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Late last year, the United States and China signed an agreement in Beijing on the terms for China to enter into the World Trade Organization (WTO). [FOOTNOTE 1]China agreed to open its domestic market further and to continue economic reform. U.S. manufacturers and service providers will be given opportunities to increase their investments in China and expand their participation in the world’s largest consumer market. The U.S. Senate must approve the agreement, and China must negotiate and conclude similar bilateral agreements with the European Union and other WTO member countries if it is to join the WTO this year, as expected. A condition of membership in the WTO is compliance with the minimum requirements regarding intellectual property protection outlined in the Trade-Related Aspects of Intellectual Property (TRIPS) Agreement, which was adopted by the WTO’s predecessor, the General Agreement on Tariffs and Trade (GATT) during the Uruguay Round tariff negotiation. Chinese intellectual property laws must be amended and modernized to meet this standard. This article reviews the 1992 Chinese Trademark Law and speculates on possible and desirable amendments. The Chinese Trademark Law was drafted in 1979, passed in 1982 and came into force in 1983. It was amended in 1992. [FOOTNOTE 2]It incorporates many prevailing international practices, such as national treatment, adoption of the International Classification of Goods and Services and opposition proceedings. At the same time, it retains certain unique features, including Customs’ monitoring of exported as well as imported goods and administrative, rather than judicial, enforcement of trademark rights by provincial, municipal and other local unit governments. The Chinese Trademark Law, the first intellectual property law enacted since the founding of the People’s Republic of China in 1949, has played an important role in creating an entrepreneurial business environment. It is probably the most frequently invoked commercial legal lever used by business owners, both Chinese and foreign, who rely on it to protect their names, marks, reputation and developing trade. To comply with TRIPS’ minimum requirements, however, several important amendments are needed. BROADENING SUBJECT MATTER Under Art. 7 of the present Chinese Trademark Law, trademarks are defined as “any word, device or other combination that is used as a trademark.” [FOOTNOTE 3]This definition is based on a dated, conservative concept that only recognizes marks in the form of words and devices. This is clearly much more restrictive than the broad definition of Art. 15(1) of the TRIPS Agreement: [F]or protectable trademark subject matter, any sign, or any combination of signs, capable of distinguishing the goods or services of one undertaking from those of other undertakings, shall be capable of constituting a trademark. In particular, words including personal names, letters, numerals, figurative elements and combinations of colors as well as any combination of such signs, shall be eligible for registration as trademarks. [FOOTNOTE 4] With the development of a global economy and the emergence of new communications technologies, trademarks are manifest in diverse forms other than words and designs. Shapes, smells, colors, sounds and combinations thereof are used with increasing frequency as trademarks and are registrable in many countries. For instance, in the past 50 years, distinctive stitching patterns displayed on the hip pockets of jeans have been used by various jeans manufacturers to differentiate their products, particularly in a post-sale environment. Instead of looking at word marks such as “Lee,” “Levi’s” and “Calvin Klein,” consumers are now able to identify jeans by reference to the distinctive stitching designs these manufacturers use. These designs clearly fall within the definition of “signs” of the TRIPS Agreement and are recognized as registrable subject matter by most, if not all, WTO members. Many such designs, through extensive use by their owners, have become very valuable trademarks, arguably more durable and more valuable than many word marks. They facilitate retention of post-acquisition customer recognition of the source of the product bearing them and for that reason are frequent targets of infringers. Although it is not explicit in the TRIPS Agreement that new forms of trademarks, such as shapes, colors and smells, must be added to the current Chinese definition of trademarks, many WTO member countries and regions already recognize such marks in their current trademark statutes. For instance, Hong Kong amended its trademark law to include new forms of trademarks when it joined the WTO. [FOOTNOTE 5]At present, China does not permit registration of marks in these progressive forms. Registration of stitching designs, colors, sounds or scents as trademarks is not permitted. When joining the WTO, China should consider a more expansive definition of trademarks to include such newer forms. DEFINITION OF “APPLICANT” Art. 1.3 of the TRIPS Agreement requires members to accord national treatment to the citizens and domiciliaries of other members in regard to intellectual property rights. This includes natural people and