Where the right owner fails to register their trademark promptly, allowing a squatter to take advantage and register it instead. Such registration not only results in the original owner losing control over their trademark and suffering infringements on their rights and reputation, but it also disrupts their business operations, leading to financial losses. Consequently, the right owner must implement timely and effective measures to mitigate the negative impacts of the trademark squatting.
Administrative Relief Measures - Traditional Method
Under China's legal framework, a trademark owner whose rights have been compromised by squatting must first address ownership disputes through the administrative procedures established by the China National Intellectual Property Administration (CNIPA). The trademark owner is required to file for the invalidation of the squatted trademark, request CNIPA to annul it, and then promptly reapply for the trademark under their own name.
Article 32: preemptive registration of a trademark already in use by others and possessing a certain influence through unfair means
According to the relevant provisions of the Trademark Law, the original owner of a trademark can typically seek administrative relief based on specific regulations. Article 32 of the Trademark Law states that unauthorized trademarks that have been used by a squatter and have gained a certain level of influence are eligible for protection. This provision aims to protect unregistered trademarks that were in use prior to the squatter's actions, thereby preventing unlawful squatting practices. The term "unregistered trademark" includes not only those trademarks that were never applied for registration before the squatting application date but also those that have lost exclusive rights due to non-renewal of their registration.
To demonstrate that a squatter has engaged in "preemptive registration of a trademark already in use by others and possessing a certain influence through unfair means," as outlined in Article 32, two key criteria must be met: (1) The registered trademark must have been in use prior to the application date and must exhibit "certain influence," which is typically assessed based on the trademark's recognition among the relevant public within a specific region in China; (2) The squatter must have applied for the trademark using "improper means." Evaluating whether the squatter has acted improperly involves considering their awareness of the prior use of the trademark, including any existing trade or cooperative relationships between the parties, their geographical proximity, and whether they operate within the same industry.
Article 15: an agent or representative has registered a trademark on behalf of their principal without authorization
Article 15 of the Trademark Law addresses the issue of trademark squatting by agents, representatives, and certain related individuals. This article specifically prohibits malicious squatting by agents or representatives and by specific related parties who are aware of another party's trademark through contractual or business relationships.
To establish that an agent or representative has registered a trademark on behalf of their principal without authorization, it is necessary to demonstrate the existence of an agency or representative relationship. Typical agency relationships may include those defined in the Civil Code, as well as business dealers who are familiar with the principal's trademark through commercial interactions. Representative relationships can encompass legal representatives, directors, managers, and similar roles.
For specific related parties, it is essential to prove not only that the registered party was aware of another's trademark due to contractual or business connections but also that the trademark application was based on prior use. Generally, the burden of proof for "prior use" as required by Article 15 is less stringent than the "certain influence" standard outlined in Article 32 of the Trademark Law.
Article 4: malicious trademark registration not intended for use
Article 4 of the Trademark Law aims to combat the practice of mass trademark applications and the imposition of excessive transfer and licensing fees. The intent of this article is to prevent malicious trademark registrations that are not intended for actual use.
Under Article 4, CNIPA will evaluate various factors, including the volume of trademark applications submitted by the squatter, the diversity of categories involved, and any instances of demanding high transfer or licensing fees. This comprehensive assessment will help determine whether the squatter's trademark registration applications exceed legitimate business needs and indicate an intention to gain improper benefits.
If a squatter submits numerous trademark applications that mimic another's trademark across a wide range of categories, or if they pressure the original trademark holder into commercial cooperation or demand exorbitant fees, these actions can serve as significant evidence of "malicious trademark registration not intended for use," as defined in Article 4. In practice, trademark squatting can infringe upon various rights and interests, including unregistered well-known trademarks, prior copyrights, and the name rights of the original trademark holder. Therefore, when seeking to invalidate a trademark, it is crucial to consider all relevant legal provisions based on the specific circumstances.
Taking administrative action to address malicious squatting is a vital step in reclaiming trademark registration for the rightful owner in a timely manner.
Civil Remedies-Innovative Solution
The civil remedy approach presents an innovative solution. Once a squatter registers a trademark, the original trademark owner loses the exclusive rights to that trademark, which allows the squatter to utilize it for business purposes under the protection of Trademark Law. However, the original trademark owner can still take certain actions to protect their interests.
According to the relevant provisions of Trademark Law, any trademark application must not conflict with previously acquired legal rights of others. The Anti-Unfair Competition Law outlines a range of protected rights, including well-known product names, packaging, branding, and business names. These rights, along with registered trademark rights, are distinct forms of intellectual property and should be safeguarded if they were established prior to the registration of the trademark in question. Furthermore, if the squatter engages in actions that create an agency or cooperative relationship with the original trademark owner, or if they intentionally hinder the registration process or disrupt the normal operations of the original trademark, such actions may be deemed as unfair competition.
In light of the various infringing activities by the squatter, the original trademark owner may pursue civil litigation based on the specific provisions outlined in the Anti-Unfair Competition Law.
Addressing Confusion Exploitation by Squatters in Accordance with Article 6 of the Anti-Unfair Competition Law
Article 6 of the Anti-Unfair Competition Law addresses the issue of squatters who exploit trademarks to conduct business activities, intentionally creating confusion in the marketplace. These individuals often utilize registered trademarks to benefit from the established goodwill associated with them, thereby boosting their own sales. In practice, squatters frequently mimic the appearance, packaging, branding, or advertising of the legitimate trademark owner, which can lead to consumer confusion and result in the unintentional purchase of their products.
