what we think

By Victoria Lei

In recent years, with the increasing vigilance of trademark owners in protecting their rights and the implementation of effective policies by the China National Intellectual Property Administration (CNIPA), the act of trademark squatting has encountered greater difficulties compared to the past. Squatters have consequently resorted to novel strategies, specifically targeting registered trademarks in China by initiating cancellation actions while concurrently applying for their own trademarks.

How Squatters Operate

Typically, squatters will conduct online searches to determine whether a brand is operating in China and whether its trademarks are being used. If they find no evidence of trademark use, such as the absence of sales of the brand's products on platforms such as Taobao, they will file for cancellation of the trademark on the grounds of non-use over the past three consecutive years. This reason for cancellation is relatively straightforward, as squatters only need to provide preliminary evidence that the trademark has not been used.

How to Counteract and Prevent Attacks from Squatters

The trademark owner, on the other hand, must present sufficient valid evidence of use to demonstrate that the trademark has indeed been used on the approved goods in China in the past three years. Failure to do so may result in the cancellation of the trademark, thereby paving the way for the squatter's application to be approved. This situation can lead to significant time and efforts being expended by the owner to defend their rights, including actions such as filing for a review of the cancellation decision (through CNIPA and even court procedures), lodging objections to the squatter's new applications, reapplying for the trademark, and responding to squatter’s objections, among others. Moreover, instability in trademark rights can hinder the trademark owner's business operations in China. The squatter creates such troubles for the right holder in order to extort a high price.

As a result, our recommendations are as follows:

1. Enhance Trademark Management: Owners should maintain a comprehensive understanding of the registration status of their trademarks. For instance, in the event of a brand logo update, it is imperative to ensure that the new logo is duly registered. Any discrepancies between the trademark displayed on product packaging and the registered trademark may render the evidence of use ineffective.

2. Regularly Collect and Prepare Evidence of Use: Even in the absence of direct business-to-consumer (B2C) sales within China, the establishment of trademark use evidence can be achieved through cross-border e-commerce (CBEC) sales or by engaging Chinese manufacturers for OEM production.

3. File New Trademark Applications: If the owner has not yet used the trademark in China but wishes to protect it, they may consider re-registering the trademark every three years. By doing so, the owner can maintain the protection of their trademark and prevent it from being vulnerable to cancellation proceedings.

The Intellectual Property team at R&P China Lawyers is dedicated to offering comprehensive legal support to trademark owners, assisting them in effectively addressing issues including but not limited to trademark squatting and cancellation. Their objective is to aid in safeguarding their business interests and facilitating their development in the Chinese market. The team manages various applications, appeals, oppositions, invalidations, transfers, cancellations and lawsuits representing clients fighting infringement with administrations (incl. online platforms, AMRs, Customs), with the Public Security Bureau, and through Chinese courts. For more information, please contact Victoria Lei at leishijing@rplawyers.com or your trusted contact at R&P.