China's "first to file" system for trademarks and patents has long caused foreign companies difficulties in protecting their intellectual property (IP) rights in China. Our experts look at the latest China Trademark Office (the CTO) initiative to create a fairer trademark system for both Chinese and foreign brand owners.

The impact of this system on foreign businesses is that they are universally encouraged to seek protection of their IP rights at the earliest opportunity once the intention to enter the Chinese market arises. Historically, however, it has not been uncommon for IP owners seeking to use and register their brand and designs in China to find that unconnected third parties have pre-emptively registered the IP.

The CTO's efforts to create  a fairer trademark system for both Chinese and foreign brand owners began with the Third Revision of Trademark Law which came into effect in May 2014 and introduced measures such as accelerating trademark examination, adopting multi-class applications, strengthening the sanctions against trademark squatting, and increasing statutory damages for infringement.

The CTO has since continued to seek a fairer and more effective system of trademark registration, which encourages and assists owners of brands new to the Chinese market to register their trademarks. The CTO's latest initiative, which came into effect on 15 October 2015, has reduced the official fees for filing trademarks in China by 25%.

The fee for filing an application for one mark in one class (covering up to 10 goods or services) has now been reduced from RMB 800 (approximately £80) to RMB 600 (approximately £60) and the official fee for filing each additional item of goods or services within a class has now been reduced from RMB 80 to RMB 60. It is anticipated that this reduction in fees will encourage businesses to register their marks at an earlier stage of considering a launch in the Chinese market.

Additional fee reductions for China IP filings

The Chinese legislature has also announced the following IP filing fee reductions:

  • Effective from 15 October 2015, the official application fee for copyright registration of software (per copyright work) has been reduced from RMB 250 to RMB 200. The fee for issuing the certificate of registration has also been reduced from RMB 50 to RMB 10.
  • Effective from 1 November 2015, the collection of fees for the recording of IP rights with the General Administration of Customs has been suspended.
  • Effective from 1 January 2016, patent owners may petition for postponing or reducing the payment of annual fees for the first six years of a patent's life; this is a significant benefit to the existing regime which is currently limited to the first three years of a patent's life.

Key issues to consider when registering trademarks in China

  • China is a first to register country rather than a first use country like the United Kingdom. Therefore, a business is advised to register its trademark in China if it intends to do business there, regardless of any international conventions, and should do so before the business actually enters the Chinese market in order to avoid any risk of losing the trademark in China. If the trademark is not registered, the brand has little protection.
  • There is no requirement for the party registering a trademark to have any intention of using that mark. In some instances, foreign companies have entered the Chinese market not only to find a competitor has already registered the trademark they own elsewhere in the world, but that the competitor is also seeking to enforce it against them and is demanding payment to transfer the trademark.
  • Opposing a filed application or cancelling a registered trademark can be costly and time-consuming. Chinese law does provide grounds for opposing a filed application or cancelling a registered trademark; however, procedures can be costly and time consuming, and to succeed it is often necessary to prove that the initial application was made in bad faith. This can be evidentially difficult. Being the first to file for registration is always the cheapest and most efficient way to secure a trademark and prevent competitors from benefiting from your mark.
  • It is important to weigh the pros and cons of adapting your mark to the Chinese market if you are selling to the Chinese market. Whether or not you wish to change the mark's appearance or translate it to adapt it to the Chinese market depends on why Chinese customers are choosing your product over domestic ones. In some cases, maintaining the "foreignness" of the brand is a distinct advantage. Other companies have translated their mark with great success, with Coca-Cola being a prime example. In relation to the latter, the Chinese translation is not only a transliteration of the original English, but also carries an excellent meaning in Chinese. A foreign business which translates its mark should consider whether the characters used are positive, whether there is any associated meaning with a transliteration, and remember to still register its original foreign mark.
  • It is possible to record intellectual property rights, including trademarks, centrally with the General Administration of Customs of China. This is relatively inexpensive and it is recommended that rights are recorded as Customs have a valuable role to play in enforcement, particularly in relation to clear-cut cases of infringement, such as counterfeiting cases in relation to brands.