China, Europe and the Netherlands: Opportunity Is Knocking at Our Doors

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  Apr. 2015
applications. In China, a company seeking to register 
its trademark must file a separate application for each 
class in which it wishes to protect its mark. China has 
forty-five different trademark classes, each of which 
has multiple subcategories, which means that in order 
for a company to be fully protected, it must file dozens 
of registrations. A failure to comprehensively do so can 
leave a company open to exploitation by an opportun-
istic squatter. 
As a result of this system, some of the world’s most 
sophisticated brands and multinational corporations—
including Tesla, Pfizer, Apple, and Hermes—have been 
victims of Chinese trademark squatters. All of these 
companies have learned the same expensive lesson, 
as a sophisticated trademark squatter can cripple a 
business in China. When companies fall victim to 
trademark squatting, they may be prevented not only 
from selling their goods within China, but may also 
from manufacturing products in China for export else-
where—unless the company pays the trademark squat-
ter to buy its mark back. Moreover, a company that 
does not buy back its mark runs the risk of the squatter 
selling the mark to a counterfeiter, which would dam-
age the value of the original mark both in China and 
abroad.
For these reasons, trademark squatting and the as-
sociated weaknesses in China’s trademark system have 
been a longstanding point of concern in the U.S.-Chi-
na bilateral economic relationship. Since 2007, in its 
report to Congress on China’s compliance with WTO 
obligations, the Office of the U.S. Trade Representative 
has expressed concern about weaknesses in China’s 
legal framework that fail to deter trademark squatters. 
Most recently, as an outcome of the 25th meeting 
of the U.S.-China Joint Commission on Commerce 
and Trade (“JCCT”) in December 2014, the U.S. and 
China committed to prioritize the issue of bad faith 
trademark filings, and strengthen communication and 
exchange on the issue through existing bilateral and 
multilateral channels. While the JCCT commitment 
is a positive step, the more significant and potentially 
more substantive development for companies dealing 
with trademark squatters is the implementation of the 
Amended Trademark Law.
The Amended Trademark Law targets bad 
faith applications
One of the most significant changes within the 
Amended Trademark Law is the addition of a good 
faith filing requirement. Article 7 of the Law introduces 
the principle of good faith in trademark use and regis-
tration, the inclusion of which has been described by 
some legal commentators as a catch-all provision pro-
viding parties with a mechanism for guarding against 
bad faith registrations that have yet to be stopped 
by other measures under existing law. As we discuss 
below, however, whether Article 7 is interpreted and 
implemented by courts in such a manner remains to be 
seen.  
The Amended Trademark Law also addresses the 
disturbing trend of Chinese trademark agents abusing 
their positions and filing bad faith marks. Foreign com-
panies applying for trademarks in China are required 
under Chinese law to register their marks through a 
state-designated trademark agent. Increasingly, some 
of these trademark agents have tried to profit from 
their knowledge of the system by filing bad faith appli-
cations. Article 19 of the Law specifically targets this 
trend, stating that:  
Investment 
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A trademark agency shall abide by principles of good 
faith, abide by relevant laws and administrative regu-
lations, and handle trademark registration and other 
trademark matters according to the instructions of its 
principals; a trademark agency shall also be obliged to 
keep secret any confidential information and trade or 
business secrets obtained through the performance of 
its duties.
In addition to the above two articles, the Amended 
Trademark Law contains other provisions that would 
benefit legitimate trademark holders in protect-
ing them against squatters. For instance, under the 
Amended Law, applicants for trademarks now only 
need to submit one application for multiple classes, 
thus simplifying the registration process and blocking 
the ability of squatters to register marks in classes in 
which the original owner had failed to file separate 
applications. Moreover, in calculating damages, the 
Amended Law lowers the burden of proof for the trade-
mark owner so as to allow courts to order an infringer 
to provide its accounting books and relevant materials 
necessary to calculate damages. Statutory damages 
have also been increased from a cap of RMB 500,000 
to RMB 3,000,000, and punitive damages are now 
permitted for up to three times the normal damages.
The law will only be as effective as relevant 
administrative and judicial bodies
Without clarity and consistency in enforcement, the 
Amended Trademark Law will be merely a paper tiger. 
It will stand as a high-minded aspiration with no im-
pact on mitigating abuses by trademark squatters. Spe-
cifically, the China Trademark Office (“CTMO”), which 
has initial jurisdiction over trademark disputes, the 
Trademark and Adjudication Board (“TRAB”), which 
handles appeals of CTMO decisions in trademark ap-
plication and opposition matters, and relevant courts 
must all uniformly realize their commitment to ending 
bad faith trademark squatting.
Influential members of the Chinese judiciary have 
publicly expressed their concern with the prevalence 
of trademark squatting. In December 2012, judges in 
the Beijing Number 1 Intermediate People’s Court held 
a press conference highlighting the findings and rec-
ommendations of a study into the cause, characteristic 
and judicial response to trademark squatting. Among 
their recommendations, the court found that it should 
exercise proper judicial discretion and admit evidence 
and accept proof  with a view to prohibiting squatting. 
To demonstrate this point, the court subsequently 
delivered judgments in six cases against trademark 
squatters.
However, inconsistency among the administrative 
and judicial bodies with jurisdiction over trademark 
disputes has stifled such efforts thus far. Specifically, 
in recent months, legitimate rights holders have found 
themselves victorious in their claims against squatters 
in court, only to find that lower bodies such as the 
TRAB ignore these jurisprudential decisions in their 
determinations on other classes of the same marks 
filed by the same squatters. This failure on the part of 
the TRAB to apply the good faith standard established 
in Article 7 of the Amended Law to similarly registered 
marks being challenged in ongoing opposition pro-
ceedings is disconcerting. Only through consistency, 
stability and predictability in the decision-making and 
enforcement of trademarks by all of the Chinese adju-
dicatory bodies will the Amended Law prove to have 
real teeth.
William M. Leahy
Associate, Akin Gump Strauss Hauer & 
Feld LLP
Stephen Kho
Partner, Akin Gump Strauss Hauer & 
Feld LLP; Former associate general 
counsel and acting chief counsel on 
China enforcement, the Office of the 
U.S. Trade Representative (USTR)
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