The first of the major problems is Trademark Hijacking. This is when a business in China registers a trademark of a foreign brand selling in China before the overseas owner of that trademark does, and then piggybacks on the advertising and success of that company before demanding licence fees or even suing for trademark infringement.

Another problem is Trademark Squatting, which occurs when individuals and companies search and register a word or logo which they feel may hold value in the future, in the hope of being able to resell the rights to the overseas owner when and if they enter the Chinese market.

Fortunately, there is relief in sight for foreign companies being blackmailed by trademark squatters. On December 24, 2012, the Standing Committee of the National People’s Congress began deliberations on a draft amendment to the China Trademark Law that would prevent the malicious registration of trademarks that are already in use.

Applications for China trademark registration will not be accepted if the applicants know beforehand that the trademarks to be registered are already in use by other companies. The amendment also offers protection for “renowned” trademarks, giving owners the right to ban others from registering the trademarks or using similar ones – even if such trademarks are NOT registered.

Of course the devil will be in the details but this will be considered a milestone event in Chinese trademark law. The Chinese courts have recently acknowledged the problem of trademark squatters and the Beijing No. 1 Intermediate People’s Court held a press conference on December 3 to study the “cause, characteristic and judicial response to trademark squatting.” The court at the same time delivered judgment in six cases against trademark squatters. Victory is in sight against these squatters and they will lower their bids when requesting buy-backs of trademark rights.

If you are a foreign company being blackmailed by squatters, there is relief in sight because the courts will be more willing to accept evidence of trademark squatting and be more liberal in interpreting the law against squatters. We recommend companies that have trademark squatter problems to initiate a cancellation application against the squatters. For companies doing business in China, we still recommend a comprehensive defensive trademark strategy to take advantage of the new laws.

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