It may be the case that when a business attempts to register their trade mark in China, they find that their trade mark has already been registered by a Chinese company. In many instances the Chinese company has registered their trade mark with the intention of selling it to that business at an inflated price. Such prior trade mark registrations are known as 'bad faith registrations'. Bad faith registrations represent a serious problem as they can inhibit a business' ability to enter the Chinese market.
Once a bad faith registration is identified, the legal solution is to either initiate trade mark opposition proceedings if the trade mark is advertised but not granted, or trade mark revocation proceedings if the trade mark is granted. To start, there are three categories of legal grounds for attacking a pirated trade mark through trade mark opposition or invalidation.
Category 1: Inherent Deficiency
Trade Mark Law of the People's Republic of China, Articles 10, 11 & 12
Inherent deficiency means either the trade mark itself is contrary to legal requirements, or the registration itself is fraudulent. This category of grounds corresponds to Art. 10~12 of the Chinese Trade Mark Law:
(i) The mark uses prohibited symbols, e.g. symbols identical with or similar to the State name, national flag, national emblem, landmark buildings, etc.
(ii) The mark uses non-distinctive symbols, e.g. symbols referring to product names, models, designs, quality, raw materials, function, use, weight, quantity, etc.
(iii) Three-dimensional mark is derived from the nature of the product, etc.
(iv) Fraudulent means have been employed during application for registration.
Category 2: Outward Deficiency
Trade Mark Law of the People's Republic of China, Articles 13, 15, 16, 31 & 32
Outward deficiency means the trade mark is similar to an earlier trade mark, or in conflict with others’ prior rights, or obtained in bad faith. This category of grounds relates to Art. 13, 15, 16 and 31 of the Chinese Trade Mark Law:
(i) The mark is a reproduction, imitation or translation of a well-known mark. A distinction is to be made between well-known marks registered in China and those unregistered in China, where the former extends protection to dissimilar goods while the latter only confers protection to similar goods.
(ii) An unauthorised agent or representative registers a mark under their own name rather than the name of their principal.
(iii) The mark contains a geographic indication of the goods and the goods are not from the region indicated, thereby misleading the public.
(iv) The mark is in conflict with the prior right of others, or is “squatting”, i.e. unfair means are employed to pre-emptively register another's in-use trade mark which has a reputation.
Category 3: Use Deficiency
Trade Mark Law of the People's Republic of China, Article 49 and related Regulations
Use deficiency means the registered trade mark is either improperly used or not used. This category only applies to revocation of trade marks and links with Art. 49 of the Chinese Trade Mark Law:
(i) The registered mark has not been used for three consecutive years.
(ii) The mark owner, without going through the required application, alters the mark, changes the registrant details or makes assignment.
(iii) The mark owner is dead or ceases to exist and the mark has not been transferred.
Finally, sometimes a business simply cannot beat a squatter to the mark through legal grounds above. Although China is a first to register country, there are limited grounds to challenge the infringer. A foreign party may rely on either a “well-known mark” ground or a “bad faith in registration” ground. Obtaining a favourable decision on either ground, however, can be both difficult and expensive. An alternative solution is to negotiate an assignment from the squatter. The original owner might purchase the mark directly, or via a cover company. Again, it will be very helpful to use experienced trade mark agents which can formulate the best negotiation strategy depending on the nature of the case.