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Importance of Overseas Trademark Registration

One of the most significant mistakes a brand can make when it comes to IP protection is neglecting to consider international trademark registrations. A U.S. trademark registration does not automatically cover business activities in foreign countries. Trademarks are territorial, so protection must usually be sought by filing and registering them in each country. Recently, Chinese law firms have been sending unsolicited emails to U.S. trademark holders, warning them of a potentially infringing trademark application in China that is going through the opposition period.

However, these trademark opposition emails are not always scams. The sender is often a genuine Chinese IP firm, and an identical trademark application has been filed, with the deadline to oppose approaching. However, the tactics used to obtain these trademarks are deceptive. Tension has been rising between the U.S. and China over “trademark squatting” (or “trademark hijacking”) – when a Chinese registration on a well-established mark already registered in the U.S. or elsewhere is obtained with the aim of exploiting it or holding it for ransom from the original owners.


Trademark Squatting 101

Squatters thrive in countries like China where “first-to-file” trademark systems have been implemented to grant trademark rights to those who first apply for brand protection with the relevant trademark office, even if another party can show prior use of the trademark. This means that jurisdictions like China do not recognize unregistered trademark rights. To be the rightful owner of your U.S. trademark in China, you must be the first applicant to register that trademark with the China National Intellectual Property Administration (CNIPA). Unlike in the United States and Canada, the CNIPA does not require trademark applicants to show “use” or “intent-to-use” of the mark.

Apple may have been one of the first to present a rare glimpse into the pitfalls the first-to-file system presents to U.S. companies. When the iPhone was first introduced in China in 2004, a local company beat Apple in a race to register the IPHONE mark, forcing the tech giant to fork up 3.65 million dollars to get the trademark back (the first of many brand protection mishaps for Apple on a global scale). Tesla fell into the same trap a decade later when a Chinese businessman registered a transliteration of Tesla and proceeded with demanding that Tesla shut down all activities in China or pay $3.9 million in damages. New Balance recently suffered similar loss, when a petition to cancel a third party’s transliteration of the brand was denied. Setting aside Apple, New Balance, and Tesla, squatters target a variety of mid-sized e-commerce brands that are becoming popular in another nation and may eventually want to pick up their business activities on the Chinese market, at which point they will be left with little choice but to cough up huge sums to purchase or license their original trademark (i.e., ransom), rebrand their product, or fight for the right to use the brand through lengthy legal battles.

In the defense of trademark squatters that made millions off of American companies that failed to implement appropriate brand strategies before jumping the gun and moving their business activities into a foreign territory…we can say squatter, but a lot of people would just say opportunistic visionary. An investor saw the opportunity before the next guy and moved on it first. Is that not how business works in the real world?


What can U.S. Companies do about Foreign Trademark Squatters?

The most important thing a U.S. brand can do to protect itself is, file first and file in any category of product that it believes the company will expand into – if you are planning to have your product made in China or to sell your product or services in China or even elsewhere outside your home country, filing a defensive trademark has been a common strategy used by trademark owners to prevent trademark squatting. Don’t get me wrong, if your company provides local fresh juices in your city, what happens in China likely will have no impact on you so there is no point in you spending time and money trying to gain additional rights there. But, if that is not the case, trademark rights and protection under the international registration of the Madrid system can prevent trademark squatters from registering your brand name as their own in their countries. U.S. trademark owners (or applicants) can file a single application, in a single language, using their favorite U.S. trademark attorney, for protection in all countries they designate that are signatories to the Madrid Protocol through the United States Patent and Trademark Office (USPTO). If the requirements are met and the fees are paid, the International Bureau will register the mark and publish it in the World Intellectual Property Organization (WIPO) global brand database…pretty simple, right?


Latest Trademark Law Amendments in China and the Perils of a Post-Ukraine-War Russia

Potential amendments to China’s trademark law are also promising. On January 13, 2023, the CNIPA published a Draft Amendment of the Trademark Law for Public Comments. Significant amendments in the Draft include requirements that resemble those in the U.S. for proof of trademark use or commitment to use by the applicant at the trademark application stage and establish a system of compulsory proof of use of a trademark every five years after registration. Unfortunately, similar amendment efforts have been far and wide in the last decade, but squatters remain unphased.

To end things on a light note, China may be the least of your international IP protection concerns amidst the tension between Russia and Ukraine. In fact, Russia recently passed a decree formally allowing Russians to exploit foreign trademarks without legal consequence. This has resulted in the squatting (or straight up infringement) of several well-known trademarks, such as McDonalds and Ikea, owned by U.S. companies that ceased business activities in Russia. More concerning is the possibility that these Russian squatters may outrun Chinese squatters in the race to become mass exporters of infringing goods.

Given the vulnerabilities U.S. companies are exposed to in the international arena, we work with our clients to pursue intellectual property protection in countries where their marks are likely to be used without their permission. Read more Rockridge® brand protection advice here.


About Violaine Panasci

Violaine Panasci, LL.M., studied law at the University of Ottawa before completing an LL.M. in New York with an emphasis in food systems and sustainable supply chains. Her practice areas include agricultural technology, cannabis, copyrights, data privacy, food & beverage, regulation, sustainable supply chains, and trademarks. V currently serves as a board member and Vice-Chair of the Governance Committee for the National Social Enterprise Alliance, a board member for the Nashville Social Enterprise Alliance, and a board member for the French American Chamber of Commerce of Tennessee. Read more about Violaine, connect with her on LinkedIn, and Calendly her directly for a meeting.

Violaine Panasci

Author Violaine Panasci

Violaine is a branding, data privacy, and regulatory attorney at Rockridge Venture Law®. Violaine uniquely combines her work in sustainable supply chains, intellectual property protection, and technology law to advise clients in areas where business and society move faster than the law. Her practice areas include agricultural technology, cannabis, copyrights, data privacy, food & beverage, regulation, sustainable supply chains, and trademarks.

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