Trademark squatting has various forms, and one of these is squatting by the trademark owner’s distributor or partner. The best way to avoid this is to register your trademark in China before you enter the Chinese market. Another precautionary measure is to clearly stipulate in the contract, before entering into any cooperation, that distributors and partners must fully respect your rights and are prohibited from applying for registration of your trademarks. If your trademark is registered by your distributor or partner due to factors such as a lack of understanding of relevant legal provisions, eagerness to produce your products or operate business in China, or failure to make appropriate arrangements for the trademark, there is still a possibility of getting your trademark back.
There are two ways to accomplish this: one is through amicable negotiation between the parties to reach a trademark transfer agreement, thereby transferring the trademark from the distributor or partner to you. The other is through legal means by filing a trademark opposition if the trademark is published for opposition, or filing for trademark invalidation if the trademark has already been registered by the distributor or partner. Simultaneously, it would be better to file your own trademark application for registration. This article provides a guideline on how to apply the relevant articles of the China Trademark Law to successfully oppose or invalidate the trademark filed by your distributor or partner, so that you can establish your own trademark rights in China.
Legal basis and applicable requirements
Article 15, paragraph 1, of the China Trademark Law provides that, without authorisation, where an agent or representative registers the trademark of the principal or the represented party in their own name, and the principal or the represented party raises an objection, the registration shall not be granted and the use shall be prohibited. Therefore, if your trademark is filed or registered by the distributor or partner, Article 15, paragraph 1, of the China Trademark Law is the law you can rely on to oppose or invalidate the contested trademark.
To establish that an agent or representative has registered the trademark of the principal or the represented party without authorisation, the following requirements must be met:
the applicant for registration of the contested trademark is your agent or representative;
the designated goods or services of the contested trademark are the same or similar to those of your trademark;
the contested trademark is identical or similar to your trademark; and
the agent or representative cannot prove that their application for registration has been authorised by you.
Among the above requirements, it is not difficult to fulfil requirements (2), (3) and (4) because the arguments are relatively straightforward. However, for requirement (1), evidence is required to prove facts, such as the relationship between the parties, acts of unauthorised registration and the trademarks of the principal or the represented party. Therefore, it is crucial to have a comprehensive understanding of these terms.
What are agents and representatives?
An agent includes the agent provided for in the Civil Code and a dealer who is familiar with your trademark through commercial dealings.
In practice, there are different types of sales agents, including:
sales companies within a group, specialising in selling the group’s products externally;
agents who enter into agency contracts with the commissioning company to sell related products in a designated area. The prices are determined uniformly by the commissioning company and commission is extracted based on sales performance, such as exclusive agents and general agents; and
distributors who purchase products from the manufacturing company and sell them externally at self-determined prices without extracting a commission.
All of these agents fall under the definition of an agent in Article 15, paragraph 1, of the China Trademark Law.
A representative refers to an individual who holds a subordinate position to you and may have knowledge of your trademark due to the performance of his or her duties. This includes individuals such as the legal representative, director, supervisor, manager or executive of partnership affairs.
What is an act of unauthorised registration of the agent or representative?
An act of unauthorised registration of the agent or representative includes the following situations:
during the negotiation stage for the establishment of the agency or representative relationship, an agent or representative registers your trademark, which may damage your interests;
after the termination of the agency or representative relationship, an agent or representative applies for registration of your trademark, potentially damaging your interests; and
although an application is not made in the name of an agent or representative for your trademark, there is evidence proving collusion between the applicant for registration and the agent or the representative. As for the act of colluding in squatting, it may be presumed if the applicant is, among other things, a relative or an investor of the agent or representative, depending on the circumstances.
What evidence can prove the existence of the agency relationship or the representative relationship?
Evidence that can prove the existence of an agency relationship includes an agency or distribution contract, and transaction vouchers and procurement documents, etc, that can prove the agency or distribution relationship.
