15 May 2018

Shifting from quantity to quality in China's trademark protection

Last year saw a new record-breaking achievement by Chinese trademarks, with over 5.7 million applications filed, which amounts to over 80 percent of the total increase of worldwide trademark applications in 2017.

This amazing statistic however, does not necessarily show the power of Chinese brands compared to the rest of the world. In the latest “World’s 500 Most Influential Brands” report issued by the World Brand Lab last year, there were only 37 Chinese brands selected out of 500, and none of them was ranked in the top 30.

There are also other aspects indicating that China still has a lot to do to strengthen the “quality” of its trademark protection, instead of “quantity.” For example, out of millions of trademarks filed each year, many are not actually put into use. According to official numbers from the China Trademark Office, in recent years, there has been a surprisingly high success rate for launching non-use cancellation action against trademarks that had been registered for three years or more. 

Several reasons could account for the “idle assets” or “waste of public resources.” For example, many applicants file trademarks only with defensive purposes, or with the purpose of making money from selling them. More controversially, there are still many trademark “hijackers” who are taking advantage of the limitations in China's current intellectual property framework.

By focusing on quality in trademark registration and protection, China needs to breed more brands of better value and on the other hand, continue to improve a more brand-owner friendly legal environment. 

In order to achieve this goal, one important measure should be to cultivate and strengthen leading Chinese brands that possess real international influence. We need more high-profile brands like Huawei, Haier, Alibaba and Lenovo that are welcomed by consumers, not only from developing countries, but also developed ones.

Another measure is to adjust policies and amend the law so as to avoid the focus on the number of trademarks a company has.

China is now launching another revision to the Trademark Law, and clauses are being suggested which could legally require proof of use for obtaining a trademark and/or mandates on maintaining the registration of the trademark every number of years.

Moreover, China has adopted or is considering the adoption of a series of measures to crack down on bad faith trademark filings and use, including establishing a blacklist of bad faith applicants, expediting the examination of cases involving bad faith, conducting special campaigns against specific types of bad faith filings, and strictly supervising trademark agencies that may be involved in filing or helping filing bad faith marks.

All these measures will help control unnecessary trademark filings without the genuine intention to use, and promote China’s image as a responsible country fighting seriously against bad faith trademark activities.

Besides the government’s efforts, the role of Chinese brand owners in building a nation of trademark quality is critically important as well. Although the sharp increase of total Chinese trademark filings in recent years obviously have shown the increasing awareness of trademark protection by Chinese companies, there are still various deficiencies in their efforts especially compared with multi-national corporations.

For example, many Chinese companies lack systematic brand protection strategy and internal management systems and regulations, and many would see trademark registration as a one-time job and an ultimate goal in itself, and will put registration certificates to the company stock without a systematic plan in place for maintenance and enforcement.

This is especially common for Chinese brands going global. According to a research, only less than five percent of Chinese domestic filings (noting now there are over five million domestic filings per year) would also turn to attempt to file for trademarks in other countries.

Even among those seeking foreign registrations, we have seen very few actual enforcement cases where Chinese companies are actively safeguarding their rights in local markets. Many infringing activities in other countries elude Chinese companies’ radar because of the negligence by the Chinese brand owners, their unsophisticated management, reluctance of troubling themselves in a local dispute, or simply due to a lack of budget.

Many are simply not familiar with the local practice and regulations and thus put their brand assets and activities there at stake. For instance, some companies do not take serious the legal requirement of real intent to use in the US before obtaining a registration certificate, and thus may face big problems for making false statements. And even after being put into actual use, they do not preserve the necessary use evidence for the purpose of maintenance and enforcement in the country.

As China tries to transform itself from “Made in China” to “Created in China,” from “China Speed” to “China Quality,” and from “China Products” to “China Brands,” this should be closely echoed in the trademark industry. 

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