Does China’s new Trademark law really do any heavy lifting to combat squatters?

China’s ‘first-to-file’ system provides opportunistic squatters the ability to register trademarks despite having no intention of using them in the market, thereby making it difficult for legitimate trademark owners to register their brands in China.

Notwithstanding the squatters, the number of Canadian trademark filings in China rose by 265% in the last 10 years showing many are eager to register their intellectual property rights in this frontier. This number is sure to increase now that Canada is part of the Madrid protocol.

If you are considering expanding into China, don’t let the squatters dissuade you. New provisions have been added to Chinese trademark law that will assist legitimate trademark owners in securing and protecting their intellectual property.

Under the new law, applications will now need to be filed with an ‘intention to use’. If a party files a trademark without an intention to actually use the mark (such as putting the trademark on product packaging that it sells), the application can be challenged on the ground that it was a bad faith filing, and the Chinese Intellectual Property Office will have the ability to dismiss bad faith applications during the trademark examination process. Third parties will also have the ability to oppose the trademark application on the basis that it is a bad faith filing. This is a positive step for trademark owners who formerly had to resort to expensive opposition and invalidation proceedings to challenge squatters’ trademark registrations. Even if the application advances to registration, a third party can seek to expunge a registration on the basis that there was no use or intention to use the trademark.

While these are certainly positive movements forward, there are limitations.

How are examiners going to assess whether an application was filed in ‘bad faith’? Upon filing, it is difficult to discern whether the applicant intends to use the trademark as described. It is easy to merely state an intended use; however, proof of use is a different story. As detailed guidelines are still being drafted, evidence of intention to use remains an uncertain basis for an opposition. Until we have more information, opposers may still need to consider lengthy court proceedings to challenge applications.

The new law attempts to address this issue by prohibiting trademark agents from accepting instructions to file an application if there are reasonable grounds to believe that the applicant has no intention to use. If a firm or agent violates the new rule, they will be subject to an administrative penalty. Trademark agents and firms in China are subject to virtually no examinations or practice license requirements. In many cases, firms and agents have assisted in bad faith filings and trademark squatters. The new penalty is a welcome change in an attempt to curtail bad faith filings.

Overall, the amendments to Chinese Trademark Law attempt to align with international standards and at least deter trademark squatters. So long as care is taken to abide by these new rules, we consider filing in China to be a necessity if you see an opportunity for your business to enter that market.