For a squatter's use of prior rights—such as product names, packaging, branding, or business names—to be considered "influential" and thus protected under Article 6, certain criteria must be met: (1) The prior rights must possess distinctiveness that identifies the source of the goods or services; and (2) The registered rights must have established market visibility and influence among the relevant public. Under this law, the burden of proof lies heavily on the squatter to demonstrate that their rights were established first and that they possess a certain level of influence. Additionally, they must provide evidence of actions that could lead to consumer confusion.
According to Article 6 of the Anti-Unfair Competition Law, "commodity names, packaging, decoration, and enterprise names with notable influence" are recognized as civil rights protected by law, while the exclusive right to utilize a registered trademark is acquired through administrative authorization processes. Given the distinct pathways to these rights, conflicts may arise. In practice, courts typically adhere to two guiding principles to assess whether a business operator is acting in good faith as outlined in the Anti-Unfair Competition Law: the protection of prior rights and interests, and the prevention of market confusion.
Addressing False Advertising by Squatters in Accordance with Article 8 of the Anti-Unfair Competition Law
False advertising, as defined in Article 8 of the Anti-Unfair Competition Law, refers to the dissemination of misleading information or promotional content that does not accurately reflect the actual performance, function, or quality of goods or services. Such practices can unduly influence consumers' choices regarding products or services.
In cases where an individual falsely claims an agency or partnership with another party, and intentionally misleads consumers into believing that the goods or services offered are affiliated with that party, the affected party can assert that this conduct constitutes confusion as outlined in Article 6 of the Anti-Unfair Competition Law. Additionally, they can seek protection under Article 8. Notably, under Article 8, the aggrieved party does not need to demonstrate that their prior rights have gained significant recognition; they only need to show that the actions of the misleading party are deceptive and could confuse consumers regarding their goods or services. This results in a lower burden of proof compared to Article 6.
Addressing Unlawfully Trademark Use to Disrupte Trademark Orders by Squatters in Accordance with Article 2 of the Anti-Unfair Competition Law
According to Article 2 of the Anti-Unfair Competition Law, the actions of individuals who unlawfully use a trademark to disrupt the rightful exercise of trademark rights are addressed. Some individuals not only utilize the trademark in question for their business activities but also submit opposition applications against the legitimate trademark registrations, thereby obstructing the registration process and interfering with normal business operations.
While the Anti-Unfair Competition Law does not explicitly define these actions as unfair competition, Article 2 outlines the fundamental elements of unfair competition. It states that business operators must not disturb market competition or infringe upon the legitimate rights and interests of other businesses or consumers. They are expected to adhere to principles of voluntariness, equality, fairness, good faith, and to comply with legal and ethical standards in their business practices.
In practice, courts typically evaluate whether a business operator's conduct aligns with the principle of good faith, adheres to ethical standards, disrupts market order, or harms the legitimate rights of others. These factors are considered collectively to determine if the actions meet the criteria for unfair competition as defined in Article 2 of the Anti-Unfair Competition Law. For example, if the defendant has not only engaged in trademark infringement and false advertising, but has also undermined the plaintiff's established rights through malicious trademark squatting and the misuse of opposition procedures. This includes the registration of trademarks that are identical or similar to the right owner's registered trademarks within relevant categories. Consequently, the defendant has utilized trademark opposition and invalidation processes to obstruct the right owner's rightful exercise of trademark rights. These actions are part of a broader pattern of infringement aimed at leveraging the right owner's goodwill and brand reputation, creating barriers to the its business operations, and ultimately seeking to diminish its competitive edge while establishing its own. Such conduct clearly demonstrates a malicious intent.
The defendant's actions violate principles of good faith and established business ethics, disrupting fair market competition and causing tangible harm to the legitimate rights and interests of the plaintiffs. Therefore, the defendant's behavior aligns with the criteria for unfair competition as outlined in Article 2 of the Anti-Unfair Competition Law, necessitating a determination of its unlawful nature and the imposition of appropriate civil liabilities.
Conclusion and Advice
In conclusion, regarding the resolution of trademark ownership disputes through civil litigation, it is observed that some individuals may register multiple trademarks belonging to others. While administrative procedures can address such malicious squatting, they often require significant time and financial investment due to the volume of cases. Is there a more efficient and cost-effective solution? We propose that the affected party consider applying for the preservation of the registered trademark in a civil infringement lawsuit. The Supreme People's Court's Interpretation on Property Preservation of Registered Trademark Rights clearly states that a registered trademark is considered a form of property. If the squatter's assets are insufficient to cover damages, the affected party can seek court enforcement to transfer ownership of the squatter's registered trademark through discount or auction.
There are various avenues available for protecting trademark rights post-registration, encompassing both administrative and judicial remedies. The registrant should select appropriate strategies based on the specific circumstances to ensure comprehensive protection of their trademark rights and interests. Additionally, implementing robust preventive measures is essential. By prioritizing prevention, one can effectively mitigate the risks associated with trademark registration and achieve long-term protection and enhancement of brand value.
Should you have any inquiries or require any support in this matter, please contact liangwen@zhonglun.com, and we would be happy to assist.
