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Chinese trademark office fights back against trademark squatters

On Behalf of | May 1, 2019 | Intellectual Property

Last week, China’s State Council adopted new trademark regulations aimed at combating bad faith registration. The amendments, based on draft regulation published by the China Trademark Office back in February, address long-standing issues of “trademark squatters” holding trademarks ransom.

Before passing these new regulations, China’s trademark system provided little protection against fraudulent trademark applications. Someone could register a trademark without proving actual use. Under the new rules, companies in the United States and across the world may be able to worry less about having their marks pulled out from under them in China.

History of trademark squatting in China

For many years, someone in China could file a trademark application for a mark they did not use– just to turn around and sell the rights back to the actual owner. This was possible because, under Chapter III Article 31 of China’s trademark statute, whoever registered the mark first had priority.

The trademark office in China did not require proof of intent to use the mark, and there were few mechanisms to prevent these bad faith applications from being invalidated. Eventually, Chinese intellectual property courts noticed suspicious patterns. These “trademark squatters” were often filing unusually high numbers of applications and appeared to be using none of the marks.

Something needed to change.

How new regulations weed out malicious applications

The new legislation allows trademark examiners in China to flag applications that seem “abnormal.” They consider the number of requests an individual or entity has filed in a short period. Plus, the person registering for the trademark must now prove that they genuinely run a business and need the trademark.  

Giving examiners the ability to weed out bad faith applications represents a step in the right direction for the trademark system in China. The process will hopefully continue to develop and become more efficient, perhaps using digital tools. In the meantime, trademark holders can look forward to a system where their marks are less likely to be held hostage.