For many years, bad faith or squatter trade mark applications in China have plagued foreign businesses with some level of reputation overseas but who had yet to enter the Chinese market. One of the measures recently announced by the China Trade Marks Office (“TMO”) to curb this problem is to establish and maintain a database to blacklist such squatter applicants.

Typically, a foreign business will discover that its mark is the subject of existing squatter registrations when it attempts to register its mark in China, or is notified by a watch service alert of new squatter applications. The foreign business will then try to remove such registration or block such application, but will find it hard to succeed even in cases where the bad faith appears blatant (the success rate is only about 30%).

Below are some examples of bad faith applications:

Class: 19
Goods: building timber; glass mosaic; porcelain or ceramic tile; floor tiles, not of metal; refractory fiber; doors, not of metal; plastic composite pipe; building glass; coating (building materials); art of stone, concrete or marble.
Brand owner won / lost opposition: TMO level – lostTRAB level – lost

Class: 35
Services: relocation of commercial premises.
Brand owner won / lost opposition: TMO level – lostTRAB level – lost

Class: 22
Services: mattresses; furniture; non metallic containers (for storage and transportation; work benches; mirror (glass); bamboo crafts; unprocessed or semi-processed horn, ivory and shell; furniture fittings, not of metal; cushions; door fittings, not of metal.
Brand owner won / lost opposition: TMO level – lostTRAB level – appeal not available under the current Trade Marks Law

Class: 14
Services: precious metals, unwrought or semi-wrought; jewellery cases [caskets or boxes].
Brand owner won / lost opposition: TMO level – lostTRAB level – appeal not available under the current Trade Marks Law

Class: 28
Services: apparatus for games; toys; toy vehicles; dolls; chess; golf clubs; golf bags, with or without wheels; playing balls; machines for physical exercises; golf gloves.
Brand owner won / lost opposition: TMO level – lostTRAB level – appeal not available under the current Trade Marks Law

Class: 25
Services: clothing; layettes; swimsuits; water-proof clothing; football shoes; shoes; hats; hosiery; gloves (clothing); girdles.
Brand owner won / lost opposition: TMO level – lostTRAB level – appeal not available under the current Trade Marks Law

Under the China Trade Mark Law, where a foreign business does not own any prior trade mark registration in China or where such registration is not in the relevant class or sub-class (Article 30), the limited grounds to try to remove or block a bad faith application would be that:

It is in a business relationship with the squatter (Article 15) Most bad faith applications are held in the name of an individual or a shell company and it would be hard to establish any kind of business relationship with the squatter
It owns other prior rights such as copyright, and such rights have been infringed (Article 32) Many trade marks are not suitable for copyright protection
Its mark has attained a “certain reputation” amongst Chinese consumers in respect of the goods or services in question (Article 32) or well-known status in China (Article 13) The bar for reputation is set very high and requires extensive use of the marks over a long period, across a wide geographical area within China. If the foreign business has operated in China extensively enough to be able to establish the required reputation, it is most likely to have already obtained trade mark protection and will not need to rely on unregistered rights
Where the squatter files numerous applications with no apparent intention to use the marks, and the marks are uncannily similar to a third party’s marks, the general principle of good faith is violated (Article 7), detriment to socialist morality or unhealthy influence to society is caused (Article 10.1(8)), and / or the registrations were obtained via fraudulent or other illegal means (Article 44) Not all squatters file numerous applications, and what violates the principle of good faith or causes detriment to socialist morality or unhealthy influence to society can be very arbitrary. Therefore the introduction of a database to blacklist squatters will go some way to plugging the loopholes.

At present, it is unclear what the criteria for inclusion in the database is (ie. automatically once bad faith has been confirmed in an opposition or invalidation, or upon complaints by brand owners, as supported by relevant evidence?); whether this database would be open for public inspection, or even how useful it would be (considering that squatters tend to be individuals or shell companies, and the incidence of repeat offenders is not that high).

Nonetheless, the establishment of the database signals the TMO’s resolve in tackling the escalating problem of bad faith applications and will go some way to alleviating the brand owners’ burden of proving bad faith.

This article is an extract from Spruson & Ferguson’s Asia-Pacific Regional Trade Mark Update. You can view the entire summary here.