China's legislature on Friday passed a new trademark law to crack down on infringement and ensure a fair market for Chinese and foreign trademark holders.
After three readings over the past two years, the revised law was passed at the bimonthly session of the Standing Committee of the National People's Congress (NPC), China's top legislature.
The new law, which goes into effect May 1 of next year, raises the compensation ceiling for trademark infringement to 3 million yuan ( about 500,000 U.S. dollars), six times the previous limit.
The revision was based on comments from lawmakers, experts and representatives of businesses and trademark agencies from China and abroad, said Wang Qing, an official with the Legal Affairs Commission of the NPC Standing Committee.
The law treats Chinese and foreign enterprises equally, said Xu Ruibiao, director of the Trademark Bureau under the State Administration for Industry and Commerce.
"Based on the amendments, it will become easier for foreign trademark holders to protect their rights in the case of infringement," he said.
"We have provided protection for nearly all the well-known foreign brands in China," Xu said. "Foreign enterprises should be confident in the fairness of trademark protection in the Chinese market."
The law adopts the principle of good faith during the registration and use of trademarks. Infringement of the trademark rights of others could result in fines worth five times the sales volume resulting from illegal business.
The new law also mitigates trademark holders' responsibility in providing proof of infringement, saying the alleged offenders shall provide their account books or other materials for investigation. Otherwise, compensation amounts could be determined according to the amounts proposed by trademark holders.
This could reduce litigation costs for trademark holders and increase the costs and penalties infringers have to pay, said Li Shunde, an intellectual property professor with the Chinese Academy of Social Sciences.
The new law also says that trademark agencies cannot accept entrustment if they know or should know that their clients are conducting malicious registration or infringing on the trademark rights of others.
Agencies violating the law will face fines and credit score penalties filed by industrial and commercial authorities. Those involved in serious cases will have their businesses suspended.
The new law offers protection for well-known trademarks, giving owners the right to ban others from registering their trademarks or using similar ones -- even if similar brand names are available. However, the words "renowned trademark" shall not be used in promotions or advertising.
The amendment also changes clauses regarding the examination period for trademark applications to make the process more efficient.
China adopted its Trademark Law in 1982 and made amendments in 1993 and 2001.
As of June this year, China held the world's largest number of registered trademarks and valid trademark registrations, at 8.17 million and 6.8 million respectively, according to the latest official statistics.