Trademark Squatting and the Limits of the Famous Marks Doctrine in China

Abstract

Many multinational companies (MNCs) are finding that their trademarks have already been registered by trademark squatters and opportunists before they even enter the China market. What is particularly troublesome for MNCs is when a Chinese entity registers a Chinese transliteration or translation of the MNC’s English or foreign language name trademark. Under China’s first-to-file system for trademarks, the Chinese entity, which filed the first application for the Chinese language trademark will be awarded the trademark registration. In China, most consumers do not speak or read English and so will know the product by the Chinese language trademark, which may not be owned by the MNC. Many believe that China is now one of the world’s largest, if not the largest, nation of squatters.

When MNCs attempt to cancel the registration of the Chinese transliteration or translation, they often resort to use of the famous marks doctrine, which allows a trademark owner to cancel an unauthorized registration if the famous mark achieved fame in the country before the squatter filed for the registration of the same mark. The famous marks doctrine, however, is subject to serious limitations in China. To use the doctrine, the MNC will need to prove that the English language trademark achieved fame in China before it was transliterated into Chinese and before the Chinese transliteration was registered. Many MNCs will find this to be a difficult task due to issues of language and culture as most Chinese consumers do not speak or read English in daily life. This dominant trait of Chinese culture means that the English language trademark usually never achieves fame before the unauthorized registration of the Chinese transliteration. Many MNCs do not seem to understand or appreciate this dominant cultural characteristic and fail to take the preventative measures that could avoid the legal headaches that arise due to trademark squatting.

JEL Classification: K2, K29, K33