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Several suggestions on improving the fight against malicious registration of trademarks

Author: Zhao DanQing, Partner at BEIJING MINGDUN LAW FIRM

As China became the world's second largest economy, there is an increasing demand of both domestic and overseas market entities for seeking trademark protection in China. However, the loopholes in China's trademark protection system have been maliciously taken advantage of. Trademarks have been applied for in bad faith without purpose of use. Such behaviors have crowded out the increasingly tight trademark resources and disturbed the order of the market economy.

In order to crack down on malicious registration of trademarks that are not for the purpose of use, the state has successively revised and issued a series of laws and regulations. The Standing Committee of the National People's Congress revised the Trademark Law of the Peoples Republic of China (the Trademark Law) in 2019. And in cooperation with the implementation of the new Trademark Law, the State Administration for Market Regulation issued Several Provisions on Regulating the Application for Registration of Trademarks. The China National Intellectual Property Administration (CNIPA) issued the Provisions on the Administration of Intellectual Property Credit in 2022. As early as 2007, the CNIPA issued the Considerations for Trademark Registration Application by Natural Persons.

These new laws and regulations have a certain deterrent effect on malicious trademark squatting , but have not effectively changed the phenomenon. During the covid-19 epidemic in 2020, thousands of epidemic-related trademarks such as 'Huoshenshan' and 'Leishenshan' were maliciously squatted. In 2021, during the Tokyo Olympic Games, the names of many Olympic champions were preemptively registered as trademarks, such as “Quan Hongchan”, “Yang Qian”, “Wang Shun”. Moreover, during the 2022 Beijing Winter Olympics and Paralympic Winter Games, thousands of trademarks related to the mascots and athletes' names of the Winter Olympics and Paralympics were also maliciously squatted.

Such severe trademark squatting situation indicates that there are defects on our systems in preventing malicious trademark squatting. Based on the existing regulations, China's crackdown on malicious trademark registration focuses on the process of trademark application for registration, whereas it ignored the supervision and enforcement after trademark registration. Therefore, we can still strengthen the fight against malicious trademark squatting from other various aspects, in order to optimize the legal environment for trademarks.

1. Increase the legal liability of malicious trademark squatter

After the malicious trademark squatting is identified , the administrative authority will normally reject application for this particular trademark or invalidate the registered trademark. The trademark squatter will only lose a few hundred yuan of trademark application fees, which evidently cannot curb the malicious trademark squatting. The Provisions on the Administration of Intellectual Property Credit issued by the CNIPA stipulates some penalty measures for malicious trademark squatter, the intensity of which however should still be strengthened. The author suggests that the following aspects may be considered so as to increase the legal consequences of malicious trademark squatting.

(1) Restrict malicious trademark squatter from handling trademark business for a certain period of time, such as within three years, or at least applying for a trademark similar to the squatted trademark.

(2) Upon the application of the real right holder, transferring the squatted trademark to the right holder for free.

(3) Requiring the malicious trademark squatter to bear the protection costs of the real right holder.

The current trademark registration fees are based on documents formulated by the National Development and Reform Commission and the Ministry of Finance, which only involve the fees and fee standards. However, in addition to that, trademark registration fees can also involve the burden of fees, the reduction of fees, and so on. For example, for small and micro enterprises, trademark registration fees can be reduced; for malicious squatted trademark, the trademark squatter can be required to bear the protection costs of the real right holder, i.e. official fees, agency fees and other reasonable expenses of opposition/invalidation/cancellation.

2. Restrict the right of trademarks not in use

Although China adopts first-to-file principle, registered trademarks do not automatically and forever enjoy trademark rights. Trademark rights ultimately come from use of trademarks. For trademarks that have not been put into use after registration, its trademark rights should be restricted or even cancelled.

(1) If a registered trademark is not used, it shall not be renewed

The validity of a registered trademark is ten years. The trademark can be renewed upon expiration of its validity period. The trademark registrant may be required to submit evidence of trademark use at the renewal process, to prove the use of the trademark , otherwise it shall not be renewed. If evidence of of use of the trademark within three years cannot be provided , the CNIPA may initiate cancellation procedures to cancel the unused registered trademark.

(2) If a registered trademark is not used, it shall not be assigned

For the assignment of registered trademarks, China implements approval system. For the assignment of a registered trademark, the assignor and the assignee shall jointly file an application with the CNIPA. Once the assignment of a registered trademark is approved, it shall be published. The assignee shall enjoy the exclusive right to use the trademark as of the date of publication.

For a trademark that has been registered for three years, while an application for assignment of this mark is filed, the assignor may be required to submit evidence of the use of the trademark, rather than merely submitting statement for assignment. If evidence of trademark use within three years cannot be provided, the CNIPA may initiate cancellation procedures and cancel the unused registered trademark on its own initiative.

(3) If a registered trademark is not used, it shall not refrain others from applying for registration of this mark

The amount of valid registered trademarks in China has reached nearly 40 million, which include a large number of unused registered trademarks. These registered but not in use trademarks have seriously hindered trademark applicants who have a genuine need to use the trademark from obtaining a registered trademark, and even hinder the trademark that has already been used in the market. When a registered trademark becomes the basis for refusal or invalidation of other parties trademark, the owner of the trademark to be rejected or invalidated shall be given the right to request the owner of the registered trademark to submit evidence of use, so as to testify whether these registered trademarks satisfy the genuine prior rights. If the trademark registrant cannot provide evidence of the use of the trademark within three years, these registered trademarks shall not become the basis for refusing or invalidating other parties trademarks. Further, the CNIPA will also proactively initiate cancellation procedures to cancel these unused registered trademarks.

(4) For trademarks which have been identified as maliciously squatted marks, they should be invalided by the CNIPA proactively

Article 44.1 of the PRC Trademark Law stipulates that the Trademark Office has the right to declare invalidation of a maliciously squatted trademark. While cracking down on the maliciously squatted trademarks such as 'Bingdundun' and 'Gu Ailing', the CNIPA proactively declared invalidations of 43 registered trademarks, including No. 41126916 'Xuedundun' and No. 38770198 'Gu Ailing', in accordance with this article.

In fact, the real right holder has invalidated a large number of preemptive trademark registrations in bad faith that infringe upon its rights. In these cases, while a trademark has been identified as a malicious squatted trademark, dozens, hundreds, or even thousands of trademarks are normally also recognized as malicious squatted marks. For example, in the case of invalidation against the mark UL No. 10619071 between Fast Retailing (China) and the Trademark Review and Adjudication Board, Guangzhou Zhinanzhen Company, Guangzhou Zhongwei Company, and the case of invalidation against the mark YILISIERNo. 5086142 between Shiseido and the Trademark Review and Adjudication Board and Ma, etc. However, the large amount of trademarks which have been identified as maliciously squatted in these cases remained registered.

If the CNIPA can proactively invalidate these maliciously preemptive trademark registrations, this will effectively crack down on the malicious trademark squatter, increase the costs of violation, and also enhance the confidence of honest business entities.

Through a series of measures, it is believed that malicious trademark squatting can be expelled from the trademark field, so that trademarks can become a favorable weapon for honest operators.

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