William Potter/ Shuttershock
31 May 2024FeaturesTrademarks

Is the US clampdown on bad faith TMs creating collateral damage?

As the USPTO and Amazon combat bad faith filings, some fear that US-based Chinese attorneys have become unwitting casualties, as Yan (Regina) Song of Aeon Law explains.

“I would like to speak to a white lawyer.”

I was stunned. I never thought that in this day and age, practising law in the US, I would encounter clients who chose lawyers based on race. Yet, this is what I heard recently.

I am from mainland China, and I work as an IP attorney leading the trademark team at a boutique IP firm in Seattle, Washington. I started practising trademark law after the trademark rules issued by the US Patent and Trademark Office (USPTO) required the representation of US-licensed attorneys for foreign-domiciled applicants and registrants.

After the new rules came into effect, some Asian US-licensed attorneys chose to work with a few Chinese agencies by ‘renting’ their licences and filing a large amount of low-quality trademark applications with questionable specimens that were prepared in China, leading to a backlog at the USPTO. As a result, these poor practices have created a stigma around Chinese IP attorneys in the US.

This reputation continues in the e-commerce industry, where trademark protection is extremely important. For instance, Tiffany (NJ) v eBay (2010) tells us that e-commerce platforms can be liable for trademark infringement conducted by their sellers. Moreover, e-commerce platforms have implemented strict rules to protect the trademark rights of their customers. Alibaba, one of the leading B2B online marketplaces, has implemented an IP protection platform where sellers and their agents can upload proof of trademark rights and report infringers.

Similarly, Amazon, the largest e-commerce platform, has a brand-protection programme called the Amazon Brand Registry. This programme has led to the development of an informal list of US-licensed attorneys to avoid when enrolling in the Amazon Brand Registry, and many attorneys on that list were coincidentally Asian and sanctioned by the USPTO due to their misconduct, such as “renting” licences.

In my experience, these events have led some trademark applicants and registrants to purposefully seek US-licensed attorneys who are not on that list to handle their trademark portfolios before the USPTO. Does the USPTO or the Amazon Brand Registry intend to discriminate against Asian lawyers? I hardly think so. Their intention is to safeguard a fair and square marketplace through new rules. Am I somehow collateral damage in this effort, a US-licensed attorney in good standing who happens to be Chinese? Unfortunately, I believe so.

New USPTO rules and Amazon’s Brand Registry

Since August 3, 2019, the USPTO has required a US-licensed attorney to represent any applicant or registrant whose domicile is not within the US or its territories. This action is in response to inaccurate and possibly fraudulent submissions that violate the Trademark Act and USPTO rules, including improper signatures and use claims.

Notably, the USPTO has experienced a considerable surge in trademark filings since 2020. In December 2020, the number of trademark applications increased 172% over December 2019. One reason, according to the USPTO, is the increase in e-commerce during the pandemic.

It is almost certain that the new rules and the recent surge benefited US-licensed attorneys. However, some attorneys chose a more “profitable” route to maximise the advantage. In a Final Order issued in the Proceeding No. D2021-04, the USPTO found that US-licensed attorney A had a service agreement with Chinese trademark agency B based on the number of trademark application materials reviewed by A, including $40 per application for A to review 30 applications or fewer per month, $30 per application to review 31 to 100 applications per month, and $20 per application for more than 100 applications per month. 

Attorney A ended up reviewing up to 500 applications per month and received up to $10,000 per month from B. A did not communicate with B’s clients directly regarding their trademark applications, but it was always B preparing the applications and entering A’s signature on those applications.

A “renting” his US licence to the Chinese trademark agency caused him to be suspended from practice before the USPTO for three months. Moreover, A is a US attorney but is also Chinese.

The mysterious  'blacklist'

Amazon’s Brand Registry is meant for sellers to protect their brands. To participate, one must have a pending or registered mark in the country where one wishes to enroll. Take the US as an example. One needs at least a pending US trademark application to enrol in the Amazon Brand Registry. For foreign-domiciled applicants, that means they may first file a trademark application represented by a US-licensed attorney, and then provide the trademark information to Amazon. 

Once notified, Amazon will then send a verification code to the attorney of record for each mark that needs to be enrolled, and the attorney of record will send the verification code to their clients, the foreign-domiciled applicants, for submission to Amazon. After the verification code is provided to Amazon, the process is complete.

For Amazon sellers, enrolling in the Amazon Brand Registry is almost always a must (it’s not required by Amazon, but sellers usually choose to enrol); and for sellers that domicile outside the US, having a US-licensed attorney is typically a prerequisite to become eligible for the Amazon Brand Registry since they need to file their trademark application first. However, their journey can be bumpy if their US attorneys are on the ‘blacklist’.

