Trademark Squatting in China

January 19, 2017 by

Trademark squatting in China can be a big roadblock for international businesses that manufacture products in China or wish to enter the Chinese market. Trademark squatting does not only affect famous brands such as Siemens, Tesla, Facebook or Apple or stars such as Emma Watson or Michael Jordan but also small to medium-sized businesses.

New Zealands trade relationship with China has nearly tripled over the past decade, with the trade volume between the two countries rising from $8.2 billion in the year ended June 2007 to $23 billion in the June 2016 year. China is New Zealand’s second-largest trading partner for exports and third-largest for imports.

Trademark Squatting

Many New Zealand businesses getcaught out because they fail to register their trademark in China eaTrademark squatting in Chinarly on. By the time they want to do business in China they may learn that their trade mark has already been granted to a Chinese company.

Similarly, New Zealand businesses that manufacture goods in China may find that a Chinese trademark squatter has registered their trademark with the intention of selling it back to the New Zealand company at an inflated price.

Trademark squatters will exert pressure on foreign companies by recordingtheir trademark with China’s customs so that any imported or exported goods bearing the trademark will be detained. If China’s custom authority determines that the goods infringe a Chinese trademark, then it will confiscate the goods and issue a penalty notice.

How to deal with Trademark squatting in China

When a foreign company falls victim to a trademark squatter, it may be unable to use or register its trademark in China trade any goods or services with the brand on it in China. In the end, the foreign business may be forced to to buy back its trademark from the trademark squatter, rebrand its products or services, or to take up the battle through the Chinese legal system.

The best strategy against trademark squatting in China is to apply for your trademark as early as possible. A solid defensive strategy to protect your brand in China is equally important i.e you will need to think about other intellectual property rights as well.

The Chinese trademark system operates on a first-file first-serve basis; only in very limited circumstances does the prior use of the trademark give rights to the mark.

A recent reform of the Chinese trademark law has put more emphasis on prior use and preventing registration of trademarks in bad faith. However, under Chinese trademark law, the interpretation of bad faith is very narrow and does not necessarily stop trademark squatters from stock-piling foreign trademarks.

What to do when you have become the victim of a trademark squatter

  1. Come up with a solid strategy (and stick to it!)
  1. Opposition to trademark registration
  1. Invalidation proceedings based on bad faith proceedings
  1. Cancellation of trademark based on non-use
  1. Defensive filing strategy by taking a multi-layered IP approach

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Chinese Trademark Law

Here are a few excerpts from the Chinese Trademark Law that explain the above.

Chapter VII Protection of the Exclusive Rights to Use Registered Trademarks

Article 51 The exclusive right to use a registered trademark is limited to the trademark which has been approved for registration and to the goods in respect of which the use of the trademark has been approved.

Article 52

Any of the following acts shall be an infringement of the exclusive right to use a registered trademark:

(1) to use a trademark that is identical with or similar to a registered trademark in respect of the identical or similar goods without the authorization from the trademark registrant;

(2) to sell goods that he knows bear a counterfeited registered trademark;

(3) to counterfeit, or to make, without authorization, representations of a registered trademark of another person, or to sell such representations of a registered trademark as were counterfeited, or made without authorization;

(4) to replace, without the consent of the trademark registrant, its or his registered trademark and market again the goods bearing the replaced trademark; or

(5) to cause, in other respects, prejudice to the exclusive right of another person to use a registered trademark.

Article 53

Where any party has committed any of such acts to infringe the exclusive right to use a registered trademark as provided for in Article 52 of this Law and has caused a dispute, the interested parties shall resolve the dispute through consultation; where they are reluctant to resolve the matter through consultation or the consultation fails, the trademark registrant or interested party may institute legal proceedings in the People’s Court or request the administrative authority for industry and commerce for actions. Where it is established that the infringing act is constituted in its handling the matter, the administrative authority for industry and commerce handling the matter shall order the infringer to immediately stop the infringing act, confiscate and destroy the infringing goods and tools specially used for the manufacture of the infringing goods and for counterfeiting the representations of the registered trademark, and impose a fine. Where any interested party is dissatisfied with decision on handling the matter, it or he may, within fifteen days from the date of receipt of the notice, institute legal proceedings in the People’s Court.