The protection and enforcement of intellectual property rights involves a plethora of c-words:  copying, counterfeit, copyright, cease-and-desist, CIPO (the Canadian IP Office).   But the one I am referring to today is China.

As the world becomes more interconnected and the global economic impact of China has significantly increased, intellectual property rights holders and attorneys have recently become faced with, what some might call, “the China Problem.”  Trademark squatting in China has become as problematic for companies today as domain name squatting was for them in the 1990s at the beginning of the internet age.

Here are some recent “squatting” examples involving well-known international brands:

  • After Tesla launched in the US,  businessman Zhan Baosheng registered TESLA in China, as well as the Tesla logo and a Chinese version of the name, and later sued the company for trademark infringement after Elon Musk’s company began doing business in China.  The dispute has since settled for unspecified terms, other than it seems Zhan agreed to allow the Chinese government to cancel his registrations.

Compounding the issues with squatting and the attention the matters above have gotten from national media, trademark owners often receive solicitation scam e-mails from alleged Chinese domain name registrars suggesting that someone is interested in registering the recipient’s trademark or business name as a domain name in that region in an effort to entice the recipient into signing up for various “services” of protection.

Certainly there’s an element of trademark “squatting” that is a function of China’s so-called “copycat culture,” where imitation is a form of mastery or flattery.  But what isn’t flattering has been the country’s reticence to assist international brands in overcoming these and other hurdles to registration.  The Chinese government has recently made strides by requiring applications to be filed in “good faith.”  Effective May 1, 2014, the amended law prohibits trademark filings where the agent knows or should know that the client is squatting, or is knowingly made to pre-emptively register a mark already used by another person that enjoys a certain reputation in China.  Theoretically, it seems that the onus is on the agent regarding knowledge of squatting, not on whether the client had knowledge that it was squatting on another’s rights, unless the applicant has some business relationship with the trademark owner.

While many companies often make economic considerations to put off filing in foreign countries until they might manufacture or sell patented or trademarked products, China presents some concerns with holding off.  China has a “first to file” trademark system, and with U.S. trademark data publicly available, it is easy for a squatter to apply for protection for new marks of U.S. companies in China – seemingly even under the new “bad faith” rules, but we’ll see how those are applied.  This is also how those pesky solicitation emails and notices begin.

Although I’m focused on China here, it’s likewise important for companies to be first to file for their trademarks in other foreign jurisdictions, especially when working with a distributor in a foreign country like Russia, Iran, India, or some Latin and South American countries.  These distributors often file for trademark protection on their own, without notice to the trademark owner.  In these situations, it’s critical for the trademark owner to file in these countries first or to ensure in their distribution agreements that the distributor agrees to assign any trademark filing to the company.  If they don’t and they later decide to file for trademark registration, their application may be refused once they later find out that the cited registration is owned by a distributor of the company’s products.  This adds to the cost of obtaining a registration, which could have been avoided at the outset.  Foreign filings today are simply the cost of doing business in a global economy.