A challenge faced by many international entities when entering the Chinese market is that their brands have already been registered as trademarks in China by speedy local filers. Some such local filers are professional squatters that have no real intent to use the trademark but instead, they aim to make money by holding the trademark registrations for ransom. Earlier this year, the Standing Committee of the National People's Congress amended the Trademark Law to introduce an intent-to-use requirement to combat trademark squatting. The amendments will come into force next month, on 1 November 2019.
Current Bad Faith Squatting Environment
China has a first-to-file trademark system dating back to 1982. To obtain a trademark registration, an applicant is not required to have any intent to use the applied-for mark in a legitimate business. This often results in trademark registrations being awarded to first filers, regardless of whether genuine intent to use exists.
The first-to-file system and the lack of any intent-to-use requirement, along with other factors, have led to a flood of applications to the trademark register and allowed for the proliferation of trademark squatting. Between 16 December 2018 and 15 June 2019, the Trademark Office of the China National Intellectual Property Administration ("CNIPA") received about 3.3 million new trademark applications. Contributing to the millions of applications are defensive filings by brand owners and trademark squatting filings. Trademark squatting filings account for a non-negligible percentage of all filings. For example, some squatters claim to be filing about 5,000 trademark applications a day.
Squatters can be a serious problem for brand owners. For example, squatters may initiate trademark infringement lawsuits requesting large damages. Squatters may file complaints with the Customs Office for seizure, confiscation and/or destruction of infringing import or export products of the true brand owner. Further still, under Article 62 of the Trademark Law, squatters may file complaints with the Administrative Department for Industry and Commerce to stop production and/or the sale of infringing products by the true brand owner.
Current Tools to Combat Bad Faith Squatting
Squatted trademark registrations may be challenged through opposition or invalidation proceedings. For example, Article 32 of the Trademark Law prohibits the registration of a trademark that is already in use by another person and enjoys a certain level of reputation.
|Original Text||WIPO Translation|
|第三十二条 申请商标注册不得损害他人现有的在先权利，也不得以不正当手段抢先注册他人已经使用并有一定影响的商标。||Article 32 No applicant for trademark application may infringe upon another person’s existing prior rights, nor may he, by illegitimate means, rush to register a trademark that is already in use by another person and has certain influence.|
Article 13 of the Trademark Law prohibits the registration of a prior well-known trademark of a third party.
|Original Text||WIPO Translation|
Article 13 A holder of a trademark that is well known by the
relevant public may, if he holds that his rights have been
infringed upon, request for well-known trademark protection in
accordance with this Law.
Where the trademark of an identical or similar kind of goods is a reproduction, imitation, or translation of another person’s well-known trademark not registered in China and is liable to cause public confusion, no application for its registration may be granted and its use shall be prohibited.
Where the trademark of a different or dissimilar kind of goods is a reproduction, imitation, or translation of another person’s well-known trademark not registered in China and it misleads the public so that the interests of the owner of the registered well-known trademark are likely to be impaired, no application for its registration may be granted and its use shall be prohibited.
However, opposition and invalidation proceedings can be costly, lengthy and complex.
New Intent-to-Use Requirement against Bad Faith Squatters
The Trademark Law has been amended to introduce an intent-to-use requirement so that bad faith applications without intent to use will be dismissed at the prosecution stage. This is significant as the Trademark Office of CNIPA is empowered to proactively dismiss bad faith applications during examination. Bad faith applications without intent to use may never proceed to registration so that brand owners do not need to resort to costly and lengthy opposition or invalidation proceedings to challenge such registrations.
|Original Text||Machine Translation|
|将第四条第一款修改为："自然人、法人或者其他组织在生产经营活动中，对其商品或者服务需要取得商标专用权的，应当向商标局申请商标注册。 不以使用为目的的恶意商标注册申请，应当予以驳回。"||Amend Article 4 to read: “If a natural person, legal person or other organization needs to obtain the exclusive right to use a trademark with its goods or services in its production and business activities, it shall apply to the Trademark Office for trademark registration. Bad faith applications without intent to use shall be rejected.”|
Further, Articles 33 and 44 have been amended to add the intent-to-use requirement as a new ground for opposition and invalidation against trademark squatting.
|Original Text||Machine Translation|
|将第三十三条修改为："对初步审定公告的商标，自公告之日起三个月内，在先权利人、利害关系人认为违反本法第十三条第二款和第三款、第十五条、第十六条第一款、第三十条、第三十一条、第三十二条规定的，或者任何人认为违反本法 第四条、第十条、第十一条、第十二条、第十九条第四款规定的，可以向商标局提出异议。公告期满无异议的，予以核准注册，发给商标注册证，并予公告。"||Amend Article 33 to read: “For the trademark for the preliminary examination and approval, within three months from the date of the announcement, the prior rights holder and the interested party consider that they are in violation of Article 13, paragraphs 2 and Article 3 of this Law, Article 15, Article 16, paragraph 1, Article 30, Article 31, Article 32, or any person who considers to be in violation of Article 4, Article 10, Article 11, Article 12, Article 19 paragraph 4, may file an objection to the Trademark Office. If there is no objection after the expiration of the notice, it shall be approved for registration, and the trademark registration certificate shall be issued and announced.”|
|将第四十四条第一款修改为："已经注册的商标，违反本法 第四条、第十条、第十一条、第十二条、第十九条第四款规定的，或者是以欺骗手段或者其他不正当手段取得注册的，由商标局宣告该注册商标无效；其他单位或者个人可以请求商标评审委员会宣告该注册商标无效。"||Amend Article 44 to read: “A registered trademark is in violation of the provisions of Articles 4, 10, 11, 12, 19, paragraph 4 of this Law, or If the registration is obtained by deception or other improper means, the Trademark Office shall declare the registered trademark invalid; other units or individuals may request the Trademark Review and Adjudication Board to declare the registered trademark invalid.”|
In addition to the intent-to-use requirement, the Trademark Law has also been amended to (i) instruct trademark agents not to represent applicants if the agents know or should know that the applicants are acting in bad faith and have no intent to use the marks; (ii) increase statutory damages awarded for trademark infringement from RMB 3 million (about CAD 0.6 million) to RMB 5 million (about CAD 1 million); and (iii) add a remedy in court proceedings to destroy counterfeit goods and molds. Although there are some uncertainties as to how the amendments will be implemented, the amendments are a positive change for brand owners looking to combat trademark squatting and strengthen their trademark protection in China.
If your company is potentially interested in the Chinese marketplace, our firm can work with Chinese counsel to help secure trademark protection for your brand in China. We can also initiate watches to notify you of the filing or publication of potentially conflicting trademark applications, so that appropriate remedial action can be taken to prevent registration of such trademarks.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.