Fighting against trademark squatters in China
The reason for the danger of trademark squatting in China is simple: like many countries, China follows a ‘first to file’ system for trademark registration, which means that the person who first files the trademark application obtains the registration.
Some Chinese companies and individuals understand the system well and, after careful review of valuable foreign trademarks, take the initiative to file the mark in their own name. All they have to do is wait until the foreign company, unable to register and exploit its trademark in China, approaches them with a view to negotiating a possible purchase.
Depending on the reputation of the foreign trademark, a few thousand RMB in investment (for registering the trademark) can generate a big profit (several millions) at sale. Trademark squatting has become a big business in China.
What remedies are available?
Purchasing the squatted trademark is not the only solution. The foreign trademark owner may choose to fight, and Chinese Trademark Law provides different procedures, depending on the circumstances.
But on what grounds? In the 1993 version of the Trademark Law, there is Article 27.1, requiring the cancellation of a registration acquired “by other unfair means”, which is sub-divided in Article 25 of the implementing regulation into different types of conduct, including the registration of well-known trademarks (25.2), unauthorised registration by agents or representatives (25.3), infringing prior rights (25.4) and other unfair registrations (25.5).
These behaviours, after the 2001 revision, are regulated by Article 13 (copying, imitating and translating a well-known trademark), Article 16 (unauthorised registration by an agent or representative) and Article 31 (infringing prior rights such as copyright, trade name right, etc, or registering a trademark by unfair means that has been used and enjoys certain reputation), when the term of “by other unfair means” is left unchanged in the new Article 41.1.
As well-known status or reputation through use in China is not easy to prove, the last resort would be Article 41.1 of the Trademark Law.
Is Article 41.1 of the Trademark Law a ‘catch-all’ clause?
Even after the new Trademark Law of 2001 came into force, the Trademark Review and Adjudication Board (TRAB) used to think that the provision “acquiring registration by other unfair means” stipulated in Article 41.1 could be a catch-all clause to stop bad faith registration, and mentioned this in its Trademark Review and Adjudication Criteria, indicating that the term “other unfair means” refers to the behaviour of registering a trademark in bad faith with the intention to conduct unfair competition and make illegal profits.
For example, in 2005, the TRAB used Article 41.1 to cancel the registration of the trademark ‘Haupt’ which reproduced the trademark used by another company.
However, the Supreme Court held a different view. In a cancellation case against the trademark ‘Chuang Lian in Chinese & Design’, the Supreme Court first expressed its opinion on the applicability of Article 41.1, saying that Article 41 of the Trademark Law refers to absolute grounds of refusal, and may only be applied to protect the public interest, not the civil rights and interest of a specific party.
This view was confirmed in Article 19 of an Opinion on Several Issues Concerning the Trial of Administrative Cases Involving the Authorization and Determination of Trademark Rights issued in 2010 and constitutes the mainstream opinion now.
Article 41.1 can still work under certain circumstances
