Brand squatters in China: a danger for all
When it comes to Intellectual property protection in Chinaone of the biggest mistakes a brand can make is not registering its trademarks in China. An unregistered trademark is a tempting target for trademark squatters (and other bad faith actors, such as unscrupulous competitors), who register trademarks in the hope of being paid by legitimate owners.
Most clients understand this at a conceptual level, but some wonder if there is really a risk of a trademark squatter in China spotting their unregistered trademark. “It’s not like we’re Starbucks” and “we’re not interested in selling to Chinese consumers” are two common objections.
Yet the reality is that brand squatters are constantly looking for victims. Plus, they’ll take a chance on just about any brand, regardless of size, as long as there’s a chance their bet will pay off. And given that it is not very expensive to register a trademark in China, the chances of success do not have to be high for the bet to make economic sense.
When hunting prey, brand squatters will turn to e-commerce platforms to see who is doing well. Savvy brand squatters will quickly get a good idea of whether products are made in China (which of course is often the case).
For sellers sourcing from China, having their brand in the wrong hands can spell disaster. Their products will technically be knockoffs, meaning the brand squatter could wreak a lot of havoc if their demands (usually money in exchange for brand ownership) aren’t met.
Trademark squatters will also review trademark filings from other countries. If you think about it, a trademark registration in the United States, for example, is a clear indication that something is wrong with the trademark in question. In fact, this is especially true in the United States, where trademarks cannot be registered unless they are actually used in commerce. If the goods described in the application are of the type normally imported from China, this gives a big head start to brand squatters.
An indication of the kind of attention that USPTO Filings are the regular emails I receive from service providers in China asking if my client also wants to register their trademark in China. The Attorney of Record’s contact information is visible in the USPTO’s database entries, so it’s easy for these vendors to reach out once they encounter an expression of interest. Here is a sample I received today (with edited key information):
Dear Frederic Rocafort
I am Coco from Weizhong Trademark, specializing in providing trademark legal services in China for global clients. Our customers can submit various service requirements (eg trademark application) online and pay the corresponding fees online.
Your client “ABC, Inc.” has applied for the “BEST TOOLS” trademark in the United States. Meanwhile, it is suggested to apply for “BEST TOOLS” brand in China for the following reasons.
- 1. The trademark registration system is applied in China, that the first applicant can obtain the trademark rights. If you do not request it in a timely manner, it will be applied and recorded by others in advance.
- 2. Protect trademark rights against infringement and promote brand value;
- 3. Effectively suppress counterfeit and shoddy products;
- 4. Effectively control the distribution channels and market prices of the goods;
Provided that your customer’s trademark is not applied in China or registered maliciously by others, your customer’s goods must not be exported from China or imported into China. Others may imitate and sell your client’s products, or even conduct business on behalf of the brand owner in China.
Trademark application via Weizhong Trademark website costs less (only $399 needed), works faster (less than 10 minutes), and makes a big difference. As long as no trademark is registered, it will cost very expensive (over $10,000) and also take more time (at least 2 years) to fix the above issues. The effects may not be satisfactory.
In order to eliminate further risks and other unknown inconveniences, it is absolutely necessary to take action immediately. Click here! Only 10 minutes are needed to complete the trademark application to better protect your client’s trademark!
At first glance, this may seem innocuous, or at worst an unwelcome solicitation. But are we to imagine that none of these service providers work with (or moonlight) with brand squatters? If the American brand isn’t interested in a Chinese brand, the supplier might as well pass that information on to a squatter, and we’ve seen plenty of cases where they’ve done this. To see Contract Drafting Scams in China: From Worst to Worst where we explain how Chinese lawyers – unlike American and European lawyers – are not prohibited from representing a Chinese company in dispute with their alleged foreign client and how we often see secret double representations harm foreign companies.
Alternatively, they could work in tandem with a squatter and another provider. First, an application for trademark registration is filed. A few weeks later, the second supplier contacts the American brand, informing it that “someone” in China has filed for registration of its brand and offers to file an opposition on its behalf. We also receive these emails.
Notice how there are veiled threats in Coco’s email: “Provided no trademarks are registered, it will cost so much (over $10,000) and also take longer (at least 2 years) to fix the above issues. The effects may not be satisfactory.“Sounds ominous, doesn’t it?
And by the way, where does this figure of $10,000 come from? How is she so confident that “others” will register the mark? Is it because she will record it if our client does not pay?
Plus, think of all the valuable information these service providers could glean from reckless brands. If the American mark indicates that it are interested in a Chinese brand, i.e. gold from the point of view of a brand squatter. Even if the brand does not want to work with that particular service provider, revealing that they are working with another provider or that they plan to apply in the future, but not yet, could help a brand squatter decide that the brand is a good target. You should be very careful when disclosing your trademark/trademark information and disclosing it to an unknown foreign lawyer (true or false) can and often does prove dangerous. To see Chinese lawyers: fakes and near-fakes.
In conclusion, if you or your lawyer receive such a solicitation, do not respond. There may be some damn good reasons to register your brand in China – but not to use these outfits.