January 23, 2022
INTRODUCTION
Trademark squatting seems to be a never-ending problem for international businesses in or looking to enter the Chinese market. Even though the legal regime and enforcement situation is improving, its still can be very profitable for squatters to game the system.
China, unlike the United States and other countries, uses the 'first to file' method rather than the 'first to use’ method, and companies from these countries are therefore often more unprepared and at risk in China.
Trademark squatters spot targets often at trade shows or by searching online for brands which have not yet come to China but show some potential. Once they arrive in China, the squatters attempt to resell their own trademark for high prices in order to profit.
The Chinese system, on the other hand, generally does not recognize trademarks registered in other countries and will only protect those who file first in China, regardless of usage or intent to use. Companies in the United States frequently believe that simply registering their trademarks in the United States would ensure that they are recognized in China.
Fighting trademark squatting can take a long time and cost a lot of money. Furthermore, there is a chance that the squatter may sue, delaying the real brand owner’s market expansion. As a result, it is critical for trademark holders to be aware of the effective legal tools at their disposal to address these challenges.
AN IMPROVING BUT STILL IMPERFECT SYSTEM
China has amended its trademark legislation in the hopes of putting an end to trademark squatters for good. Articles 4 and 44 of the 2019 amended China Trademark Law added new grounds for oppositions and invalidations based on a lack of bona fide intention to use the mark, and Articles 63 and 68 of the 2019 Amended China Trademark Law provide administrative penalties and increased monetary damages for filings made in bad faith.
Dealing with trustworthy platforms whose operations are governed by the e-Commerce Law is likely to be more beneficial than dealing with squatters directly. Platforms can, for example, take substantial technological actions that have real-world repercussions for squatters' businesses, such as removing links and/or banning their accounts.
The seemingly straightforward approach to handling squatter registrations is to file an action for non-use. If the squatter resists (by showing a bare minimum amount of evidence of use), invalidation actions (other than on the basis of non-use) should be launched as soon as possible to destabilize the squatter's mark, but no later than five years after the squatter's mark is registered. The rate of successful actions for non-use and invalidation has been increasing for many years now.
HOW TO PROTECT YOUR BRAND IN CHINA
Before entering the Chinese market, business executives must choose the best techniques for protecting their trademark. Some of the preventive and remedial measures are outlined below.
Early registration
Because of China's "first to file" method, the outcome of any trademark dispute is largely determined by who registered it first. As a result, companies planning to expand into China should file for registration as soon as possible, especially since registration can take over a year to be effective.
Multiple registrations
Even though many international companies successfully register their trademarks in China before trademark squatters, they occasionally run into issues with their specific products and services. Because squatters gain future registrations in other categories and sub-categories, they can keep businesses hostage by prohibiting them from extending their operations to adjacent business categories.
As a result, businesses should register in as many categories and subcategories as they can afford. Even after registering a trademark, businesses should keep an eye on it for any squatting or infringement.
Protect yourself by translating the trademarks
In China, registering your brand name as a trademark is more difficult than in the United States. This is because, in order to localize their product in China, Western corporations frequently employ Chinese transliterations of their original brand name. For example, the Chinese version of Jordan is Qiaodan (pronounced "chee-ow dahn"). In such circumstances, simply registering the English name isn't enough. Overseas companies must additionally register their trademarks in Chinese transliteration.
Foreign companies operating in China should use a strategic blend of literal translation, phonetic transliteration, and descriptive adjustments to find the perfect brand name to register their trademark. It is strongly advised to employ the help of multilingual professionals for this task.
Keep accurate records
To dispute suspected trademark squatters' claims and facilitate renewal, cancellation, and amendment, companies must keep all trademark-related paperwork and other documentation in each location, including international operations.
Expect a fight
If you decide to pursue legal action, be prepared for a lengthy and costly struggle.
Settlement and negotiation
Given the time-consuming, costly, and uncertain process involved in trademark disputes, it may be more cost-effective (even if you are mad as hell!) to negotiate with the squatter rather than purchase the trademark from the squatter in an out-of-court settlement.
CONCLUSION
Trademark squatters are adaptable to the ever-changing legal and business environment. While Chinese law has improved to combat trademark squatters, brand owners need to stay proactive to protect their legitimate interests by filing trademarks defensively and monitoring and protecting their legitimate interests against encroaching squatters.
Please contact us (inquiries@ChinaLawSolutions.com) to get a recommendation on a firm which can assist your business with trademarks in China. All inquiries are treated as confidential.