The China National Intellectual Property Administration (CNIPA) has taken significant steps in recent years to combat malicious trademark registration practices. This includes addressing issues such as trademark hoarding, piggybacking on well-known brands, free-riding, and hijacking trending topics.
Despite these efforts, as outlined in Articles 33 and 45 of the Trademark Law, the CNIPA will not proactively review certain registration activities. Instead, it relies on prior right holders or interested parties to raise objections or file for invalidation independently. If these parties do not identify malicious registrations promptly or fail to provide adequate evidence after a registration application is submitted, the malicious registrant may wrongfully secure exclusive rights to the trademark. This could lead to claims of trademark infringement against foreign enterprises, resulting in negative consequences.
Action Strategy for Trademark Squatting
In practice, one common form of malicious registration is trademark squatting. This typically occurs when a foreign enterprise has not registered its trademark in China, yet its products have entered the market through various channels.
Common practices associated with trademark squatting
Opportunistic squatters may then file for trademark registration before the foreign enterprise can act. Depending on the situation, it may be possible to argue that the squatting infringes on the foreign enterprise’s existing rights under Article 32 of the Trademark Law, or that it involves the registration of a trademark previously used by the foreign enterprise that has gained recognition. At various stages of the trademark process, it is possible to challenge the registration of the squatted trademark or seek to have it declared invalid through opposition or invalidation procedures.
Cross-class trademark squatting behavior
Cross-class trademark squatting behavior often arises when foreign companies seek trademark registration for their primary products in specific categories but neglect to secure defensive registrations in other relevant categories.
In addressing this squatting behavior, foreign enterprises can not only assert their rights based on the general provisions regarding trademark squatting but can also argue that their registered trademarks qualify as well-known trademarks. This would allow for protection across different categories, as outlined in Article 13 of the Trademark Law. However, it is important to recognize that the criteria for establishing a trademark’s well-known status are quite stringent. Therefore, foreign enterprises must be prepared to present substantial evidence of their trademark’s use to support their claims.
Trademark squatting by agents, representatives, or related parties
Trademark squatting by agents, representatives, or related parties is a notable concern. This practice often arises when foreign companies market their products through Chinese agents. In such instances, squatters exploit their connections to gain insight into the foreign enterprises’ trademarks and subsequently apply for trademark registration for similar or different goods and services without authorization.
To address these actions, Article 15 of the Trademark Law is typically invoked, which stipulates that squatters should not be permitted to register trademarks based on their specific relationships with foreign enterprises. Additionally, some foreign companies may choose to authorize their domestic agents to apply for trademarks for convenience. In these situations, it is crucial to establish clear agreements regarding trademark ownership upon the conclusion of the agency relationship.
Brief summary and advice
In summary, to mitigate the risk of malicious trademark squatting, businesses should thoroughly evaluate their operational scope and proactively register commonly used and defensive trademarks in relevant categories. This strategic approach will help create a robust trademark portfolio.
Furthermore, it is advisable to maintain comprehensive evidence of trademark usage to demonstrate its recognition, which can be invaluable in potential trademark opposition, invalidation proceedings, or disputes related to trademark infringement and unfair competition. This evidence may also be useful in addressing any future trademark revocation issues.
Response Strategies for squatted trademarks as trade names
A trademark primarily serves to identify the source of goods or services, while a business name is designed to differentiate between various business entities. This distinction can lead to confusion when identical terms are utilized as both trademarks and business names by different rights holders, particularly in relation to similar goods or services.
In China, the National Intellectual Property Administration oversees trademark registration, whereas the Market Supervision and Administration Bureau manages business name registration. Unfortunately, these two authorities typically do not cross-reference their approvals, which can result in situations where entities attempt to capitalize on the reputation of well-known brands by registering foreign trademarks as business names in China, a practice known as malicious registration.
Below are some common instances of such malicious registration and potential solutions:
Utilizing the registered or well-known unregistered trademarks of foreign companies as trade names for businesses can lead to significant legal implications. Given the strong relationship between trademarks and business names, if a foreign entity registers its trademark as its business name, even if this registration is conducted properly and the name is used appropriately, it may still be viewed as potentially misleading to consumers and in violation of fair competition principles. In legal contexts, such cases are typically addressed under Article 58 of the Trademark Law and Article 6 of the Anti-Unfair Competition Law, which assert that such registration could mislead consumers into thinking that the products are associated with another entity, thereby constituting unfair competition. Consequently, the use of the business name may be challenged.
