Trademark squatting in China

Trademark registration in China is necessary before doing business in China or with Chinese partners. It’s important to know that it doesn’t apply only to exporters. Importers should also remember to register their logo if they display it on the product, packaging, or any printed materials. Why is it so important? The Chinese trademark law has a rule of “first to file.” It means that someone else can register your trademark. Consequently, it won’t be possible for you to use your own logo in the territory of China. Unfortunately, trademark squatting in China is a common practice. In the article, we explain why it is crucial to register your trademark in the People’s Republic of China before someone else does it.

How does trademark squatting in China work?

A 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 with the National Intellectual Property Administration (国家知识产权局). Legal trademark protection in China has been 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 must register it in China.

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 a trademark being registered by a third party has been increasing again. Unfortunately, we also encounter situations where entrepreneurs lose rights to their logos in China.

The principle of “first to file” in Chinese trademark registration law gives the so-called “trademark trolls” a lot of opportunities. For them, registering 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 and Tesla. Not wanting to do away 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 and why trademark squatting in China is such a common threat to foreign companies.

Consequences of not registering a trademark in China

In another article, we already wrote about what happens when you don’t register your trademark in China.

If you import from China and don’t have trademark rights, the shipment of goods with your logo can 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 products with your logo. It’s worth mentioning that the goods are usually 100% prepaid when you import from China. 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 may lose 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, the consequences of neglecting trademark registration are very serious. Therefore, it is essential to remember trademark registration in China before taking any other action.

When a 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?

Foreign importers and exports don’t register their trademarks in China because they don’t know it is advised. 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 with Chinese partners. And, in the case of exporters, even before you exhibit at the trade fair for the first time. Otherwise, the third party can exploit your negligence very easily. If someone else registers your trademark in China, the fault will be yours too.

Six million applications for trademark registration are filed with the Trademark Office in China annually. Why is your company not among them? Register your trademark in China before someone does it.