Don’t Sleep on Your China Trademark

George Santayana once said: “Those who cannot remember the past are condemned to repeat it”? Although the line was not about Chinese trademark law, it might as well have been. We have been beating the drum for years about registering trademarks in China (see here and here for a representative sample), but every time I start to think the subject has gone stale, a bunch of new matters come in that prove me wrong.

When people run into problems with China trademarks, it can often be traced to one of the following four misconceptions.

Misconception #1: US and EU Trademark Registrations Protect You in China

The first misconception is that a trademark registration in the U.S. or EU or some other jurisdiction will provide some protection in China. There is no such thing as a worldwide trademark; every country has its own trademark system, and your US or EU trademark has no bearing on your trademark rights in China. The one exception in China is for well-known brands, but this exception is so limited as to be meaningless. Starbucks had to litigate for years to prove it was a well-known brand, and even that was not a slam dunk.

Misconception #2: You Can Get “Your” Trademark Back by Showing You Used it First in China

The second misconception is that if a third party registers “your” trademark in China, you will be able to get it back by showing you used it first in China. China employs a “first to file” system for trademark registration, with virtually no protection for unregistered trademarks. In this respect, China’s trademark system is the opposite of America’s, where you gain some trademark rights by usage alone. In China, anyone can register “your” trademark and prevent you from using it, even if they are not even using the trademark. This happens all the time and it is legal under Chinese law. If someone registers “your” trademark first, that makes them (not you) the rightful owner of that trademark in China—and if you attempt to sell goods in China bearing that trademark, your goods could be seized because you are the one violating China’s trademark law. It’s not a bug, it’s a feature.

Misconception # 3. You Can Invalidate the Registration of “Your” Trademark Based on Bad Faith

The third misconception is that if one of your Chinese competitors registers “your” trademark, you will be able to invalidate the registration on the basis of bad faith. Although last year’s revisions to the Trademark Law theoretically strengthened the requirement that trademark applications be made in good faith, the Chinese Trademark Office still has a narrow conception of what constitutes bad faith. In the vast majority of situations, your only hope of successfully challenging an existing registration on a bad faith claim is to show that the owner of “your” trademark is (1) a business partner or (2) a serial trademark squatter. And even those two methods are far from foolproof. To show that someone is a business partner you need to prove that you had a business relationship before they submitted the trademark application — and without any possibility of court-ordered discovery, such proof can be elusive. It is equally difficult to prove that someone is a serial trademark squatter. If they have registered several hundred trademarks and do not appear to conduct any business related to the goods and services covered by those trademarks, then you have about a 50/50 chance.

If the owner of “your” trademark is just a Chinese competitor — which happens all the time, because who else knows the business better? — your options are highly unappealing: (1) you can buy the trademark from the competitor at a usurious price; (2) you can go into business with the competitor on unfavorable terms; (3) you can pick a new trademark and rebrand; or (4) you can stop doing business in China. The competitor has no incentive to do anything that would actually help you. We handled a matter in which a Chinese company registered the names of its three largest non-Chinese competitors, effectively taking those companies out of the market in China for a few years, at least under their own names.

Misconception # 4. You Need Not Register a Trademark in China if You Just Manufacture There

If you are having your products made in China and someone registers your brand name or logo as their trademark, they (not you) are the rightful owner of that trademark in Chin and this means they can cease your products and prevent them from leaving China for violating their trademark rights. This actually happens quite often and the perpetrator of this “theft” is usually tied to your own manufacturer.

If you care about what happens to your IP in China, you need to register your trademarks in China now. The Chinese trademark system only helps those who help themselves.

We will be discussing the practical aspects of Chinese law and how it impacts business there. We will be telling you what works and what does not and what you as a businessperson can do to use the law to your advantage. Our aim is to assist businesses already in China or planning to go into China, not to break new ground in legal theory or policy.