When selling trademarks in China, it is difficult to give a definite estimate of the amount of money that should be set aside for the buy-back of the trademark. The final transaction amount will depend on the circumstances of the case. It can be expected that the final price will not be too high if it is a trademark that has been registered in bad faith by an unauthorised third party. In such a case, the person who made such a registration is aware that the rightful owner of the mark can successfully apply for a declaration of invalidity. In such a case, the repurchase of the mark can significantly speed up the inevitable and thus the rightful owner’s recovery of the right to the mark. Assuming that the entire process is carried out efficiently and without unexpected complications, the buyer gains approximately 18 months of additional time. Often, this period may turn out to be an ideal market moment not to be missed, as failure to take advantage of it could result in measurable financial losses. In such a situation, the buyer should take into account the cost of selling the trademark, which fluctuates around EUR 2.500 – taking into account the cost of alternative procedures, this price does not seem excessive.
The final cost of selling brands in China is also significantly affected by whether the buyer is a large, well-known company. It also depends on whether the products are currently a hit on the market or not. In this case, the larger the company and the greater the market demand for its products, the higher the selling price of the brand.
The Chinese Patent Office processes incoming applications for the transfer of trademark rights quite quickly. If the documents submitted are free from formal and legal defects, the change of ownership and the sale of the trademark should be recorded in the registers after approximately six months from the date of filing the application with the Office, including the three-month period for publication of the trademark. Confirmation of the change of rights to the register is a special document – a decision on change of ownership, which is issued by the Chinese Patent Office after the necessary formalities have been completed. It should be noted, however, that this document does not have the status of a trademark registration certificate. You will need to make a separate application to obtain it.
The procedure for selling a trademark in China should be considered in terms of two possible situations.
The first and simplest situation is the purchase of a trademark invented and created by a person whose immediate objective is to sell it quickly. In this case, the transaction and the transfer of the trademark rights usually take place immediately once a suitable buyer is found and the parties negotiate a price for the transfer of the rights that is satisfactory to them.
The second possible scenario is the sale of a trademark registered by an unauthorised third party in bad faith. This is a situation where the person applying for protection of a particular mark is fully aware that he is registering a mark which is not his property.
Unfortunately, such unpleasant situations are still not uncommon, but recent changes in Chinese law are increasingly in favour of the rightful owners, making it much easier for them to fight for the effective retrieval of their trademark rights. However, if the buyer agrees to buy back the rights to its own trademark previously registered by an unauthorised third party, then the situation is essentially similar to the first case described above. The parties should therefore agree on the terms and conditions of the sale of the trademark and then formalise the transfer of rights in the trademark in accordance with Chinese law.
A separate aspect is the purchase of a brand that already exists on the market, has acquired a certain, even small, percentage of market share and is present on social media. The actual purchase of such a brand turns out to be a much more complicated process, which should be preceded by a comprehensive audit of the brand owner’s company. This step should not be omitted even if (although unlikely) the subject of the transaction is only the rights to the trademark.
Another important element related to the valuation of a trademark should be noted – accounting. It turns out that the right to use a trademark acquired by a given company, which can be used for economic purposes with an expected economic useful life of more than one year, falls within the scope of intangible assets. Therefore, such a sale should be accounted for accordingly.
A Trademark Sale and Purchase Agreement in China is a rather complicated document that deals not only with the actual transfer of the trademark, but also with the question of the transfer (or not) of the copyright and many other formal and legal issues, depending on the specific case. This transaction requires the security and legal effectiveness of the entire project, and its final stage is the filing of an application for the transfer of trademark rights with the Chinese office. At Trademark Partners, we work closely with experienced lawyers, so our clients can be assured that the sale of a trademark in China will be in accordance with applicable regulations and Chinese case law.