructions on the examination standards for trademarks that incorporate “ 中国 ” (the Chinese characters for “China”) or start with “ 国 ” (the Chinese character for “Nation”).

•  Examination standards for trademarks including “ 中国 ” (the Chinese characters for “China”)
For trademarks which contain words that are identical with or similar to the State name, should the applicant and the trademark being applied for be in conformity with the following qualifications, preliminary approval will be granted:

(a)  The applicant must be established with the approval of the State Council or its authorized organization, and the name of the applicant should be registered by the registration authority in accordance with the law.

(b)  The trademark being applied for must be consistent with the name of the applicant. In the event that the trademark being applied for is consistent with the shortened form of the applicant's name, the shortened form should be approved by the State Council or its authorized organization.

(c)  The trademark being applied for must have a close corresponding relationship with the applicant.

(d)  The prescribed range for goods or services within which the trademark being applied for is used must be consistent with the prescribed scope of business.

• Examination standards for trademarks starting with “ 国 ” (the Chinese characters for “Nation”)

(a)  For trademarks consisting of or including “ 国 ” (the Chinese character for “Nation”) + prescribed commodity name for the the trademark”, the application for the trademark should be refused for exaggeration and fraudulence, lack of distinctiveness or having detrimental influences.

(b)  For trademarks starting with “ 国 ” (the Chinese character for “Nation”) but not in the form of “ 国 (the Chinese character for “Nation”) + prescribed commodity name for the trademark”, different situations should be considered. Trademarks which directly display the quality traits of the commodity on which the trademark is used, trademarks that are fraudulent, detrimental to fair competition and market order and trademarks that have detrimental influences on politics will be rejected.

For review of the above kinds of trademarks, authorities should be prudent and cautious. The applications for the said trademarks should be reviewed by Examination Committee Conference, Trademark Office Review of Business Conference, Trademark Office Business Conference or the Trademark Review and Adjudication Board Committee Conference.

During the trademark application proceedings, the applicant may submit relevant certification materials. Top

NDRC issues Circular on delegation of approval authority over foreign-invested projects
On May 4, 2010, NDRC (National Development and Reform Commission) issued "the Circular on Properly Handling the Delegation of Approval Authority over Foreign-invested Projects to Lower-level Authorities" (the Circular).

This Circular specifies that, with the exception of those to be approved by the relevant departments of the State Council as indicated by ¡°Catalogue of Investment Projects with Government Approval¡±, a foreign invested project which has total investment of less than USD 300 million (including capital increase) and falls under the encouraged and permitted categories in the ¡°Catalogue of Foreign Investment Industry Guidelines¡± will now be subject to approval from the provincial counterparts of the NDRC and will not require approval in Beijing. Top

Analysis

Court upheld rejection of trademark applications for vehicle models in first instance judgment of Audi vs. TRAB
Recently, the Beijing No. 1 Intermediate People's Court has issued its first instance judgments for several cases in which Audi sued TRAB, but were not in favor of Audi. These cases involved trademark applications for "A3," "A4" and "A6", and "A8" etc, all of which refer to Audi car models. Previously, the CTMO has rejected Audi's application for TT and Q 7 in Class 12 as well as several associated marks in the form of letters + digits such as S3 and S4, which were applied for registration before the CTMO through international registration of trademarks in the same category for territorial extension. Most of these applications are pending for re-examination.

The Court holds that these marks, composed of non-stylized forms of letters and digits are merely indicative of Audi car models, lack distinctiveness and fail to designate the origin of commodity and are therefore not eligible for registration as trademarks. The CTMO and TRAB have cited the same reasons for their rejection of the trademark registrations. Top

The thresholds of counterfeiting registered trademarks have been improved

-- Relevant provisions of Economic Criminal Cases Prosecution Regulation
Article 61 provides that use of an identical trademark on the same merchandise without permission of its registered owner shall be prosecuted in the following situations 1) illegal proceeds generated from counterfeiting of others' registered trademarks by an individual amounting to RMB 100,000 or more; 2) illegal proceeds generated from counterfeiting of others' registered trademarks by an organization amounting to RMB 500,000 or more; 3) counterfeiting well-known trademarks or trademarks of medicine for human use; 4) although the illegal proceeds fall short of the amounts prescribed above, the counterfeiter(s) concerned have received administrative penalties more than twice and have once again initiated counterfeiting of others' registered trademark; 5) counterfeiting behaviors have caused adverse effects.

-- Relevant provisions of the Criminal Case Prosecution Regulation
In comparison, Article 69 of the Criminal Case Prosecution Regulation sets the thresholds for the prosecution of the said counterfeiting behavior as such: (a) revenue from illegal operations has amounted to RMB 50,000 or illegal proceeds have reached RMB 30,000; (b) counterfeiting two or more registered trademarks, from which illegal revenue has amounted to RMB 30,000 or more, or from which illegal proceeds has reached RMB 20,000; (c) other serious situations.

It is clear that Article 69 of the Criminal Case Prosecution Regulation takes more severe criminal measures to sanction infringing behavior of counterfeiting registered trademarks and greatly reduces the prosecution thresholds. For example, the threshold which was previously set for revenue from illegal operations at RMB 100, 000 for individuals and RMB 500,000 for organizations was lowered to RMB 50,000 for both individuals and organizations counterfeiting one registered trademark. For Individuals or organizations that counterfeit two or more trademarks, the threshold is RMB 30,000. In addition, there is a newly introduced threshold for prosecution of illegal proceeds at RMB 30,000 for counterfeiting one registered trademark and RMB 20,000 for counterfeiting two or more registered trademarks respectively. Top

Prosecution threshold for commodities labeled with a fake trademark that are still in stock

-- Relevant provisions of Economic Criminal Cases Prosecution Regulation
Article 62 provides that the prosecution threshold for knowingly selling commodities under a counterfeited trademark is set at sales revenue of RMB 100,000 for individuals and RMB 500,000 for organizations.

-- Relevant provisions of Criminal Cases Prosecution Regulation
Article 70 provides that the following circumstances shall be prosecuted : (a) sales revenue of the counterfeited commodities amounting to RMB 50,000; (b) counterfeited commodities, though not sold yet, that are valued at RMB 150,000 (c) The sales revenue of the counterfeited commodities does not reach RMB 50,000, but the combined value of the sold and those in inventory is in excess of RMB 150,000.

Article 62 of Economic Criminal Cases Prosecution Regulation stipulates that sales revenue of RMB 100,000 by an individual and RMB 500,000 by an organization shall be recognized as relatively large sales revenue. This threshold is greatly reduced to RMB 500,000 for both individual and organizations in Article 70 of the Criminal Case Prosecution Regulation s . The latter also clarifies the circumstances in which counterfeited commodities are found to be still in inventory. To be specific, in cases where any of the infringing commodities are not yet sold, the prosecution threshold is set in terms of the value of said commodities, which is RMB 150,000. In cases where part of the infringing commodities are sold and part are still in inventory, the threshold is set at the combined value of both, which is also RMB 150,000 even if the sales amount is short of RMB 50,000. Top