4. Closer Scrutiny on Assignments of Trademarks from Squatters

To further curb trademark squatting, we note that the CNIPA may reject assignment applications if they are suspected to be made for profit. The new Guidelines provide that objections may be raised if registrants own a considerable number of trademarks and have previously assigned their marks to various assignees. Evidence showing the intent to use the assigned trademarks may be required. If such evidence is unavailable or the evidence submitted is invalid, the assignment applications may be rejected. When negotiating buybacks with squatters, we recommend including clauses in assignment agreements to deal with situations of non-approval of assignment applications (e.g., cooperation in responding to objections and voluntary withdrawal/surrender of the trademark(s) if assignment is disapproved) and filing backup trademark applications.

5. Courts Order Squatters to Compensate for Expenses for Tackling Squatting

In China, there is no cost award if rights owners succeed in removing bad faith filings via actions before the CNIPA. However, recent court judgments show that the courts may order squatters to reimburse trademark owners for reasonable legal expenses incurred in tackling bad faith filings based on the Anti-Unfair Competition Law if such bad faith filings constitute obstacles to rights owners’ businesses and undermine their competitive advantages. In the landmark case Brita GmbH v. Shanghai Kangdian Industrial Co., Ltd. (2021), the Shanghai Minhang District People’s Court awarded the plaintiff costs of RMB 2.8 million (approximately US $434,400), in compensation for, among other things, the plaintiff’s legal expenses resulting from the defendant’s bad faith filings, oppositions, and invalidations. While it remains unchanged that trademark squatting alone is not sufficient to establish unfair competition, the courts may find unfair competition if squatters also rely on such bad faith filings to lodge malicious opposition and invalidation actions, complaints, or infringement lawsuits.

6. Strict Regulations on the Registration and Use of Deceptive and Misleading Marks

The PRC Trademark Law prohibits the registration of signs possessing negative meanings, contrary to national and public interests, or misleading consumers as to the characteristics or origins of goods and services. The guidelines provide that the CNIPA will tightly scrutinize trademarks for any potential violations. For signs possessing multiple meanings or capable of being used in different ways, it may be rejected if one of the meanings or modes of use falls into any of the specified circumstances.

ow the sign is actually used will generally not considered. The CNIPA also published the Standards for Determination of General Trademark Violations in December 2021, which reiterates that any person who uses such trademarks may be ordered to rectify their use and may be punishable by fines. It further provides that once the CNIPA’s decision takes effect, the local Administrations for Market Regulation are entitled to take action against any further use of such trademarks. From our recent cases, we observe that the CNIPA will not lightly waive its objections. That being said, the courts are generally more sophisticated and may come to a different conclusion, especially for marks rejected for being misleading. Brand owners may consider lodging appeals to continue the effort in securing registration. If it is desired to use the marks without registration, it is advisable to use them in a descriptive manner to avoid liability.