Trademark squatting in China

Registration of your trademark in China is a basic necessity before undertaking business with China. It’s important to know that it doesn’t apply only to exporters. Importers should also remember about registering their brand if they display it on the product, packaging, or any printed materials. Why is it so important? In the Chinese trademark law, there is a rule „first to file”. It means that someone else can register your trademark. Consequently, they will deprive you of the right to use it in the territory of China. Unfortunately, trademark squatting in China is a common practice. In the article, we explain why is it crucial to register your trademark in the People’s Republic of China before someone else precedes you.

trademark squatting in China

Even a giant such as Apple had problems with the protection of the trademark in China.

Trademark, commonly known as a logo, is a recognizable sign, design, or expression which identifies products or services of a particular source from those of others. In China, the trademark is legally protected after registration in the Chinese office. Registration of trademarks in other countries doesn’t protect it on the People’s Republic of China territory. Therefore, before undertaking any business dealings in China, it is essential to register your trademark in the National Intellectual Property Administration (国家知识产权局). Legal trademark protection in China is active for ten years. The need for registration applies to both exporters and importers. Whether the trademark appears on the product, packaging, or printed materials such as the user’s manual, you need to register it in China.

How does trademark squatting in China work?

According to Dan Harris, one of the best lawyers specializing in doing business with China and the author of China Law Blog, recently, the danger of trademark being registered by the third party has been increasing again. Unfortunately, we also encounter situations where entrepreneurs lose rights to their logo in China.

The principle „first to file” in Chinese trademark registration law gives the so-called „trademark trolls” a lot of opportunities. For them, registration of a foreign trademark is an easy way to make money. The company, which brand was registered by someone else, is very often forced to pay a large sum to win back its trademark. The same happened in the well-known cases of Apple or Tesla. Not wanting to part with their logo, they had no other choice but to pay a few million dollars to be able to use it on the Chinese market.

It’s worth emphasizing that according to the mentioned principle, people who register someone else’s trademark in China, don’t act against the law. On the contrary, it’s legal according to the law. That’s the reason why it’s so tempting for the Chinese opportunists. And why trademark squatting in China is such a common threat.

Consequences of not registering a trademark in China

In another article, we already presented problems connected to the lack of trademark registration in China.

If you import from China and don’t have trademark rights, the shipment of goods with your logo will be stopped at the border. It happens at the request of the legal owner, which in this case is the person who stole your trademark. The result is that you can’t receive your own products with your own logo. It’s worth noticing that when you import from China, the goods are 100% prepaid. This kind of situation leads to significant losses.

In the case of exporting to China, if someone else registers your trademark, you won’t get permission to place your products on the Chinese market. Moreover, you will encounter a lack of interest from potential buyers. Nowadays, Chinese importers check whether potential business partners have a registered trademark before the transaction. Otherwise, they are not interested in buying goods from such an exporter.

As you can see, consequences connected to the lack of legal trademark protection are very serious. Therefore, it is essential to remember about trademark registration in China before taking any other action.

When the third party registers your trademark in the Chinese office, it’s very difficult to do anything about it. Certainly, it’s not the risk you’re willing to take. If someone else gets the rights to your trademark, you will be forced to buy it back for a large sum of money. The high cost may force you to start using another trademark in China (which you also need to register). In the worst-case scenario, you will have no other choice but to end your cooperation with China.

How to protect yourself from trademark squatting in China?

Lack of legal trademark protection in China results mostly from a lack of knowledge of foreign entrepreneurs. If you plan to start doing business in China and already know about the „first to file” rule, it’s really easy to avoid trademark squatting in China. You have to register your trademark in China before you undertake any business dealings with Chinese partners. And, in case of exporters, even before you exhibit at the trade fair for the first time. Otherwise, the third party can exploit your unpreparedness very easily. If someone else registers your trademark in China, the fault will be yours too.

In 2017, nearly six million applications for trademark registration were filed with the Trademark Office in China. Why your company isn’t among them? Register your trademark in China before someone precedes you.

ExamineChina helps in the registration procedure. If you want to protect your company in China – feel free to contact us.

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