The spectre of trademarks pirated by unscrupulous Chinese actors is well-known. A growing counter narrative is increased respect and protection for intellectual property (IP) by Chinese courts and institutions. A data point for this new trend is provided in this article, involving an American company that recently used Chinese legal institutions including the China Trademark Office (CTMO) to successfully claw back trademark rights from multiple trademark pirates.
The American company is an emerging transnational manufacturer and distributor of automotive parts and accessories. Founded in 2001, their North American footprint is well-established. Their business on other continents is growing. They eventually reached the all-too-common predicament of being large enough to appear on radar screens without having the necessary trademark registrations to mitigate risk of piratical misappropriation.
The first pirate was a Chinese company that was buying the American company’s automotive goods from an intermediary broker. Unbeknownst to the American company, the pirate filed for and registered trademarks on the American company’s name in classes for related automotive accessories. With American and Chinese counsel, negotiation took place and an agreement was ultimately reached with the pirate to assign the registered trademarks to the American company.
In China, in order for the assignment to become effective, it must be registered with the CTMO. An application for registration of the assignment must be filed jointly by the assignor and assignee. Both parties must sign the application and provide a power of attorney and a certificate of good standing. An assignment certificate is then granted. Even with a cooperative opposing party, the process took six months and required legal fees to be paid for American and Chinese lawyers handling the matter.
With counselling, the American company took action to file for a Chinese trademark on their company name (and house brand) in their core business area of automotive vehicles. The application was filed with the CTMO – and summarily rejected. A trademark for the same mark and in the exact same core class of goods and services was already registered. Upon investigation, the name of the registrant was completely different than the mark, and the registrant’s business was completely removed from the automotive field. It was clear that there was yet another pirate at sea.
This second pirate was not as cooperative as the first. Proposals to the pirate to have the registration assigned to the American company were rejected. The pirate became unresponsive to further attempts at contact. The only recourse was an invalidation procedure with the CTMO to cancel the second pirate’s registered trademark.
In a request for invalidation of a registrant’s mark, the CTMO looks at evidence of, among other things: pre-emptive registration against a mark having a pre-existing reputation (eg, a ‘famous’ mark or one that is known to the public); prior business relationship between the applicant and registrant; existence of any prior trade name rights; and prior copyright by the applicant and any infringement thereof. The CTMO will analyse evidence related to these issues, including evidence of the similarity of the marks, when the applicant’s products gained a ‘public reputation’ and whether the registrant knew of the applicant’s use of the mark. The Trademark Law of the People’s Republic of China (PRC) also requires invalidation if the registration violates Articles 10, 11 or 12, which list prohibitions of certain marks, such as generic or otherwise non-distinctive marks, and deceptive or unwholesome marks.
The CTMO found in favour of the American company on the first count, namely that the pirate’s mark constituted pre-emptive registration of a mark having a pre-existing reputation. The CTMO found there was insufficient evidence for the other three counts. On the whole, the CTMO was convinced by the American company’s arguments and it invalidated the second Chinese pirate’s trademark registration. The American company was victorious, but the process took fourteen months. Because the CTMO refused to stay prosecution of the original application pending the outcome of the invalidation proceedings, the American company’s first application was deemed abandoned and it had to file a new trademark application. The second application was ultimately allowed and registered.
As this case study demonstrates, it is imperative to be pro-active with trademark registration in China. Despite this good outcome for the American company and despite the increased respect and protection of IP rights that China may be demonstrating, much time and expense can be saved if foreigners proactively register their trademark rights in China.