As this mysterious ‘blacklist’ is allegedly from Amazon, if a seller’s attorney of record is on that list, the seller’s enrollment in the Brand Registry may be rejected. Thus, for successful enrollment, sellers must avoid any attorneys deemed untrustworthy by this ‘blacklist’. The version of this list I obtained listed 52 attorneys and law firms, the majority of which can be identified as Chinese attorneys or firms. This list also provided information about the sanctioned attorneys retrieved from the USPTO.

When questioned, Amazon denied the existence of such a list but admitted that its system indeed erroneously flagged some attorneys. Amazon’s answers have only left me with further questions. Did Amazon mistakenly flag US attorneys who have Chinese names? Is there a reason that Chinese attorneys are prone to USPTO sanctions and the Amazon blacklist?

The role China’s IP system plays

While some legal experts express doubts about IP protection in China, others speak highly of China’s recent efforts. The US International Trade Administration has claimed that IP infringement and theft is widespread in China but the country has also taken steps to address this. China has not only set up a court system to enforce IP protection but also regulates its marketplace of IP service providers. 

According to the statistics provided by the China National Intellectual Property Administration (CNIPA) in 2023, there are around 87,000 IP agencies, including 4,520 patent agencies and 71,466 trademark agencies. In early 2023, CNIPA requested trademark agencies to verify and resubmit their information for review, and by the end of March 2023, only 16,921 trademark agencies passed the review and were approved by CNIPA. Trademark agencies that failed the review can no longer sign and submit trademark applications.

Fewer competitors in the marketplace may mean less competition, but the reality is not friendly to Chinese lawyers. The CNIPA’s statistics demonstrate that the major factor in determining the pricing of IP services is competitors. To stand out from their competitors and receive the most clients, some Chinese trademark agencies found a cost-effective way: pay a small fee to a US-licensed attorney to use their name and bar number to file trademark applications in the US, which are fully prepared in China. Using this method, a US attorney can file more than 1,200 applications in two months, with almost more than 20 applications being filed per day. The cost is also much lower than a trademark application fully prepared and filed by a US-licensed attorney. 

The logic is to use less of the US attorneys’ work to reduce the total cost. However, Chinese clients have no or limited knowledge about this arrangement; they believe the pricing for a US trademark application filed by a US attorney should cost the same.

If the US attorneys’ work cannot be diminished or replaced, another way to reduce the total cost is to pay Chinese lawyers less. A Chinese IP lawyer once told me that he could not be compensated for handling the foreign patent work because his clients would rather pay for US attorneys, not Chinese lawyers. To receive clients, this Chinese lawyer finally agreed not to charge his service fees for handling foreign patent work. I was shocked that he willingly accepted unfair compensation for his time and efforts. Meanwhile, clients have no or limited knowledge about why someone would agree to this deal; they believe the pricing for a Chinese lawyer should always be discounted. This has perpetuated the problem.

Impact on Chinese lawyers in the US

A profile of the legal profession in 2023 published by the American Bar Association tallied that 79% of all lawyers are white, confirming that white lawyers are still overrepresented in the legal field. Moreover, the percentage of Asian American lawyers has increased from 2.5% to 6% since 2021.

Chinese lawyers practise in a wide variety of legal areas in the US. Even though English may not be their first language, Chinese lawyers in the US go to law schools, take bar exams, and get licensed just as all lawyers do.

In China, clients are unwilling to compensate Chinese lawyers properly; in the US, clients are afraid that Chinese lawyers are not worth the value. This stereotype hurts everyone. In China, some IP lawyers and firms reduce their legal fees by sacrificing the quality of work or their own time due to the price competition and clients’ disrespect for their value. 

This leads to low-quality trademark filings in the US, which severely disrupt the USPTO. To earn the money that may be lost due to these biases, some Chinese US-licensed attorneys choose to violate USPTO rules by “renting” their bar licences to those Chinese trademark agencies, causing entities such as the USPTO and Amazon Brand Registry to flag attorneys. These events combined have led to prejudice towards Chinese attorneys.

Beating biases

The USPTO’s battle to combat low-quality trademark applications requires Chinese lawyers to properly educate and guide their clients to understand the value of their lawyers and IP. Furthermore, Chinese companies need Chinese lawyers who understand both US laws and Chinese culture to assist in the protection of their overseas IP.

I hope that Chinese IP lawyers and legal professionals do not continue to be collateral damage in this fight and that clients learn to respect value, and treat them fairly. Their roles are essential to improving the IP environment in China, which is then beneficial to the US, and all countries that emphasise the value of IP.

Yan (Regina) Song is an IP attorney at Aeon Law. She can be contacted at: regina@aeonlaw.com

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