legal entities. The present Chinese Trademark Law, however, does not permit trademark applications to be filed by individual natural people who do not own a business, foreign or Chinese. Art. 4 of the law defines applicants as “any enterprise, institution, or individual producer or trader, intending to acquire the exclusive right to use a trademark for the goods provided, manufactured, processed, selected or marketed by it or him.” [FOOTNOTE 6]This has prevented individuals who act as individuals, rather than as companies, partnerships or some other form of business organization, to obtain trademark registrations. Expansion of the definition of “applicant” to allow any individual owners of trademarks who have their own businesses to apply for registration of their trademarks could encourage development in business sectors best served by individual entrepreneurs and venture capitalists. WELL-KNOWN MARKS The existing Chinese Trademark Law also has no provision extending enhanced protection for well-known marks. Instead, there is a very narrow administrative regulation on certification and action against infringement of such marks. [FOOTNOTE 7] The regulation, which includes criminal sanctions against trademark infringers and a clear definition of well-known marks, is effective. To make the provisions more forceful, however, the content of the administrative regulation could be added to the Chinese Trademark Law, updated and revised. Under the regulation, China recognizes only well-known marks owned by Chinese companies. Trademarks owned by foreign companies are not reviewed and evaluated. Moreover, the Chinese Trademark Office accepts evidence only of local sales of products or services bearing trademarks. Commercial promotional efforts, such as print and TV advertising of trademarks, are not accepted as proof of reputation, and reputation outside of China will not be considered. Art. 6.2 of the TRIPS Agreement states, “In determining whether a trademark is well-known, accounting shall be taken of the knowledge of the trademark in the relevant section of the public, in deciding knowledge in that mark obtained as a result of the promotion of the trademark.” [FOOTNOTE 8] Often, a mark is heavily promoted through traditional and electronic media before a product bearing the mark is actually offered for sale in China. For instance, the well-known trademark “Chicago Bulls” was known to millions of sports fans in China through TV broadcasting of the famous team’s basketball games that occurred well before products such as sweatshirts and accessory goods — including key chains, bags, umbrellas and mugs bearing the “Chicago Bulls” mark — were actually sold in the country. If such a promotion does not qualify as evidence of use and is not taken into consideration by the Chinese Trademark Office in determining whether a mark is well-known, owners of many recognized and valuable trademarks, especially those of foreign companies that plan product introductions for China, will be prejudiced. Frequently, infringers exploit this window to flood the market with counterfeit goods bearing well-known marks after the marks have been advertised but before genuine products are available. To have foreign promotional activities included by the Chinese Trademark Office in its consideration of reputation would enable owners of well-known marks, especially foreign owners, to obtain adequate legal protection, establish a solid basis for full-fledged and uninterrupted use of their marks in China and facilitate the eventual sale of genuine products bearing these well-known marks in the country, protecting Chinese consumers from deception, confusion, misrepresentation and fraud. Arts. (1) and (3) of the TRIPS Agreement provide that the owner of a trademark registration has the exclusive right to prevent third parties from using the identical or similar marks on identical or similar goods or services without his or her authorization. [FOOTNOTE 9]They further prohibit others from using identical or similar marks on goods or services that are not identical or similar to the ones of the registration but have a connection with those in the registration and use of which is likely to cause damage to the registration owner. EXTENDING THE SCOPE OF RIGHTS This definition broadens the traditional scope of protection that a Chinese trademark registration conveys to its owner by extending the exclusionary right to goods and services not listed in the trademark registration but deemed within the scope of the owner�s associated business or future expansion plan. Of course, the owner of the trademark registration in question is required to prove likelihood of damage if he or she wishes to exclude others from using an identical or similar mark on goods or services not identical or similar to the ones designated in his or her registration. Usually, this can be done easily if a mark is well-known. These provisions could facilitate the prevention of theft of goodwill of registered marks in relation to goods and services not specifically designated in the registration. Frequently, a trademark is registered only for the goods for which it is famous. Infringers may decide to manufacture and sell infringing products that are not specifically designated