Foreign companies entering the Chinese market are all too familiar with trademark piracy. Typically, a foreign company intending to register its mark in China finds out that someone has already applied to register the company’s brand in China. China’s first-to-file system, narrow interpretation of bad faith, its unique complex system of trademark classification, and the large number of Chinese language equivalents of a foreign mark all help to create a hotbed for trademark piracy. Although recent amendments to China’s Trademark Law appear to bolster protection against trademark piracy, their application and enforcement so far have been disappointing.
China follows a “first-to-file” system, in which trademark rights are awarded to the party who first files the application, irrespective of any history of use. This presents an opportunity for trademark pirates to register a foreign company’s mark under their own name if the company did not register its mark promptly. Although trademark piracy is not unique to China, it is especially prevalent in China. China has adopted a very narrow interpretation of the concept of bad faith, making it easier for pirates to obtain trademark registration in China than in countries such as Japan and Germany. Moreover, the potential large number of Chinese language equivalents of a foreign mark provides copious opportunities for trademark piracy.
Even if a foreign company has duly registered its trademark in China, it is not immune to piracy thanks to China’s complex trademark classification system. Like many countries, China has adopted the Nice Classification. However, the Chinese system further divides each of the 45 Nice classes into multiple subclasses. Goods and services under different subclasses are not considered similar. This means that similar or identical marks can sometimes be registered within the same class if their associated goods or services fall under different subclasses. For example, if a company only registers its mark in subclass 2510 (gloves), it may be vulnerable to pirates who register its marks in a different subclass (e.g. subclass 2509 for socks) within the same class, class 25 (clothing).
When a foreign company falls victim to trademark piracy, it may be prevented from using or registering its mark in China. Consequently, the company may have to pay a ransom to buy back its mark, move to rebrand its products or services, or fight a losing battle in the Chinese Trademark Office (CTMO). If the company does not take any action or is unsuccessful in the CTMO, the pirate can benefit from the reputation of the original mark, and its use of the mark may damage the goodwill of the original mark in China and abroad, including preventing distributors from dealing with the original manufacturers.
Changes to the Trademark Law
China’s relatively new Trademark Law contains the following provisions touted as being intended to, among other things, assist foreign companies in fighting against pirates:
- Article 7 requires the application for registration and use of a trademark be based on the principle of good faith;
- Article 13 prohibits the registration and use of a trademark that is a copy or imitation of another unregistered trademark that is well-known in China;
- Article 15 prohibits agents, representatives and others who have business relations with the owner of the unregistered mark from registering the same or a similar mark for the same or similar goods and services; and
- Article 32 prohibits bad faith registration that infringes upon others’ existing prior rights.
Although the new Trademark Law offers foreign companies potentially valuable protections, it will be a paper tiger if it is not applied to actually interdict trademark piracy. To date, the Trademark Law has not provided the promised benefits in curtailing trademark piracy.
Insufficient Enforcement by the CTMO
Foreign companies are entitled to file an opposition based on Articles 7, 13, 15 and/or 32 once the pirate’s application for registration has been published. However, to date, these provisions have not proven particularly helpful in tackling trademark piracy. Although marks that are “well-known” are to be protected under Article 13 of the new Trademark Law,  the status of being “well-known” in China is difficult to achieve, insofar as the CTMO examiners are concerned. To date, the CTMO has only deemed a handful of trademarks to be well-known in China (e.g., PIZZA HUT, DUPONT and WAL-MART).
Another common ground for opposition, Article 32 of the new Trademark Law (same as Article 31 of the old Trademark Law), provides:
Article 32 No application for trademark registration may infringe upon the existing prior rights of others, and bad-faith registration by illicit means of a trademark with a certain reputation [emphasis added] already used by another party shall be prohibited.
In an opposition proceeding based on Article 32, evidence is usually provided to show that:
- the pirates are serial pirates;
- the foreign company has registered the original mark in several other countries;
- the original mark has acquired reputation in China and in other countries;
- the foreign company has used and promoted the original mark worldwide and in China; and/or
- the original mark and the pirated mark are identical or similar and are for similar products or services.
Despite the foregoing, foreign companies usually fail in opposition proceedings based on Article 32 because they are unable to convince the CTMO that the original marks had gained “a certain reputation” in mainland China prior to the application date of the pirated marks, even though the original marks were known outside of mainland China. Based on our experience, however, if foreign companies can assert copyright in the marks, then claiming prior copyright can be effective in trademark oppositions. However, this is only possible for marks that have significant design elements.
The new Trademark Law no longer provides for an appeal in trademark opposition proceedings. Under the new law, an unsuccessful opposition will immediately lead to the registration of the pirated mark. The only other recourse the unsuccessful opponent has is to seek to invalidate the registration; however, invalidation proceedings are expensive and complicated. The opponent can also file for cancellation for non-use, but only if the pirated marks have not been used for three consecutive years after registration.
Until the CTMO officers become committed to fighting trademark piracy, this change to the Trademark Law will reduce the options available to legitimate trademark owners to oppose the registration of pirated marks, making the battle against trademark piracy more challenging.
Conclusion and Suggestion
Despite amendments to the Trademark Law, trademark piracy will probably persist in China. This is likely due more to a lack of willingness to enforce the law by administrative authorities such as the CTMO than to a lack of adequate legislation. Evidentiary standards required by the CTMO to oppose pirated marks are unclear and difficult to attain. To better guard their brands, the only alternative for foreign companies is to register their marks in China as early as possible in all relevant classes and subclasses to stymie trademark pirates. Moreover, because Chinese consumers are more likely to refer to foreign brands by reference to Chinese versions of the brand names, companies should register the Chinese translation and transliterations of their marks in addition to registering the marks in English.
- Yang Yang, “Comment on ‘Haitang Bay’: Has the Law Provided for Full Protection Against Trademark Registrations in Bad Faith?” IIC (2005) 46:491 at 498.
- Trademark Law of the People’s Republic of China (2013 Amendment) (promulgated by the Standing Comm. Nat’l People’s Cong., Aug 30, 2013, effective May 1, 2014) [new Trademark Law].
- New Trademark Law, supra note 1, art 33.
- New Trademark Law, supra note 1, art 13.
- Sunny Chang, “Combating Trademark Squatting in China: New Developments in Chinese Trademark Law and Suggestions for the Future”, online: (2014) 34: 2 Nw J Int’l L & Bus 337 Scholarly Commons Law
- Trademark Law of the People’s Republic of China (2001 Amendment) (promulgated by the Standing Comm. Nat’l People’s Cong., Oct 27, 2001) [old Trademark Law].