Two Steps Forward, One Step Back: A Need for China to Further Amend its 2013 Trademark Law in Order to Prevent Trademark Squatting

Dec 2017

This Note examines the effect that China’s 2013 Trademark Law amendments have had on curtailing the trademark squatting problem that plagues foreign corporations and individuals attempting to register a trademark in China. Trademarks play a crucial role in establishing brand recognition in an individual or a company’s product. Given China’s large and growing population of potential consumers, obtaining a Chinese trademark is especially valuable. Chinese trademark squatters, however, make this difficult for foreign corporations and individuals by filing for registration in China once the mark gains popularity, not intending to use the trademark in commerce, but to hold it as ransom until a fee is paid. This Note will provide a historical overview of China’s Trademark Law, discussing past amendments leading up to China’s 2013 amendments, which took effect on May 1, 2014. Then, this Note will acknowledge the positive effects of China’s 2013 amendments, specifically Article 7’s good faith principle, while arguing that more reform is needed to clarify what constitutes good faith and equalize the appeals process under Article 35, which grants legal rights in a trademark before the appeals process is complete. Finally, this Note will propose adopting the definition and examples of bad faith from Australia’s Trade Mark Amendment Act, while detailing how China can create transparency and grant more rights to foreign corporations and individuals during the appeals process.

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Two Steps Forward, One Step Back: A Need for China to Further Amend its 2013 Trademark Law in Order to Prevent Trademark Squatting

