China’s Trademark Law stipulates that, when granting others the right to use registered trademarks, the licensor must record the licence with the China Trademark Office (CTMO).
On 29 October 2024 the China National Intellectual Property Association (CNIPA) released the Guidelines on Registration Procedures for Trademark Licences, to help businesses understand the relevant legal provisions and procedures for recording trademark licences. The guidelines clarify that the effectiveness of trademark licence contracts is unaffected, regardless of whether the licence is recorded with the CTMO. However, unrecorded licences cannot be enforced against third parties acting in good faith.
Through the guidelines, the CNIPA hopes to prevent confusion, misidentification and other adverse effects, as well as rights disputes caused by non-standard trademark licence behaviours.
Recordal preparation
To prepare for the trademark licence recordal, the guidelines prompt that, in the trademark licence contract, the licensor and licensee should clearly agree on the licensed trademark (eg, registration number and specimen), the licence type and the related behaviour, restrictions of the parties, licence scope, licence period, use method, scope of goods or services and quality assurance matters.
It is also recommended that the parties make clear provisions on breach of contract liability, dispute resolution methods and other matters without violating legal provisions. The guidelines also detail the trademark licence types, the procedures and requirements for filing trademark licence recordals and other practical matters for attention.
Practical tips
Before entering into a trademark licensing or cross-licensing agreement, the licensee should perform due diligence on the trademark to be licensed. This includes, but is not limited to, checking ownership details, the registration status of the trademark for the specific goods or services to be licensed in China, and whether there are any existing licences, or frozen or pledged registrations recorded with the CTMO. Additionally, it should be verified whether the mark is subject to non-use cancellation, invalidation or related administrative proceedings.
If the licensed mark is for use on drugs, tobacco and related goods in China, the licensor should also check whether the licensee has obtained valid certificates from the relevant government department to engage in the relevant industries or produce the licensed goods. This is a critical step to avoid possible contract disputes and future losses. Professional assistance from local attorneys maybe considered.
The trademark licence contracts per se are not required for filing trademark licence recordals. However, local attorneys should draft or review the contracts to ensure that no terms violate the Trademark Law and other relevant laws and provisions.
There is no specific requirement for the licensing fee/royalties in China, so the amount can be zero if the parties agree.
Benefits of recordals
In practice, many trademark licences are not recorded with the CTMO, and many licensors may think licence recordals are only beneficial for licensees, which is not true.
Possible benefits for recording the trademark licence with the CTMO include, but may not be limited to, the following:
For licensors:
- In circumstances such as defending against a non-use cancellation action, or fighting against infringers or against a licensee pre-empting similar or equivalent marks (eg, a Chinese-version mark of the licensed English mark) with the CTMO, the licence recordal certificate may be used as evidence to replace the licence contract that may contain sensitive/confidential information.
- Once the trademark licence recordal is approved by the CTMO, it will be published and made available to the public so the local market supervision bureaus and the relevant consumers can better supervise the licensee’s use. Meanwhile, it might deliver a message to third parties that the trademark is in use, hence lowering the possibility of third-party non-use cancellation action to some extent.
For licensees:
- The trademark licence recordal certificate can be directly used by the licensee to prove its legal rights to use the licensed trademark, and/or to assist smooth payment of licensing fee/royalties from China to foreign licensors.
- Some social media platforms may require the licensee to submit the trademark licence recordal certificate as a necessary document.
While the guidelines clarify that trademark licence contracts are unaffected regardless of whether the licence is recorded, recording trademark licences with the CTMO would not only give legal protection to the recorded licensee in the conflicting licences made by the licensor, but also help the licensor avoid potential contract disputes caused by the conflicting licences made by mistake or internal chaos.
With the above in mind, it is recommended that licensors record trademark licences with the CTMO.
This article first appeared in WTR Daily, part of World Trademark Review, in December 2024. For further information, please go to www.worldtrademarkreview.com.
