China does a lousy job policing bad-faith trademark registrations and that makes trademark squatting a profitable and low-risk activity in China.
Those who are unfamiliar with Chinese trademark practice might think the problem is China’s trademark law. Not so. China’s Trademark Law has a number of provisions that could easily be invoked to combat trademark squatting, including the following:
Article 10.7 prohibits any trademark “in the nature of fraud in advertising that easily confuses the public with the quality or other characteristics or origins of the goods, or the place of origin of the goods.”
Article 10.8 prohibits any trademark “detrimental to socialist morals or customs, or having other unhealthy influences.”
Article 13 states that registration shall be denied and use prohibited for any mark that is a “reproduction, imitation, or translation of a third party’s famous trademark which has not been registered in China and where the goods are identical or similar, which may cause public confusion and damage the interests of the registrant of the famous mark.”
Article 15 states that “Where an agent or representative, without the authorization of the principal, seeks to register in the agent’s name the principal’s trademark and where the principal objects, registration shall be refused and the use of the mark shall be prohibited.”
Article 32 states that “No trademark application shall infringe upon another party’s existing prior rights. Nor shall an applicant rush to register in an unfair manner a mark that is already in use by another party and enjoys substantial influence.”
The problem is the Chinese Trademark Office (CTMO) does not interpret the Trademark Law in a way that constrains trademark squatters. As a practical matter, the only time aggrieved IP owners have a good chance to prevail in an opposition on the first try is if (1) the trademark squatter is an obvious and well-known squatter with hundreds of applications for other people’s trademarks or (2) the trademark squatter has (or had) a business relationship with the “real” owner.
The former can be shown by printing out the search results from the CTMO database along with a few annotations (and even then it’s basically a coin toss). The latter depends on the facts of the situation; the better the facts, the better the odds. In an ideal situation, the Chinese party would have executed (using their chop) a formal agreement in which they agreed not to register or otherwise interfere with any of their partner’s IP. Such an agreement could be used both as evidence for a trademark opposition and as the basis for a lawsuit. But the ideal is rarely attained, in large part because Chinese parties who execute formal agreements don’t go out and register their business partners’ trademarks – and if they do they are willing to assign them.
Most of the time, a trademark opposition against a former business partner is instead supported by a sheaf of circumstantial evidence demonstrating the business relationship. The best circumstantial evidence consists of documents issued by the Chinese side and bearing their company chop (like an invitation from them for purposes of a business visa), or documents issued by a third party clearly identifying both the foreign buyer and the Chinese party (like shipping or customs documents). But even those are often hard to track down. Many business relationships – even with millions of dollars of product exchanging hands – are based on generic purchase orders that could easily be forged and are exchanged with a factory owner’s personal email account. Add to that the fact that orders are often placed with or shipped by another entity, and it’s no surprise that the dots are often quite difficult to connect.
Over the years, our China trademark lawyers have included the following sorts of documents as evidence in trademark oppositions:
- The business card of the Chinese side.
- The Chinese side’s business license
- Emails from the Chinese side
- The Chinese side’s passport.
- Purchase orders from the foreign buyer
- Invoices from the Chinese side
- Bank receipts from the Chinese side’s bank showing payment from the foreign buyer.
- Bank receipts from the foreign buyer showing payment to the Chinese side
- Shipping documents showing the Chinese side as the exporter of record and/or the foreign buyer as the consignee.
- The foreign buyer’s corporate Certificate of Good Standing
- Photographs of the foreign buyer visiting the Chinese party, or vice versa
- Visa invitation letters from the Chinese party to the foreign buyer, or vice versa.
With a circumstantial case, you never know what is going to turn the tide with the CTMO examiner, so it’s usually best to err on the side of excess. The more evidence the better.
But it’s even better to register your trademarks first so you don’t have to deal with this situation at all.