Strategy for foreign rights holders against TM squatting in China

A large number of companies with brands that have had a significant history and degree of notoriety abroad did not in the past place any great importance on registering their brands as trademarks in China because their major markets were not in the country. The sales of some brands in China have been aided by domestic distributors, but they, too, failed to register their trademarks in such situations.

With the changing economic environment, China as a market with a relatively active economy has increasingly drawn the attention of these developing brands. However, once these brands establish a company in China and prepare to go all in, they often discover that their trademarks have been preemptively registered in their core classes by others. Failure to secure the registration of such trademarks in China will have a major impact on the business development of such brands in China, and if business development is forced for short-term gains, their business interests may suffer material damage due to trademark infringement claims.

The trademark registration regime in China operates on the first-to-file principle. Trademark squatting is naturally an extremely negative factor for the business development of a company. However, if an active approach is taken, there is still some hope; if a well-suited response strategy is taken, an “every cloud has a silver lining” type of effect could very well manifest itself.

Author: Frank Liu is a partner at Jincheng Tongda & Neal in Shanghai