News & Insights

Late last year, we looked at recent changes in Chinese trade mark law arising from the decision of the Supreme Court of the People’s Republic of China in the “HONDAKIT” case.

The Chinese “first to file” trade mark system, under which the first person to apply to register a trade mark trumps an earlier user of that trade mark, creates an incentive to register trade marks early. Often they are registered before they are ever used, and some of those marks never end up being used. Others are used for a while and then become disused.

Speaking with our clients and other businesses since then, we have heard stories of trade marks already being registered in China by third parties, often by trade mark squatters who have no genuine interest in using the trade marks.  One business told us how their export shipments from China are regularly seized by Chinese customs, because a squatter holds the trade mark and has a customs notification in place (you can read more about IP customs notifications and seizures here).

Our conversations highlighted the importance, in practical business terms, of registering your trade mark rights if you do any business in or with China. This is not just our recommendation, but also the recommendation of David Bennett, Counsellor (Intellectual Property) at the Australian embassy in Beijing.

So, what can be done if a trade mark squatter has applied to register your trade mark in China?

refusal for bad faith

On 1 November 2019, an amendment to the Chinese Trademark Law came into effect that makes bad faith registration of trade marks more difficult. New regulations on the implementation of the Trademark Law came into effect on 1 December 2019.

As a result of these changes, trade mark applications lodged in bad faith, which are not intended for use, will be rejected. This is intended to provide a basis for the China Trademark Office (CTMO) to reject applications where they can be identified as such, but also provides a basis for third parties opposing a trade mark application or seeking the invalidity of a registered trade mark.

opposition

If you become aware that a bad faith application for “your” trade mark is progressing through the CTMO, opposing that application before it is registered is recommended. That is done through the CTMO.

Trade mark oppositions have a narrow window. The opposition must be lodged within three months of publication of the trade mark by the CTMO.

revocation

If the trade mark has been registered, then invalidation can be sought through the Trademark Review and Adjudication Board (TRAB). Some grounds for invalidation can only be raised within the first five years of the trade mark being registered, so it is advisable to act sooner rather than later.

pre-emption by agent or business partner
Specific grounds of revocation exist to deal with agents or representatives who have applied for registration without approval, or if there is an existing contract or business relationship with the trade mark registrant. This addresses the reality that some trade mark squatters are potential business partners, manufacturers or distributors who register trade marks as leverage in contract negotiations, or to lock in relationships with foreign companies.

famous marks
While merely using a trade mark before it is registered by a trade mark squatter does not provide a basis for invalidation, unregistered famous trade marks can be protected through invalidation.

other prior rights – copyright
Invalidation is possible based on prior rights existing, such as under copyright. Copyright registration can be used to protect a stylised trade mark, including a trade mark that contains a logo. There are some procedural requirements for copyright registration, including providing the date that the work was first published and where this was done.

The real benefit of this type of intellectual property right is that you don’t have to nominate any specific category of good or service. What you are protecting is the work itself. This then provides you with a legal basis in China for attacking trade marks registered by squatters regardless of the goods or services in respect of which they have registered it. In practice, copyright is often pleaded in addition to bad faith.

Copyright registration can also be very useful if invalidation is no longer possible through the TRAB because the five year invalidation period has passed. Copyright infringement proceedings can be used to actively combat any use of the trade mark by the third party.

non-use removal

In China, as in other jurisdictions, trade mark registration comes with an obligation to actually use the trade mark. If a trade mark is not used in China, in relation to the goods and/or services in respect of which it is registered, for a period of three years then it becomes vulnerable to be cancelled for non-use. This is not limited to bad faith registrations – any trade mark that remains unused for three years is vulnerable to removal.

In making a non-use removal application, the applicant merely needs to provide a simple investigation report to demonstrate that the trade mark appears to be unused. The burden then shifts to the trade mark owner to prove that they have actually used their trade mark during the past three years. If the trade mark turns out to have been used by the owner, there are generally no adverse consequences for having sought its removal. A non-use removal action is therefore both comparatively inexpensive and low risk.

striking a deal

Finally, while it may be anathema to many, sometimes the most cost-effective means of dealing with a bad faith registration is to strike a deal with the squatter. Particularly in the context of recent changes to the Chinese Trademark Law that make it easier to challenge bad faith marks, and that make it harder for squatters to enforce those marks, negotiated deals are likely to be easier to strike than ever before. The price is likely to be substantially lower than the US$60 million that Apple paid in 2012 to purchase the iPad trade mark in China.

lodging your own application

Any time that you challenge the registration of a Chinese trade mark in order to clear the path for your own trade mark, you should lodge your own application before you take any action to challenge the other trade mark. Otherwise you run the risk of another similar application being lodged in the meantime, including by the person whose application or registration you are challenging.

Of course registering your trade mark in China early is also the best way to guard against trade mark squatters in the first place.

take-away points

The key rule remains: if China may be relevant to your business, register your trade marks there as soon as possible.

If somebody else has already registered “your” trade marks, or trade marks that are similar to your trade marks, different options exist to try to remove or invalidate those earlier registrations. But act quickly, because time limits apply.

The IP team at Macpherson Kelley is experienced in dealing with China and assisting Australian businesses to protect their IP in China, including utilising our extensive international networks through our membership of Multilaw.

The information contained in this article is general in nature and cannot be relied on as legal advice nor does it create an engagement. Please contact one of our lawyers listed above for advice about your specific situation.