It’s not hard to imagine the frustration of a business owner upon discovering that their brand has already been registered in China. One can only guess how the mix of irritation and anger feels, compounded by a sense of guilt for failing to register the trademark in advance. The frustration can be even greater if the company previously held rights to the brand in China but lost them due to negligence. Unfortunately, this happens too.
To avoid claims of infringement, the only option may be to pause business plans in China—at least until the unauthorized party’s trademark protection is invalidated. Afterward, it’s time to take on the challenge and start the fight to recover protection for your own trademark. The situation is difficult but not hopeless—Chinese law allows for such actions, and success is becoming increasingly common. However, the outcome depends on many factors.
The key to success lies in convincing the Chinese Trademark Office (CNIPA, the Office) that the current, unauthorized trademark holder acted in bad faith when registering the mark. This refers to situations where the applicant, registering the mark in a specific class, was fully aware that it had been created by a third party to designate products appropriate for that class.
Providing such evidence is easier if the trademark was registered by a Chinese business partner based in Mainland China. This could include a potential distributor engaged in business negotiations or even someone to whom the foreign entrepreneur—let’s use a Polish business as an example—sent business proposals, product catalogs, or packaging designs. Proving bad faith becomes even simpler when the parties have taken typical steps toward formalizing a collaboration. Price negotiations, trade term discussions, and promotional activity planning are standard actions that confirm active relationships aimed at establishing regular cooperation.
When preparing evidence for proceedings to reclaim trademark rights, it is important to focus on proof related to discussions with a Mainland Chinese entity and directly tied to Mainland China. Negotiations conducted with a Hong Kong-based entrepreneur may not be sufficient as evidence in the context of Mainland China.
Here, we are referring to simpler cases.
Unfortunately, the situation is not always so straightforward. The impulse to register a foreign trademark with CNIPA can arise from events like industry conferences or trade fairs. These events attract thousands of visitors, and all it takes is for one attendee to notice a brand being promoted and quickly file for its protection in China. Importantly, such “noticing” doesn’t necessarily have to occur behind the Great Wall.
In a globalized world, European trade fairs are visited not only by people from neighboring countries on the Old Continent. Guests from Asia and the Middle East are also a common sight. Once again, it only takes a walk through the exhibition hall to spot an unregistered brand and file for its protection in China that very same day.
Let’s not forget that observing brands or deliberately searching for unregistered trademarks can happen discreetly every day. A visit to shopping malls, specialty stores, monitoring registered domains, or simply having access to a computer with an internet connection is all it takes. In the era of tech startups promoting themselves on social media, dynamic, ambitious, and appealing brands can appear on someone’s smartphone screen thanks to an algorithm—often without the brand itself even being aware of it.
In other words, a marketing manager who does not rule out even passive customer acquisition from China should realistically assess the risk of losing trademark rights due to registrations made by bad-faith applicants.
In the digital world, it is difficult to remain invisible or even unnoticed by market participants. Stepping outside the paradigms of common European practices and the ethics we are accustomed to is more a sign of prudence and a realistic approach to navigating the global landscape than of excessive fear or caution.
Paraphrasing numerous proverbs about acting in advance, it’s no exaggeration to say that registering a trademark in key markets is a good practice—significantly cheaper and quicker than engaging in lengthy and costly battles to reclaim rights to your own trademarks in foreign markets.
In common perception, there may be a belief that trademark protection is only relevant for companies planning to expand their exports into new markets.
While it is true that an expanding company must include IPR measures in its project plans, it is too often overlooked that trademark protection is equally important for importers from China and other Asian countries.
Even companies whose sole market is Europe or South America, but which imports from China ready-made products or components branded with their own trademarks, are not exempt. Importers buying under their own brand in China also fall victim to their own inaction. With a Chinese trademark registration certificate, they could benefit from additional legal tools.
A potential scenario might unfold as follows: an importer finds a company to produce goods marked with their own logo. Acting in good faith, the entrepreneur provides the manufacturer with graphic files of the logo, the parties agree on how to label the product, and typical cooperation begins. However, if the unaware manager has not registered the trademark in advance in China, and the bad-faith manufacturer notices this oversight and registers the trademark under their own name, this constitutes a bad-faith registration.
What happens if the importer decides to find a new supplier? Will the new supplier, upon learning that the first one holds the trademark, be willing to cooperate and risk a lawsuit for damages from their Chinese competitor?
Formally, in such a case, the new manufacturer becomes an infringer of trademark rights in China, as they violate the trademark rights of another entity within Chinese territory. In other words, a legal dispute over trademark infringement may arise between two Chinese manufacturers in China, involving the trademark of the Polish producer. Meanwhile, importer’s buyer might remain entirely unaware of this situation.
Trademark Partner assisted a Polish producer and exporter in recovering their trademark in a very similar case. Their first distributor registered the trademark under their own name. The second distributor, who was supposed to replace the first, quickly pulled out of the business upon discovering the situation. The exporting company owner learned about the issue from the second (potential) distributor.
The most challenging situation arises when an importer decides to end its cooperation with the first Chinese factory. This is the moment when the supplier can make three strategic moves that completely block its client, placing it in a very precarious position.
The first move is to set up customs control in China for products bearing importer’s logo. In such a case, customs authorities will verify whether any company processing outbound customs clearance has the legal right to ship goods labeled with that brand out of China. If it is not listed in the registry as an entity authorized by the trademark owner to export the products out of China, the shipment will be detained at the border. The first manufacturer, as the formal owner of the trademark in Mainland China, gains complete control of the situation, and customs clearance can only proceed with their consent. Otherwise, the goods will be confiscated and destroyed, with the costs charged to the company attempting to export the shipment—goods that were likely prepaid by “unauthorised” exporter.
The abandoned manufacturer can manipulate the situation in such circumstances at will. They may make a second move, forcing client (an importing company) back to the negotiating table, imposing a return to cooperation under less favorable terms, certainly. The third move involves pressuring an importer to cease collaboration with any other manufacturer. Finally, the manufacturer may demand compensation from the infringer—the exporter of the detained shipment—who will almost certainly seek recourse from the an importing company.
Today’s international trade is not limited to the physical exchange of goods that can be stopped at borders. Business services, IT services, and software licensing constitute a significant part of the borderless economy, which, in principle, is subject to similar trademark regulations. The key difference, however, is that proving bad faith in such cases can be significantly more challenging.
According to Article 15 of the Chinese Trademark Law, no person shall apply for trademark protection for marks identical or similar to those of their business partner if they are aware of the partner’s mark due to an existing business relationship. In cases of blatant violations, where the trademark registered in bad faith is identical to the mark of another party business, the latter can file a request with the authorities to invalidate the registration by proving the registrant’s bad faith. The outcome will heavily depend on the evidence submitted by the party requesting invalidation.
If the scenarios described apply to your business, contact us. We can help you recover your trademark.
