How to Deal with the Bad Faith Filings of Trademark Registration in China

Trademarks can appreciate in value over time. The more your business reputation grows, the more valuable your brand will be. It is of prime importance for the foreign companies doing business in China to register their trademark. Having a registered trademark in China will enable you to have the rights that all the products registered under your ownership. A registered trademark is a legal mark that the item belongs to you and you have the authority to sell, modify or use the commodity in whichever way you want.

Foreign applicants without residency or place of business in China are required to submit trademark applications through a local Chinese trademark agent who will deal directly with the CTMO. The China Trademark Office or CTMO has issued requirements that must be met in order to approve your trademark application in China. Trademarks are also useful for protecting the interests of consumers. When businesses are responsible for any products or services bearing their trademark, they tend to take more pride in products. To maintain a good reputation, trademarked companies will often work harder to provide quality services and products.

As stipulated by the China Trademark Law, An unregistered well-known trademark can be protected against copy or imitation by a third party on similar goods/services, through oppositions or invalidations. China has had specialist IP tribunals in the Chinese courts to deal with patent (and other IP-related) cases.

 

Article 4 – rejection of bad faith filings at the initial examination stage

 

The new provision added to Article 4 says: “malicious trademark registration without an intention to use should be rejected.” In order to remove the phenomenon at its source, the new amendment empowers the China Trademark Office (TMO) to deny bad-faith filings at the initial examination stage.

 

Sanctions against bad faith filings and trademark litigation instituted in bad faith

A trademark agency that assists with bad faith filings in violation of Article 19 is also subject to administrative penalties including warnings and fines, which can be imposed on both the agency and the responsible officers.

 

Are there any benefits from a pre-filing use of the trademark?

The benefits from a pre-filing use are minimal since rights are obtained via registration. However, the applicant can use this to demonstrate the mark’s distinctiveness and overcome opposition on the ground of non-distinctiveness.

 

According to the new trademark law, the cap amount of punitive damages for willful trademark infringement will be increased from “three times” to “five times” the amount of the actual losses suffered by the right owner. The upper limit of statutory damages will be raised from RMB 3 million to 5 million yuan. A valid trademark can be bought, sold, licensed, and used as a security interest for acquiring a business loan. A registered trademark is essential if a company wants to raise funding, expand, merge, or sell.

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Know the Limitations of Full Service Outsourcing in China

In the global business arena, the outsourcing industry of China is playing a pivotal part. China-based service providers are currently able to offer a totally integrated service. China is quickly building a strong outsourcing industry, and emerging outsourcing players already have strong credentials. Full service outsourcing is a great way for the foreign companies to become leaner and more focused, efficient and effective.

The decision to outsource anything – be it manufacturing or business services – is never an easy one because it entails a sea change in the way a business works. It has implications related to organizational structures, employee strength as well as not-so-obvious ones on inventory and logistics operations. But full service outsourcing is not an entirely risk-free business practice. As the tariff war between the United States and China refuses to die down, full service outsourcing is getting a bit complicated.

Unvailing the risk of full service outsourcing in China

  • Saving cost is the main reason US and European companies opt for the full service outsourcing in China. For them, it is fast, cheap and easy way to start manufacturing. But often they fail to realize that after getting involved in a full service agreement, it becomes costly and complex to switch to a Joint Venture, WFOE or Representative Office.
  • One of the clauses of full service outsourcing is foreign companies need to hand over their IP, the details of their employees, their office and everything they are up to in China. Obviously, it is not going to be an easy process that your China hosting company will smoothly hand over everything to you when you want to sever the relationship with them.
  • In case, after signing out the full service outsourcing agreement you end up not liking their services at all. There are two options you can opt for, either you can terminate the contract or can sue on your agreement. In both scenarios, you end up paying a considerable amount of money along with wasting a huge amount of time.

China is now being perceived globally as an outsourcing destination, but as a business owner, you need to gain maximum knowledge on business conditions. Things could get sour very soon in China.

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