China adopted a system that gives priority to the first person to file a trademark application
with the local patent office. As a result, many foreign companies still fall into the trap of not
registering their trademark rights early enough, thereby preventing themselves from freely
doing business beyond the Great Wall. Indeed, there are still cases where a company's
trademark has already been granted to a Chinese company, which often registers with the
direct intention of reselling it to a foreign brand at an inflated price. Such tactical
registrations are a problem faced by many European companies wishing to do business in
China. Trademark infringement severely restricts a foreign company's operations, exposes it
to substantial financial losses and the arduous process of recovering rights to the trademark.
What are the penalties for trademark infringement and how can you successfully fight for
your trademark rights in the Middle Kingdom? The specialists at Trademark Partners will
look after your interests in China and help you to avoid trademark infringement problems.
Trademark infringement in China can be divided into two basic categories:
Infringement committed prior to the formal filing of the trademark to China Patent Office, such as bad faith registration or so-called trademark trolling;
Infringement of an already registered trademark, such as the sale of counterfeit
products, i.e. products owned by someone else bearing a trademark identical or
similar to that of the rightful owner.
Tactical trademark registrations in China are considered to be bad faith registrations. They pose a serious threat to European companies wishing to expand into the Chinese market.
Trademark infringement can result in the loss of a foreign company’s freedom of action, preventing it from entering the market or even importing goods from China. This is because the person who has registered the trademark can stop products bearing the logo from being cleared through Chinese customs.
Problems arising from a late decision to register a trademark in China also affect large, well-known companies, which are just as likely to be victims of trademark infringement. One example is Apple, which was overtaken by a Chinese manufacturer of leather goods, including iPhone cases, in registering the IPHONE trademark in certain classes. Another example is the trademark registration of Tesla, which we wrote about in our blog. To avoid the risk of such situations, it is advisable to start the process of trademark registration in the relevant classes and subclasses as early as possible – preferably several years before the planned launch of the goods.
According to Chinese law, the owner of a registered trademark has the right to sell it. In fact, there is a special online platform in China that is directly dedicated to the sale of trademarks. It is affiliated with the China Technology Exchange and has been approved by the State Council. It should be noted, however, that while the sale of trademarks is legal in China, a problem arises when the sale involves a trademark that has been acquired from its original owner. The remedies in such cases are governed by China’s Trademark Law, which provides that if a trademark is infringed on the Internet, the original trademark owner may file a lawsuit to invalidate the trademark.
New regulations introduced in China have increased the penalties for trademark infringement. Under these regulations, a trademark owner has the right to demand the destruction of goods bearing a counterfeit trademark, as well as the materials and tools used in the production of those goods.
In the situation of trademark infringement, there are several legal avenues followed by specific legal remedies:
An administrative route, i.e., filing a complaint with the local market regulatory authority, which may result in the confiscation and destruction of the goods and a fine of up to RMB 250,000;
Civil proceedings, i.e. filing a lawsuit for trademark infringement, which may result in a cease and desist order, confiscation and destruction of goods and equipment used in production, and/or an award of damages;
Customs proceedings, i.e. the filing of an appropriate notification with the customs authorities to block the export or import of counterfeit goods; the customs authorities then have the right to seize and destroy
Customs action, i.e., filing an appropriate notification with the customs authorities to block the export or import of counterfeit goods; customs then has the right to seize and destroy the counterfeit goods; the counterfeit goods;
Within three months from the date of publication of the intention to register a trademark in the Official Bulletin, a company has the right to file an opposition with the Chinese Trademark Office. The opposition will be considered legitimate only if the original trademark owner proves to the Office that granting protection to the trademark will infringe the trademark. On the other hand, if the trademark has already been registered, the company can try to invalidate the trademark in question on grounds such as fraud, bad faith registration or infringement of an earlier right. In certain cases, it is also possible to initiate cancellation proceedings, for example, if a trademark has not been used for the last three years.
It is worth knowing that the quickest way to regain a trademark right is often to enter into negotiations with the person who filed the application. Negotiations can be an opportunity to gather the necessary evidence, so it is best to conduct them with the participation of a professional intermediary.
The most effective protection against trademark infringement is to register your trademark before you start operating in the Chinese market. It is also a good practice to monitor the market and trademark registries in China on an ongoing basis so that possible infringements can be quickly detected. At Trademark Partners, we are on the ground in China and can act quickly and effectively.
