New hope for trademark owners in China

In Insights, Uncategorized

3 September, 2015

In China, the trademark system is based on the “first-to-file” system, which means that the first company or person to file owns the legal right to the trademark. There is no requirement for the intention to actually use the mark as we know it from a.o. the US system.

Up until now the so called “Trademark Squatters” have been a huge problem in China. These Trademark Squatters file hundreds of names with the Chinese authorities long before the brand owners enter the Chinese market and then they try to extort the owners in settlements, forcing them to “pay up” if they wish to be able to use their trademark in China.

Revised rules to prohibit trademarks registered in bad faith
China has recently implemented a new revised set of rules that among other things prohibits registering trademarks in bad faith. This is a step towards the system we know from Europe.

Until this point, trademark owners have been left with the options of either creating an entire new trademark for the Chinese market, expensive settlements or taking legal actions and spending huge amounts on legal fees in the hope of gaining legal right to their own trademark. Tesla, Apple, Sothesby’s and Michael Jordan are only some of the many trademark owners that have fought battles with these Chinese Trademark Squatters. Many of these battles have proven unsuccessful up until now.

Recently, the American brand Michael Bastian has fought for their trademark and won the case against a Trademark Squatter before the Chinese Trademark Review and Adjudication Board (TRAB). A Chinese company had registered the trademark Michael Bastian’s English name and the Chinese transliteration in 2007. The TRAB found that the Trademark Squatter had abused the trademark registration, use and administration process in China even though there was insufficient evidence of Michael Bastian’s use of the trademark or publicity in China prior to the date of filing by the defendant. Further the TRAB found that the defendant violated the principle of Honest and Good Faith. According to his principal counsel Foley & Lardner, Michael Bastian is the first non-Chinese individual or entity to win a case under the principle of honest and good faith despite little evidence of prior use.

A step in the “right” direction, but…
So does this mean that all troubles are solved in China and that trademark owners can feel home safe? Definitely not! It is important that trademark owners are aware that there are distinguishing features in this decision and uncertainty as to how much weight the TRAB will give to this decision in the future. In the Michael Bastian case, the TRAB cited that the defendant had engaged in similar conduct and attempted to file many trademarks identical or similar to other prior trademarks. Therefore in this case it was rather clear that the defendant actually was a Trademark Squatter. It is therefore uncertain whether the TRAB would have reached the same decision had the defendant not clearly just registered trademarks to put pressure on right holders and make money from this.

However, the decision is a step in the “right” direction so to speak. Moreover, this decision is important in the sense that it will send a signal of increased confidence to foreign companies entering the Chinese market, and to use their name and IP to build their brand in China. Hopefully, this decision will set precedent and make it easier for trademark owners to regain and protect their IP rights in China.

It is still uncertain what line the TRAB will take against these Trademark Squatters, and we at Awapatent will definitely advice right holders to still consider the previous cases in China as a warning to get their trademarks registered early in China, at least if at some point in the future China is considered a market of interest.

Maria Dam Jensen, Legal Counsel

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