Strategy against legal actions initiated by trademark squatters

As trademarks in China are subject to the first-to-file principle, the problem of preemptive registration is relatively salient. Many trademark squatters will use the preemptively registered trademark to take legal action against the foreign rights holder to demand a large transfer price.

As a result, if the rights holder simply responds passively each time to an action taken by the trademark squatter, the rights holder will fall into the trap set by the squatter and ultimately be compelled to agree to unreasonable demands. To avoid this, the rights holder needs to map out a plan in advance.

Common means used by trademark squatters. After the successful preemptive registration of a trademark, some trademark squatters will directly contact the foreign rights holder, offering to transfer the trademark at an exorbitant price. Other trademark squatters will use the preemptively registered trademark on related goods or services so as to confuse consumers, but also seek an opportunity to transfer the trademark for a high price.

Frank Liu is a partner at Tiantai Law Firm