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China recognizes severity of malicious trademark registrations; immediate registration is crucial

Foreign companies often face a situation in which their trademark is registered in China by a third party. As a result, they encounter difficulties in registering their trademarks and may even be unable to launch their business in China. Protecting their trademark rights is crucial and needs to be addressed early on.


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The Chinese government recognizes the severity of the malicious trademark registrations and how it has damaged the establishment of a fair business environment.

As a result, Chinese authorities have amended some articles of the Trademark Law to combat malicious trademarks.


This initiative signifies a shift towards prioritizing the protection of true trademark owners' rights. Consequently, it has become relatively easier to protect true trademark owners' rights in China from legal grounds and practices.


Steps to protect a trademark

The true owner of a brand can protect it by:

  1. Taking aggressive ways to attack the malicious trademark before the CNIPA, such as opposition, invalidation, and non-use cancellation action against the malicious trademark. These actions can be taken depending on the status of the malicious trademark. The opposition action can be taken during the period when a trademark has not been registered but is in opposition period. The true owner does not have prior trademark rights in China, thus, in the opposition action, it can rely on Article 32 of Trademark Law, that states that the malicious applicant rushed to register the true owner's trademark in bad faith which had earlier used and acquired a certain reputation over similar goods in China before the malicious trademark’s filing date. The chance of success in the opposition action will depend on the evidence the true owner can provide. Invalidation can be requested after a trademark is officially registered. Same as the opposition, the chance of success in the invalidation will depend on the evidence. When a trademark is officially registered for more than three years, a non-use cancellation action can be presented. The burden of proof falls on the malicious applicant, making it an effective and relatively straightforward way to attack malicious trademarks.

  2. Negotiating a deal to transfer the malicious trademark. Though many foreign companies feel reluctant to purchase the malicious trademark, it is often necessary to pay money to resolve problems effectively, especially if the malicious trademark has severely impacted their business in China. Some malicious applicants (trademark squatters) make a living by registering and selling trademarks. It may be possible in some cases to purchase the trademark by paying a reasonable fee.

  3. Filing the trademark in China as soon as possible. It is crucial to file your trademark in China in all related classes once you are aware that it has been unlawfully registered by a malicious applicant. This will help prevent any further malicious registrations. Some companies may not want to register in the same classes as the malicious trademark, fearing that their trademark will be rejected. However, it is important to file it as soon as possible. The malicious applicant will know of your actions and may attempt to re-file the same trademark. If they are successful in doing so, it could potentially bar your later filed trademarks.

Malicious registration by a partner or distributor

In some cases, foreign companies fall victim of their own distributor or partner in China, who attempts to register trademarks that the actual owner has not registered.


The Trademark Law protects companies in such situations. Article 15 states that “where an agent or a representative applies for registration of a trademark of the principal or the represented party in the agent's or the representative's own name without authorization, the trademark shall not be registered and shall be prohibited from use upon opposition from the principal or the represented party.”


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“Where an applicant for registration of a trademark identical with or similar to an unregistered trademark in prior use by another party on identical or similar goods has any contractual, business or other relationship except the relationship described in the preceding paragraph with the other party and knows the existence of the unregistered trademark, the trademark shall not be registered upon opposition from the other party.”

This provision bans any maliciously preemptive registration of trademarks, with the knowledge of others' trademarks, in relation to contracts, business transactions, or other relationships, except as provided in the preceding provision, for the same or similar goods.


Criteria

There are specific criteria to determine if a party has preemptively registered a trademark used by another, such as:

  • the trademark of others was used prior to the application for the disputed trademark in mainland China.

  • the applicant for the disputed trademark has a contractual, business, or other relationship with the person who used the trademark first, and the applicant is aware of the existence of the other person's trademark due to this specific relationship.

  • the disputed trademark is applied on the same or similar goods or services as the trademark used by others first.

  • the disputed trademark is identical or similar to the trademark used by others first.

Evidence

The existence of contracts, business relationships, and other relationships must be proven with evidence, such as contracts, correspondence, transaction records, purchase documents, company payroll, labor contract, social insurance, medical insurance materials, household registration certificate, and other evidence to prove specific relationships.


Recent legislative changes underline the intention of the Chinese government to better protect intellectual property rights.


Short articles

In the first half year of 2023, Chinese authorities prosecuted 11,675 individuals for intellectual property rights (IPR) infringement crimes, an increase of 36.1% year on year. Trademark infringement crimes accounted for the highest proportion of 88.9%, with 10,384 individuals prosecuted, followed by copyright infringement.


Additionally, 167 individuals, mostly internal staff, have been prosecuted for trade secret infringement crimes, up 89.8%.


In terms of the types of enterprises involved in trade secret infringement crimes, the victims included both traditional manufacturing enterprises and high-tech companies in fields of information technology, biomedicine, and intelligent manufacturing.


Regarding the types of trade secrets infringements, software source code, technical programs, equipment drawings and other technical information are the main types.



 

Woodburn Accountants & Advisors is one of China’s most trusted business setup advisory firms.


Woodburn Accountants & Advisors is specialized in inbound investment to China and Hong Kong. We focus on eliminating the complexities of corporate services and compliance administration. We help clients with services ranging from trademark registration and company incorporation to the full outsourcing solution for accounting, tax, and human resource services. Our advisory services can be tailor-made based on the companies’ objectives, goals and needs which vary depending on the stage they are at on their journey.

 

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