Three categories to tackle bad faith trademark registrations in China

It may be the case that when a business attempts to register a trademark in China, it has already been registered by a Chinese company. In many instances, the Chinese company has registered the trademark with the intention of selling it to that business at an inflated price. Such prior trademark registrations are known as ‘bad faith’ registrations.

Bad faith registrations represent a serious problem for brand owners as they can inhibit their ability to enter the Chinese market. Once a bad faith registration is identified, the legal solution is to either initiate trademark opposition proceedings if the trademark is advertised but not granted or trademark revocation proceedings if the trademark has been granted. To start, there are three categories of legal grounds for attacking a pirated trademark through trademark opposition or invalidation.

Category 1: Inherent Deficiency

References: Trade Mark Law of the People’s Republic of China, Articles 10, 11 & 12

Inherent deficiency means either the trademark itself is contrary to legal requirements or the registration itself is fraudulent. This category of grounds corresponds to Art. 10~12 of the Chinese Trade Mark Law:

• (i) The mark uses prohibited symbols, e.g. symbols identical with or similar to the State name, national flag, national emblem, landmark buildings, etc.
• (ii) The mark uses non-distinctive symbols, e.g. symbols referring to product names, models, designs, quality, raw materials, function, use, weight, quantity, etc.
• (iii) A three-dimensional mark is derived from the nature of the product, etc.
• (iv) Fraudulent means have been employed during the application for registration.

Category 2: Outward Deficiency

References: Trade Mark Law of the People’s Republic of China, Articles 13, 15, 16, 31 & 32

Outward deficiency means the trademark is similar to an earlier trademark, or in conflict with others’ prior rights, or obtained in bad faith. This category of grounds relates to Art. 13, 15, 16 and 31 of the Chinese Trade Mark Law:

• (i) The mark is a reproduction, imitation or translation of a well-known mark. A distinction is to be made between well-known marks registered in China and those unregistered in China, where the former extends protection to dissimilar goods while the latter only confers protection to similar goods.
• (ii) An unauthorised agent or representative registers a mark under their own name rather than the name of their principal.
• (iii) The mark contains a geographic indication of the goods and the goods are not from the region indicated, thereby misleading the public.
• (iv) The mark is in conflict with the prior right of others, or is “squatting”, i.e. unfair means are employed to pre-emptively register another’s in-use trade mark which has a reputation.

Category 3: Use Deficiency

References: Trade Mark Law of the People’s Republic of China, Article 49 and related Regulations

Use deficiency means the registered trade mark is either improperly used or not used. This category only applies to the revocation of trade marks and links with Art. 49 of the Chinese Trade Mark Law:

• (i) The registered mark has not been used for three consecutive years.
• (ii) The mark owner, without going through the required application, alters the mark, changes the registrant details or makes an assignment.
• (iii) The mark owner is dead or ceases to exist, and the mark has not been transferred.

Finally, sometimes a business simply cannot beat a squatter to the mark on legal grounds above. Although China is a “first to register” country, there are limited grounds to challenge the infringer. A foreign party may rely on either a “well-known mark” ground or a “bad faith in registration” ground. Obtaining a favourable decision on either ground, however, can be both difficult and expensive. An alternative solution is to negotiate an assignment from the squatter. The original owner might purchase the mark directly or via a cover company. Again, it will be very helpful to use experienced trademark agents who can formulate the best negotiation strategy depending on the nature of the case.