China is the country receiving the largest number of trademark applications not only because it is a key market but also because starting business in China without registering your trademark is extremely risky.
– Why should you protect your trademark in China?
The Trademark Office of National Intellectual Property Administration, PRC (“CNIPA”) adopts a “first-to-file” trademark regime, making it imperative that businesses apply for trademark registration at the earliest opportunity.
China does not automatically recognize trademarks registered in other jurisdictions and will grant protection only to those who file first in China, regardless of the use or intent to use. Under such circumstance, although you may first create and use a brand in China, you will not be entitled to get it registered in case a third-party has already registered the same or similar one.
– When to protect your trademark?
It is vital to protect your trademark in China:
- before any commercial prospection;
- prior to any contact with potential suppliers.
Trademarks are protected on a country-by-country basis. Therefore, registration in Mainland China does not cover Hong Kong, Macau and Taiwan.
Moreover, if your trademark is not registered at the time when signing the contract with Chinese counterparts, proper wording shall be included in the contract.
– What risks do you face by not registering your trademark in China?
Trademark squatting is rampant in China and the squatters is entitled to the exclusive right on that trademark which will prevent you, the brand owner, from using the same in China. In practice, the risks are as follows:
- Impossibility to sell and distribute in China: as you are not the owner of certain trademark under China’s Trademark Law, the squatter may try to seize the products you want to sell in China.
Moreover, to make sure you are the rightful owner of the trademark, a distributor may ask you to present the trademark certificates of the products you want to sell in China.
- Difficulties to manufacture in China: when your product is manufactured by a Chinese subcontractor in a manner of OEM, you may need to immediately register your trademark in China to prevent trademark squatting by any former subcontractor, otherwise, he/she/it may try to prevent you from exporting the products manufactured by a new subcontractor.
- Difficulties to open a shop: malls and shopping centers offering premium locations in China are reluctant to rent premises to tenants without proper rights on the trademark of the shop. Providing the evidence of your legitimate rights on your brand is frequently requested as a precondition for the opening of the shop.
- Difficulties to distribute via the Internet: the biggest e-retailer platforms such as Jingdong and Tmall will not work with merchants who cannot provide evidence of its legitimate rights to use the distributed brands. However, these e-commerce platforms are crucial if you want to develop business in China.
– Which remedies can be used in case of trademark squatting?
In practice, to require the cancellation of “your” trademark registration made by a third-party applicant, the basis of bad faith is difficult to prove, and the invalidation of the registration is difficult to obtain.
The Chinese legislator and the CNIPA are well aware of such issue and amended the China Trademark Law on April 23, 2019 to curb on bad faith trademark applications. Such amendment aims at increasing the rejection of bad faith trademark applications and provides guidelines to the CNIPA to identify such bad faith applications (the same applicant registered a large number of trademarks in a short period of time, absence of intention of use, etc.).
The legal remedies in China may be time consuming and uncertain: the rate of success of an action for a trademark cancellation or for forfeiture of trademark for non-use remains extremely low.
To deal with the registration of “your” trademark by a competitor, you may consider the following alternative options:
- Starting negotiations to buy-back the trademark; or
- Adapting your trademark for the Chinese market by registering elements distinctive enough to increase the chances of success.
-> This article may also be of interest to you : What are coexistence agreements between trademark owners?
To know more, download our legal handbook related to the intellectual property rights legal regime in China …
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