Brooklyn Journal of International Law Volume 42 | Issue 2 Article 10 5-1-2017 Two Steps Forward, One Step Back: A Need for China to Further Amend its 2013 Trademark Law in Order to Prevent Trademark Squatting Jessica Martin Follow this and additional works at: https://brooklynworks.brooklaw.edu/bjil Part of the Comparative and Foreign Law Commons, Intellectual Property Law Commons, and the International Law Commons Recommended Citation Jessica Martin, Two Steps Forward, One Step Back: A Need for China to Further Amend its 2013 Trademark Law in Order to Prevent Trademark Squatting, 42 Brook. J. Int'l L. 993 (2018). Available at: https://brooklynworks.brooklaw.edu/bjil/vol42/iss2/10 This Note is brought to you for free and open access by the Law Journals at BrooklynWorks. It has been accepted for inclusion in Brooklyn Journal of International Law by an authorized editor of BrooklynWorks. TWO STEPS FORWARD, ONE STEP BACK: A NEED FOR CHINA TO FURTHER AMEND ITS 2013 TRADEMARK LAW IN ORDER TO PREVENT TRADEMARK SQUATTING INTRODUCTION T he People’s ;epubliQ oL !hina _9!hina8^ has *uiQHly emerged as a leading force in the global economy.1 In 2010, !hina surpassed Tapan to have the world’s seQond-largest economy behind only the United States.2 By 2031, economists predict that !hina will surpass the 7nited :tates to beQo/e the world’s largest economy.3 With the LinanQial do/inanQe oL !hina’s upper class, the continuing development of its middle class,4 and a 2016 population of approximately 1.3 billion people,5 it is no surprise that 9dsciaty-seven percent of the U.S. companies surveyed by the American Chamber of Commerce in Shanghai said they intend to inQrease the level oL invest/ent in !hinaZ Z Z Z86 In order to Lully Qapitali`e on !hina’s /arHetplaQe, /any Qorporations and individuals have realized the importance of filing for trade/arH registration in !hina, whiQh identiLies a produQt’s source and establishes recognition between a product and a particular 1. See Paul Kossof, The New Chinese Trademark Law, 104 TRADEMARK REP. 867, 867 (2014). 2. See Andrew Monahan, China Overtakes Japan as World’s No. 2 Economy, WALL ST. J. (Feb. 14, 2011, 6:21 PM), http://www.wsj.com/articles/SB10001424052748703361904576142832741439402. 3. See Andrew Soergel, America’s Days Are Numbered as the World’s Top Economy, U.S. NEWS (Dec. 28, 2015, 2:16 PM), http://www.usnews.com/news/articles/2015-12-28/americas-days-are-numbered-as-theworlds-top-economy. In 2031, China is projected to have a gross domestic product (GDP) of $35.26 trillion USD, while the United States is expected to have a GDP of $33.66 trillion USD. Id. 4. See Kossof, supra note 1. 5. U.S. and World Population Clock, U.S. CENSUS BUREAU, http://www.census.gov/popclock/ (last visited May 25, 2017). 6. Alexandra Ho, Record Number of U.S. Companies Call China Top Bet, Survey Shows, BLOOMBERG NEWS (Mar. 4, 2015), http://www.bloomberg.com/news/articles/2015-03-04/record-number-of-u-s-companies-callchina-top-bet-survey-shows. The survey, which included responses from 377 companies, shows a slight increase from the 2014 survey, where 65 percent of U.S. companies indicated a strong desire to increase investment efforts in China. See id. 994 BROOK. J. INT’L L. [Vol. 42:2 corporation or individual.7 Trademarks play a vital role for foreign corporations and individuals trying to establish themselves in today’s global eQono/y,8 as trademarks allow a company or individual to distinguish their product and reputation from others in a crowded marketplace.9 The importance of trademarks has especially increased due to the prominence of advertising to consumers.10 For eleven straight years, China has received the most trademark applications in the world.11 In 2013 alone, China had 13.24 million trademark applications.12 Given these statistiQs, it is apparent that !hina has beQo/e a 9trade/arH powerhouseZ813 Many corporations and individuals, however, have been precluded from receiving sufficient trademark protection in the Chinese marketplace by notorious trademark squatters.14 A trade/arH s*uatter is 9a person or Qo/pany that aQ*uires trade[ marks, not in the hopes of actually using them to help market a product or service, but rather, in the hopes of making trademark infringement claims against other persons or companies that do 7. See Kossof, supra note 1. 8. See Paolo Beconcini, China: The Role of Trademark Opposition in the Protection of Brands in China in Light of the New Trademark Law, MONDAQ (Oct. 30, 2014), http://www.mondaq.com/china/x/350820/Trademark/The+Role+Of+Trademark+Opposition+In+The+Protection+Of+Brands+In. 9. See Abigail Rubinstein, 7 Reasons Why Trademarks Are Important to Your Business, ENTREPRENEUR (July 24, 2014), https://www.entrepreneur.com/article/235887. 10. See Timothy W. Blakely, Beyond the International Harmonization of Trademark Law: The Community Trade Mark as a Model of Unitary Transnational Trademark Protection, 149 U. PA. L. REV. 309, 309 (2000). 11. See Hank Leung & Ai-Leen Lim, ‘Professional’ TM Squatters in China, LEXOLOGY (May 5, 2014), http://www.lexology.com/library/detail.aspx?g=b89acc4f-b101-4cec-898b-adbf5fdcc017. 12. See Zhang Mao, China’s New Trademark Law, WORLD INTELL. PROP. ORG. MAG., no. 5, Oct. 2014, at 34. The number of applications received in 2013 is a dramatic increase from 2005 and 2006, when the Chinese Trademark Office received 664,017 and 766,000 trademark applications respectively. Robert H. Hu, International Legal Protection of Trademarks in China, 13 MARQ. INTELL. PROP. L. REV. 69, 71 (2009). 13. See Mao, supra note 12. 14. See Sophie Brown, Brand Wars: Battling China’s Trademark ‘Squatters,’ CNN (July 17, 2014, 10:30 PM), http://www.cnn.com/2014/07/17/world/asia/china-trademark-squatters-penfolds/. 2017] Chinese Trademark Squatters 995 use the/ to /arHet their produQts or serviQesZ815 Trademark squatting is a global issue that has become an increasing concern over the years.16 Since 2007, the Office of the U.S. Trade Representative17 has expressed concern over the insufficient impaQt that !hina’s Trade/arH Law has on deterring trade/arH squatters.18 As a result of trademark squatters, foreign corporations and individuals have lost billions of dollars in both sales and jobs,19 including in 2009 alone, when U.S. corporations lost an estimated $48 billion USD.20 These lost sales demonstrate how trademark squatters interrupt the flow of global commerce as a whole, as they prevent individuals and corporations from capitalizing in foreign marketplaces.21 Examples of trademark squatting victims include Hermès, who filed a trademark in China without registering its Chinese translation, Ai Ma Shi.22 Hermès, however, continuously used Ai Ma Shi as its Chinese name with the QharaQters 9爱马8 in 15. Donald J. Smythe, Clearing the Clouds on the CISG’S Warranty of Title, 36 NW. J. INT’L L. & BUS. 509, 515 (2016). 16. See id. 17. The Office of the U.S. Trade Representative (USTR) advi (...truncated)


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Jessica Martin. Two Steps Forward, One Step Back: A Need for China to Further Amend its 2013 Trademark Law in Order to Prevent Trademark Squatting, 2017, Volume 42, Issue 2,