in the registration in an effort to avoid the trademark owner’s attention. If not stopped immediately, however, such marginal infringement and misuse will dilute or detract from the reputation and distinctiveness of the registered mark and restrict the owner’s ability to expand the trademark to adjacent areas or products. The existing Chinese Trademark Law Art. 38(4) contains catch-all language that defines infringement as actions that “cause, in other respects, prejudice to the exclusive right of another person to use a registered trademark.” [FOOTNOTE 10]The current law does not contain as broad a principle as the TRIPS Agreement. In practice, neither the Trademark Office nor government enforcement agencies extend a trademark owner�s rights to goods or services that are not identical or similar to the goods or services designated in the registration. Should China join the WTO, explicit language must be added to the Chinese Trademark Law, so as clearly to define a broader scope of rights granted by a trademark registration, which is required by TRIPS, and needed for effective commerce. JUDICIAL REVIEW The TRIPS Agreement requires that the administrative enforcement of the trademark law be reviewed by a judiciary. Art. 4(4) provides that “parties to a proceeding shall have an opportunity for review by a judicial authority of final administrative decisions and, subject to jurisdictional provisions in national laws concerning the importance of a case, of at least the legal aspects of initial judicial decisions on the merits of a case.” [FOOTNOTE 11] The existing Chinese Trademark Law provides judicial review of administrative penalties in trademark infringement cases. In trademark application prosecution, opposition, cancellation and invalidation proceedings, however, the current Chinese administrative review is final. Parties involved do not have an opportunity to apply for judicial review of the Trademark Office’s decisions. To comply with the TRIPS requirement, the Chinese Trademark Law should make judicial review available for all administrative decisions regarding determination of trademark rights. As a first step, China can place cases involving revocation and invalidation of granted trademark rights under judicial review. However, to comply with TRIPS and give trademark owners a fairer chance, China eventually should let all such cases, especially appeal cases filed by trademark applicants against the Trademark Office’s decisions refusing registration of a mark, be reviewed by the judiciary. Arts. 22 to 24 of TRIPS relate to protection of geographical indications. [FOOTNOTE 12]In contrast, the present Chinese Trademark Law lacks comparable provisions. Protection of geographical indications, such as collective marks or certification marks, is only briefly mentioned in the implementing regulations of the Chinese Trademark Law. In modern commerce, this is not sufficient. Over the years, China has become aware of the importance of such protection, and already there are plans to amend its trademark law to include protection of geographic indications — i.e., marks that certify goods the specific quality of which is largely or totally determined by geographic factors, natural environment and traditional human factors such as origin, purity or raw materials. The protection of certification marks can prevent abusive use of such marks and damage to their reputation. Collective marks, on the other hand, would facilitate small and midsize companies working together, leveraging their resources to expand production, sales and reputation so as to establish enhanced market identifiers and favorable market positions. Including the protection of geographical indications in the Chinese Trademark Law will protect not only foreign trademark owners, but also tens of thousands of small companies in China. It is expected that the Chinese Trademark Law, in its next revision, will add provisions regarding registration and use of such marks. China already has made significant progress toward preparing itself to join the WTO. A modern and more effective trademark law in China would bring it closer to that goal. David Weild III is a senior partner at New York’s Pennie & Edmonds L.L.P.Hailing Zhang is a senior associate at the firm. FOOTNOTES: FN1Michael Laris, “China, U.S. Sign WTO Deal,” Washington Post Foreign Service, Nov. 15, 1999, at A1. FN2Dong Baolin, “Thoughts on the Second Revision of the Chinese Trademark Law,” China Patents & Trademarks, No. 2, 1999, at 38. FN3Art. 7, Trademark Law of the People’s Republic of China, China Trademark Office, 1992, at 47. FN4 The General Agreement on Tariffs and Trade Uruguay Round, Art. 15(1), at www/Urebalaw.com/gatttext/htm. FN5Rayman Perera, “The Implementation of TRIPS in Hong Kong,”Presentation to the APEC Industrial Rights Symposium in Tokyo, 28-29 August 1996, at http://info.gov.hk/ipd/apec.html. Hong Kong retains its own trademark law for 50 years after its return to mainland China. FN6Art. 4, Trademark Law of the People’s Republic of China, China Trademark Office, 1992, at 47. FN7See Dong, supra, n.2. FN8See supra, n.4, at Art. 6.2. FN9Id. FN10See supra, n.3, at Art. 38(4). FN11See supra, n.4, at Art. 4(4). FN12Id.

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