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Trademark Squatting: A Problem in China for American Business

August 16, 2017

 

Throw 'em in with the

patent trolls . . .

 

Trademark squatters are a real nightmare for American companies manufacturing and conducting business in the most populated country in the world. Unfortunately, many companies become aware of trademark squatters all too late, for it is China's foreign trademark process and differences from United States trademark law that enable trademark squatters to exploit foreign brands and harm American business. 

Trademark Squatter (n) -

An individual or entity who registers a trademark only to gain benefits from original marks or real trademark owners.

The situation is this...

 

A company operating outside of China begins conducting business in or through China, but fails to register their trademarks with the China Trademark Office (CTMO). Trademark squatters then swoop in and submit trademark applications for the trademarks that the foreign company had been using outside of China. Because China is a "first-to-file" country, the CTMO is willing to grant trademark rights to these trademark squatters regardless of whether they are actually using the mark or not, so long as they were the first trademark applicants to submit their applications. Even worse, trademark squatters can then record their registrations with China customs, who will confiscate any goods that infringe the trademark squatters' registered trademarks. This renders foreign companies unable to import or export goods bearing their trademark (which is often their company name) to and from China without first paying the trademark squatters a pretty penny to release the rights they have in the the marks at issue.

 

The solution is this...

 

Register your trademarks early, and register them with both the Chinese Trademark Office and China customs.

Registration with the

China Trademark Office (CTMO):

 

As mentioned, China typically grants trademark rights to the first person or entity to file a trademark application, and there are only very limited circumstances where the CTMO will grant rights to a prior user of a trademark over the first applicant. The takeaway of this is that you need to put in your application as early as possible to ensure your mark is not snatched from under you and then later used against you. 

 

Registering directly with the CTMO is a 9 to 12 month process. If you are just looking to register one mark, the filing fees at the moment are around $45 USD (depending on the conversion rate) for each of the first ten classes of goods or services in which you would like to be protected. It'll cost you an additional $4.50 USD for each class beyond the first ten. There are, of course attorneys' fees involved, and the amount will vary depending on how much time and correspondence with the CTMO is required. You may end up spending a couple thousand dollars, but I promise you, this may be nothing compared to the cost of being blind-sighted by a trademark squatter.

Registration with China Customs:

 

After registration with the CTMO is complete, you will have the option to record your registration with China Customs. Recording with China Customs provides a huge benefit to trademark owners, especially those concerned with counterfeit goods. There is no legal requirement to record, but the advantage is that China Customs will confiscate goods bearing an infringing mark that do not come from authorized manufacturers, importers, or exporters. China Customs will then contact you (the trademark owner) and dispose of the infringing goods upon request.

 

Recording with China Customs is fairly straightforward, though it must be done through an agent registered with China Customs. The fee for this is between $100-$150 USD, and recordation is valid for ten years unless it is renewed.

If you any of you readers have questions or need assistance with this process, please feel free to contact one of our experienced Los Angeles business and intellectual property attorneys.

 

 

About the Author: 

 

David "Tyler" Bennett is a business and intellectual property attorney, and he is a partner at Verhagen | Bennett LLP.  To learn more about David, please click here.

 

For questions or comments about this post, please email David directly at: David@VerhagenBennett.com

 

To make suggestions about future posts, please email: Info@VerhagenBennett.com

 

 

© 2017 David T. Bennett — This article is for general information only. The information presented should not be construed to be formal legal advice nor the formation of a lawyer/client relationship.