China strengthens regulations against malicious trademark imitation and preemption with enhanced penalties

China has enacted a comprehensive revision of its Trademark Law, which will be implemented on January 1, 2027. This overhaul aims to significantly curb malicious trademark squatting and bolster consumer protection measures.

The revised law introduces stricter penalties for bad-faith trademark practices. Applicants found to be imitating or preempting others' trademarks with knowledge of their existence will face warnings and potential fines of up to 100,000 yuan (approximately $22,000 USD). Furthermore, the law now explicitly states that applying for trademarks without the intent to use them, and in quantities significantly exceeding normal business needs, will be grounds for refusal.

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This revision of China's Trademark Law is expected to serve as an opportunity to create a more predictable and fair trademark environment for businesses in both countries.

For South Korean businesses operating in China, these amendments are anticipated to provide a more robust legal framework for challenging bad-faith trademark registrations. Companies can now leverage these new provisions to file objections and invalidation suits more effectively. The law also enhances consumer protection by imposing fines of up to five times the illicit profits gained from using trademarks that exaggerate or falsely represent a product's performance or origin, potentially leading to consumer misinterpretations. In cases where illicit profits are difficult to calculate, fines can reach up to 250,000 yuan (approximately $55,000 USD), with severe violations potentially leading to trademark registration cancellation.

In parallel, the management and supervision of trademark agencies will be strengthened. The revised law clarifies reporting obligations for these agencies and expands the oversight authority of regulatory bodies to prevent them from supporting malicious applications and to combat unfair practices within the agency market. This is expected to foster a more reliable environment for South Korean companies undertaking trademark applications and rights management in China. The revisions align with recent bilateral discussions between South Korea and China on intellectual property cooperation, specifically addressing joint responses to malicious trademark applications aimed at unfair profit.

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As the system shifts towards usage, our companies also need to systematically manage evidence of trademark use in China, such as sales, advertising, and distribution data.