What you need to know about trademark squatting

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    One of the most important changes in the revised Trademark Law is to explicitly set forth “good faith” as one of the fundamental principles for registration and use of a trademark in China. Fighting against trademark squatters is expected to be less burdensome under the revised Trademark Law, which comes into force on 1 May 2014. It would be advisable to consider the following key points when a Western company deals with trademark squatters under the revised Trademark Law.

    刘建龙 Colin Liu
    刘建龙 Colin Liu

    Is the trademark squatter a trademark agent? As of June 2013, more than 17,000 firms in China are qualified to act as a local agent to file trademark applications with China’s Trademark Office (TMO). In practice, it is not uncommon that trademark agency firms register a large number of trademarks in their own names and blackmail the actual owners to purchase them back.

    Firms with good knowledge

    The trademark agency firms have good knowledge on the law, and thus it is more difficult to tackle them than individual squatters. The revised Trademark Law explicitly prohibits the trademark agency firms from registering any trademark in their own names. If the squatter who applied for registration of your trademark in China is a trademark agency firm, you would have good chances of success in opposing the trademark registration of the squatter under the revised Trademark Law.

    Does the trademark squatter have any contractual, commercial or other relation with you? The current trademark regime prohibits your trademark agent/representative or your sales agent/distributor (jointly, agents) from registering your trademark without authorisation.

    The Supreme People’s Court (SPC) further confirmed its judicial interpretation [2010] No. 12 that a trademark application through the collusion between a trademark squatter and the agents should also be rejected. However, in practice, there are still uncertainties about whether suppliers or other types of business partners would also be caught.

    Uncertainties clarified

    These uncertainties have been clarified under the revised Trademark Law, which explicitly provides that you would be allowed to oppose the registration of the trademark squatter as long as you have evidence proving that the trademark squatter obviously knows your trademark through its contractual, commercial or other relation with you.

    Does the trademark squatting infringe any of your prior rights such as copyright, registered design, trade name and right in portrait, etc.? Trademark registrations that prejudice prior rights are prohibited under the current trademark regime. This rule remains unchanged under the revised Trademark Law. In practice, you are allowed to oppose the registration of the trademark squatter, if such registration infringes your prior rights, including but not limited to copyright, registered design, trade name and right in portrait.

    Scope is broad

    The scope of the prior rights is broad. For example, the SPC ruled in 2010 that the name of a medicine that has been actually used and has a significant influence can be protected as a prior right against trademark squatters.

    Are you being blackmailed by the trademark squatter? If you are blackmailed to purchase back your trademark, or the trademark squatter forces you to conduct business with him, or if the trademark squatter “free rides” the pre-existing reputation of your trademark to mislead consumers, these would be useful evidence proving the bad faith of the trademark squatter.

    You may wish to challenge

    In the case that you have used your unregistered trademark in China and gained a good reputation, you may wish to challenge the bad faith of the trademark squatter and invoke article 32 of the revised Trademark Law (i.e. article 31 of the current Trademark Law) to invalidate the registration of the trademark squatter. Article 44 of the revised Trademark Law (i.e. article 41 of the current Trademark Law) contains a “catch-all” provision prohibiting improper trademark registration in China. Even if your trademark has not yet been broadly used in China, you may nevertheless invoke the “catch-all” provision to challenge the bad faith of the trademark squatter and complain that its trademark registration was acquired by improper means.

    Does trademark squatter actually use the trademark? A trademark would be vulnerable for revocation if it has not been used in China for a consecutive period of three years after it has been granted registration. Most of the trademark squatters do not actually use the trademarks that they have registered. In practice, if a trademark squatter has registered a large number of trademarks, this would be an indication that those trademarks are not actually used by the trademark squatter. You may wish to request that the TMO revoke the trademark registration on the ground of non-use.

    Effect needs to be tested

    Although it is expected that the revised Trademark Law should hold back the booming growth of trademark squatters in China, the actual effect needs to be tested after the amendments have been implemented on 1 May 2014.

    The key points mentioned above are not intended to be exhaustive of all possible remedies against the trademark squatters under the revised Trademark Law. In any case, preservation is better than cure. Early registration would be always recommendable for Western companies intending to do business in China.

    Colin Liu is a partner at CMS, China in Shanghai. He can be contacted on +86 21 6289 6363 or by email at colin.liu@cmslegal.cn