Trademark squatting, or bad faith Trademark filing, is essentially when a third-party files and registers a Trademark merely to sell it for a profit later to someone who actually needs it and/or wants to use it. The original applicant then faces enormous challenges in registering in that country since the squatting party controls the intellectual property (IP) rights to that Trademark.
Trademark squatting is a serious issue in markets like China, as a result of the differences in Trademark laws in different countries. As opposed to Australia, China has a first-to-file Trademark system, which means that the first party to apply and file for a Trademark obtains the rights to that Trademark indisputably. The squatting third-party can even go one step further in enforcing their rights to the Trademark and potentially sue the original applicant in the foreign jurisdiction for infringement.
In this blog, we will discuss ways in which to combat Trademark squatting, the Chinese government’s efforts in tackling this continuing headache for existing foreign businesses, and a recent famous case the ruled in the original applicant’s favour.
How can business owners prevent this?
The best way to prevent any of the abovementioned squatting issues is to file in all relevant and potential business growth jurisdictions as soon as possible, particular in first-to-file countries. The first point of call would be to file your Trademark in your own home country, i.e. in Australia all Trademark registrations are managed and enforced by the government body: IP Australia. Then, you would apply for Trademark registration in your key countries of international business growth and future business expansion.
Given that third-party Trademark squatters are notoriously adaptable, foreign business and brand owners should stay proactive and vigilant in their efforts when it comes to opposing, invalidating and/or cancelling Trademarks based on non-use. It is suggested to conduct in-depth clearance and background searches to investigate whether the cited Trademark owner is in fact a third-party squatter or a genuine Trademark owner.
The Chinese government’s response
The latest amendment, Article 4 of the Chinese Trademark Law (2019) saw that bad faith Trademark applications that are not filed for the purpose or intention of use should be refused. This empowers the original applicant to succeed in opposition or invalidation cases before the China National Intellectual Property Administration (CNIPA) or the people’s courts, based on the following:
- The existence of business relations with the Trademark applicant (Article 15);
- Prior copyright, name right or trade name; or
- Prior use of an unregistered Trademark with a certain influence (Article 32).
The amendment is part of a dedicated effort by the CNIPA to function as watchdogs for Trademark squatting activities, rather than just relying on foreign business and brand owners to initiate actions. This allows the two groups to work together to combat third-party bad faith Trademark filings.
Cases of Recent Trademark Squatting
The highly publicised legal battle between the famed American athlete, Michael Jordan, and the Chinese sportswear company, Qiaodan Sports Co Ltd, saw that the latter was using a Chinese transliteration of Michael Jordan’s name, “chee-ow dahn”, and a logo of Nike’s well-known Air Jordan symbol as registered Trademarks. The case also saw the establishment of a critical three (3)-step rule for relying on personal name rights:
- The name has acquired a high level of reputation in China;
- The relevant public refers to that natural person by the name; and
- There is a ‘stable correspondence relationship’ between the name and the natural person.
To summarise, business and brand owners relying on this right will have to demonstrate not only their well-known status (or a certain degree of fame), but also compelling evidence such as awards, rankings, market surveys and national library search reports to establish that the public does associate that name to the natural person. It is worth noting that the personal name right of an English name does not necessarily encompass to its Chinese counterpart or its Pinyin, and vice versa.
Therefore, foreign business and brand owners are encouraged to file both its English and Chinese equivalent mark to ensure the broadest scope of protection, as third-party squatters often take advantage of multiple linguistic representations of a given brand name in their bad faith activities.
Key Takeaway for Business and Brand Owners
The key rule applies – if China may be relevant to your business or your future business growth, register your Trademark there as soon as possible. This is also the recommendation of the Counsellor (Intellectual Property), David Bennett at the Australian embassy in Beijing. If a third-party has already registered ‘your’ Trademark(s) or Trademark(s) that are similar to your Trademark(s), different options exist to try to remove or invalidate those registrations. However, time limits apply so you need to act fast!
Trademark law is the best area of IP law that offers protection, strategy, and leverage. Here at IP Partnership Lawyers, our team of solicitors are experts in Trademark registrations in both Australia and internationally, and we also assist clients with Trademark oppositions and the removal of Trademarks. Please see contact us to discuss further.
This blog provides general information and is not intended as legal advice specific to your circumstances. Please feel free to seek our professional legal advice if you have any particular questions, concerns and/or queries.