Despite its contribution to the prosperity of the trademark cause, the rapid growth of the trademark agent market sector introduced a number of issues or problems. These included a below-average industrial structure, below-average or unqualified employees, various levels in the quality of services, chaotic pricing, malicious competition, violations of the good faith doctrine, and the use of false promises to cheat customers.
In light of the tumultuous situation, the new revision strengthens the management of the trademark agent sector. It clearly provides that the good faith doctrine is applicable to trademark agent activities; requires that trademark agent organizations shall not accept any commission to squat or infringe any mark; further requires that trademark agent organizations shall not apply for or register any trademark other than commissioned by their clients; strengthens the management of the trademark agent sector; and particularly prescribes penalties applicable to trademark agent organizations. The above are embodied in Articles 19, 20 and 68 of the new revision.
This is the first time that the Trademark Law provides for regulation of trademark agent organizations, which lays a foundation for the regulation of the entire sector and the monitoring of the operations of related organizations. It is believed that the provisions will also encourage the sector to self-regulate and develop itself in a more healthy fashion.
Strengthening the protection of proprietary trademark rights
Based on the rules of damages defined in Article 56 of the existing Trademark Law, Article 63 of the new revision added the following: 1) the amount of damages may be determined as a reasonable multiple of the royalties for the registered trademark concerned; 2) the burden of proof shall be reasonably allocated; and 3) the cap of legal damages is increased to RMB 3,000,000 yuan. The changes offer a good solution to such prominent problems, such as the insufficient amount of damages awarded in judicial practice and the insufficient protection of trademark proprietors. They also provide a powerful deterrent to potential infringers. According to Zhang Weijun, the legal cap was set to be RMB 1,000,000 in the early drafts of the new revision. It was not until June 2013 in the Trademark (Revision Draft) submitted to the Third Session of the Standing Committee of the 12th National People’s Congress for the second reading that the amount of legal damages for infringement cases were changed from “RMB 1,000,000 yuan or below” to “between RMB 20,000 yuan and RMB 2,000,000 yuan.” In the third-reading draft, which was submitted to the Fourth Session of the Standing Committee of the 12th National People’s Congress in August, the legal cap was further raised from RMB 2,000,000 yuan to RMB 3,000,000 yuan. The changes were intended to exhibit more power in cracking down on trademark infringements.
The inclusion of punitive damages in express terms in the new revision has attracted wide attention and led to extensive discussions in related sectors. It is generally believed as a huge breakthrough and a great attempt in the advancement of intellectual property legislation of China.
Among the many changes in the new revision, this author believes, the rules on malicious infringement and punitive damages are significant because they are more powerful in fighting against infringements and protecting trademarks, and because they are also a technical breakthrough in the intellectual property legislation.
As explained by Li Yongbo, a lawyer from Unitalen Law Office, the law of China, which has its origin in the Continental Law system, has taken a “break-even” approach to determine civil damages. Punitive damages have been introduced gradually only in a few areas, thanks to the growth of the market economy. In the case of infringement damages, this “break-even” approach, in a sense, provides an encouragement to infringers. The inclusion of punitive damages provides a good deterrent to repeat or potential infringers. It also provides an incentive that encourages trademark proprietors to proactively protect their rights against infringements and to create more social wealth and value. Thus, the move is dependent upon the characteristics of intellectual property and social economic development.
In the Opinions of the Supreme People’s Court on a Few Issues in the General Situation of Intellectual Property-related Adjudicatory Services under the Current Economic Trend issued in 2009, Article 16 places a requirement to improve the compensatory, punitive and deterring power of the awarding of damages, lower the cost for right holders to defend their rights, and increases the price that infringers must pay for their infringement. In determining the amount of damages, the court shall be adept at using rules of evidence to examine and compute evidence in a comprehensive and objective manner. It should employ logical reasoning and daily life experience to judge the truthfulness, lawfulness and probative force of evidence, and should find the facts based on the preponderance of evidence. Moreover, the parties should be guided to use the infringement-related damage or gain to compute the amount of compensation, and try to avoid any oversimplified application of legal damages. If it is difficult to prove the exact amount of the damage or gain, but is obviously in excess of the legal cap, the entire picture of evidence should be taken into account and an amount higher than the legal cap may be awarded.
The inclusion of the guiding opinions of the Supreme People’s Court is a great step forward in maintaining fair competition in the market and protecting the legal rights of trademark proprietors and consumers. It stands out as a practical reference for other changes to intellectual property-related laws in the future.
(Translated by Ren Qingtao)
