Trademark Protection in China: Beware of Trademark Squatting
VSChina has become one of Utah’s most important trading partners. As more Utah companies do business in China, many are neglecting to protect their trademarks there, exposing them to malicious trademark squatting, a situation in which someone other than the original owner of the trademark knowingly registers a trademark with the intention of holding it for ransom or profiting from the goodwill of the trademark owner.
China is a jurisdiction of first filing, meaning the first person to file a trademark will be granted exclusive rights to that trademark. This policy offers squatters the opportunity to rush to register foreign trademarks before the original trademark owners have a chance to do so. The squatter can then take advantage of the bad faith registration to extort payment from the true owner of the mark. If the brand owner refuses to pay, the squatter will threaten the brand owner with legal action to prevent the brand owner from doing business in China, whether it is manufacturing products in China for exporting or selling brand name products in China.
Until recently, Chinese trademark laws did not have an explicit and clear requirement for use in commerce. As a result, registrants have filed thousands of applications for the purpose of negotiating registrations, not using marks in commerce. For example, one company filed nearly 6,000 applications in one day, and there are reports of an individual racking up over 100,000 registrations. China recently revised its trademark laws to combat such bad faith trademark registrations. The amendments give the Chinese Trademark Office the ability to reject applications that are not made for the purpose of using the mark. But China remains a hotbed of brand squatting.
Some trademark owners overlook registration in China because they assume that a trademark registration in the United States will provide some protection in China. But this is not the case. A registration in the United States does not give any right to use a trademark in China. Other trademark owners forego registration in China because they believe squatters are unlikely to target their unregistered trademarks. But the squatters are always looking for new victims. And they’re not limiting their views to big companies like Starbucks, Apple and Tesla, which have each battled brand squatters in China. The cost of registering a trademark in China is minimal and squatters will go after almost any trademark if there is a chance of getting a payoff from a trademark owner.
Although new revisions to China’s trademark laws may put trademark owners in a better position to fight bad faith registrations, it remains difficult to oppose an application or invalidate a registration based on bad faith. faith. Traditionally, the Chinese Trademark Office has taken a narrow interpretation of what qualifies as bad faith. Unless you can prove that the squatter is a business partner (i.e. you have a contractual relationship with the squatter) or a serial squatter (i.e. the squatter has deposited more than trademarks that he could not use), an action for opposition or invalidation has little chance of succeeding. With the new laws, China’s trademark office may be more willing to consider other factors, but it’s unclear whether the changes will significantly reduce the heavy burden of proving bad faith. If an invalidation or opposition action fails, the trademark owner is faced with purchasing the registration at exorbitant cost, rebranding, or ceasing to do business in China.
One of the best ways to prevent trademark squatting in China is to register your trademark there as soon as possible. If you intend to do business there, even if you only manufacture your products and do not intend to sell them, you must apply to register your trademarks. If you file for registration in China within six months of applying for a trademark in the United States, you can claim your priority date in the United States as a priority date in China. If more than six months have passed since your US filing date, your China filing date will be your priority date. Either way, your goal should be to file for your trademark before the squatters can. When you register your mark, you should also consider registering the translation and transliteration of your mark.
China’s amended trademark laws specifically allow defensive trademark filings to preserve space for future business, so when filing, think broadly. Consider adopting a broader range of goods and services that target classes that surround your core business. Include not only the goods and services you currently offer, but also those you might offer in the future. Take the kitchen sink approach; more is better. But be prepared to defend your listing with evidence to justify the defensive filing.
As the trademark landscape and regulations continue to evolve in China, strategic plans for registration and enforcement must also evolve. For Utah companies that currently manufacture or sell products in China, or intend to do so in the future, the best defense is a good offense. Brand owners need to file trademark applications quickly and be consistent and diligent in monitoring their intellectual property to maximize those assets.