China acts to Block Trade Mark Squatting

China, like most countries in the world, operates a “first-to-file” system in relation to trade mark registrations meaning that, in principle, the first party to file an application for registration of a trade mark will be awarded rights, to the detriment of a later applicant.  Unlike the rest of the world, the practice of “trade mark squatting” became common in China, whereby a local Chinese applicant files for registration in China of a trade mark identical with, or very closely similar to, a well-known trade mark of another party, usually a large Western multi-national, which is registered elsewhere but not in China.  Often, the Chinese registrant has no intention to use the mark in China, and is simply seeking commercial advantage by offering to sell the Chinese trade mark registration to the brand owner, which might be considered the true owner of rights in the mark (at least from a moral perspective).  This problem has been exacerbated by the lack of regulation of trade mark agents in China, some of whom have assisted “trade mark squatters”.

In April 2019, the Chinese government amended the Trade Mark and Unfair Competition Law, in a move to try and kerb the worst excesses of such “trade mark squatting” practices.  The amended law is due to come into effect in November this year.

Amongst other measures, the latest amendment to the legislation explicitly prohibits registration of a mark if the applicant does not have any intention of using it: such an application is now considered to be in bad faith and should be rejected.  Moreover, an allegation of such bad faith can also now be used as a ground of opposition, to prevent such an application proceeding to registration; or as a ground of invalidation for existing registrations.

At the same time, the new legislation increases sanctions against trade mark agents who accept client instructions when the agent knows, or should have known, that the applicant has no bona fide intention to use the mark in China.

These measures will improve the situation in China for non-Chinese companies, but the best defence is undoubtedly to register your mark at an early stage if it becomes apparent that you are likely to use the mark in China.

If you have any questions regarding the above, we should be pleased to assist – please get in touch with your normal contact at Nash Matthews.