Furthermore, once the enterprise name is registered, if the registrant engages in “prominent use” of the trade name—such as through distinctive visual elements like font style, size, and color—this can draw undue attention to the business name, making it appear more independent from the overall enterprise name. This prominent display can endow the business name with a “trademark significance” separate from the enterprise name, leading to potential confusion. In judicial practice, these situations are often evaluated in conjunction with Article 57 of the Trademark Law and the Supreme People’s Court’s interpretations regarding trademark civil disputes, which may recognize such registration as infringing on the exclusive rights of others’ registered trademarks, warranting a cessation of use.
In light of the current situation in China, where trademark registration and business name registration are evaluated independently, there is currently no official mechanism in place to proactively manage this type of legal risk. We recommend that foreign companies, either independently or through representatives, utilize the National Enterprise Credit Information Publicity System and similar resources to perform regular searches and monitoring using trademark text as a keyword. If any instances of malicious registration are identified, it is advisable to submit an administrative complaint to the business name registration authority citing trademark infringement or unfair competition, or to pursue a civil lawsuit in the people’s court.
Strategies of Trademark Non-Use for Three Consecutive Years
In accordance with Article 49 of the Trademark Law, a registered trademark may be revoked if it has not been utilized for three consecutive years without a valid justification. This provision aims to encourage trademark owners to actively use their registered trademarks and prevent the underutilization of trademark resources. It is essential that the use of trademarks reflects genuine intent and action. Furthermore, even if there is a sincere intention to use the trademark, failure to retain relevant evidence of such use may still lead to revocation.
Based on this understanding, we have identified common scenarios in which foreign enterprises may experience trademark revocation, along with recommended solutions:
Insufficient Evidence Despite Actual Use
Some foreign enterprises may find their registered trademarks subject to revocation applications, even though they are actively using these trademarks in China. This situation often arises from non-standard usage practices, evidence being generated outside of China, or evidence being managed by domestic distributors. Additionally, negligence in providing necessary documentation during the revocation review process can also lead to challenges.
To mitigate this risk, it is advisable for foreign enterprises to align their trademark usage with their actual business operations. This includes displaying trademarks on products, packaging, transaction documents, and in advertising or promotional activities. Furthermore, it is crucial to ensure that domestic distributors maintain comprehensive records of usage evidence. This documentation may include, but is not limited to, licensing agreements, sales contracts, invoices, physical products, brochures, awards, and protection records.
By doing so, enterprises can present valid evidence of trademark use when faced with revocation applications based on non-use, thereby safeguarding the validity of their registered trademarks.
Situations Where Trademark Use Should Be Discontinued
The pandemic has significantly affected the business operations of foreign enterprises in China, leading to varying degrees of contraction. Some companies have even opted to suspend their activities in the region. It is possible that certain foreign enterprises have ceased using their registered trademarks during this time. However, it is important to note that the long-term effects of the pandemic will eventually subside, allowing foreign enterprises that have temporarily halted operations to potentially resume or re-enter the Chinese market.
That said, if a registered trademark is revoked due to non-use for three consecutive years and subsequently registered by another entity, the foreign enterprise may encounter legal challenges when they attempt to resume business. Therefore, in accordance with current laws, regulations, and judicial practices, it is advisable for foreign enterprises to reapply for trademark registration within three years if they do not plan to use their registered trademark in specific categories but foresee the possibility of future operations in those areas. This proactive approach will help maintain their exclusive rights to the trademark.
In summary, a registered trademark is a vital asset for any enterprise. Foreign businesses seeking trademark protection in China should focus on establishing a solid trademark strategy prior to registration, engage in defensive registration during the application process, and ensure genuine use of the trademark post-registration. It is essential to safeguard trademarks throughout the entire registration and usage process, maximizing their role in identifying the source of goods or services. Additionally, whether a trademark is registered or unregistered, it is crucial to maintain evidence of its use. This documentation not only demonstrates the trademark’s popularity and influence but also serves as a defense against malicious registration and filing activities.