Evidence that can prove the existence of a representative relationship includes: (1) company registration data; (2) the payroll, labour contracts, employment documents, social insurance, medical insurance and other materials of the enterprise; and (3) other evidentiary materials that can prove that a party has a specific identity subordinate to the representative and may know the trademark of the represented party due to the performance of duties.
The chance of success in the opposition or invalidation against the trademark filed or registered by your agency or representative greatly depends on the sufficiency of evidence proving the existence of an agency relationship or representative relationship. Therefore, it is crucial to properly keep the above-mentioned list of evidence. In our practice, we have seen many cases where the real trademark owner failed to provide the necessary evidence to prove the existence of this relationship, resulting in the loss of opposition and invalidation cases and ultimately leading to the loss of their trademarks.
What are the trademarks of the principal or the represented party?
Trademarks of the principal include the following:
the principal’s trademark specified in the contract or the authorisation document;
if there is no agreement between the parties and the agency relationship has been established, the trademark previously used by the principal in respect of the goods or services sold by the principal shall be deemed the principal’s trademark; and
if there is no agreement between the parties, the agent’s use of the trademark over the goods or services they distribute is sufficient to cause the relevant public to believe that the trademark is a mark indicating the difference between the goods or services of the principal and those of others, due to the agent’s own advertising and publicity, and shall be deemed to be the principal’s trademark in respect of the principal’s goods or services.
The trademarks of the represented party include the trademarks previously used by the represented party and other trademarks belonging to the represented party according to law.
As you can see, to apply Article 15, paragraph 1, of the China Trademark Law, it is not necessary to prove that you have used your trademark in mainland China before your agent or representative files your trademark, but you need to provide solid evidence to prove that the contested trademark is indeed your trademark. This evidence can include the agency and distribution agreement that clearly stipulates that it is your trademark, the registration certificates and the use evidence of the contested trademark in other countries or regions, etc.
How to judge that the agent or representative has obtained the authorisation for trademark registration?
The contents of the authorisation given by the principal or the represented party shall include the goods or services and trademarks that the agent or the representative can register, and the expression of the intention of authorisation shall be clear and definite.
The agent or representative must provide the following evidence to prove the existence of the authorisation:
written authorisation documents given by the principal or the representative party to the agent or the representative; and
other evidence through which it can be determined that the principal or the represented party has made a clear and explicit expression of the intention to authorise the agent or the representative.
Although an agent or representative has not obtained the express authorisation of the principal or the represented party at the time of applying for registration, if the principal or the represented party subsequently ratifies the application for registration, the agent or the representative shall be considered to have acquired the authorisation of the principal or the represented party. The authorisation of the principal or the represented party is obtained at the time of applying for registration of a trademark, but if the principal or the represented party later reneges, it shall still be deemed that the agent or the representative has obtained the authorisation of the principal or the represented.
Typical cases
Case one: invalidation of trademark ‘Green Doctor in Chinese characters’
In 2017, a foreign company (the applicant) and a company in Tianjin (the respondent) signed a sales agency agreement on the applicant’s ‘RIs0LI’ brand series products in mainland China, and the respondent is the agent and distributor of the applicant in mainland China. The ‘RIs0LI’ brand series products of the applicant include ‘DR.CREN’ series products. As early as 2015, the applicant’s agent company has advertised and sold products bearing the ‘DR.CREN’ mark. The respondent, as the distribution agent of the applicant, should be aware of the trademark ‘DR.CREN’, which was previously used by the applicant and has strong originality. The disputed trademark ‘Green Doctor in Chinese characters’ has similar Chinese meaning to the ‘DR.CREN’ trademark previously used by the applicant, and the products (eg, cutlery, forks and tableware) approved for use in the disputed trademark are related to the products (such as the pots and pans) previously used by the applicant in terms of sales sites, sales channels and consumption objects, and belong to similar goods. To sum up, the registration of the disputed trademark constituted the agent applying for registration of the principal’s trademark without the authorisation of the principal referred to in Article 15, paragraph 1, of the Trademark Law and it should be declared invalid. The respondent did not file an appeal against the invalidation decision, and the disputed trademark become invalid.
Case two: invalidation of trademark ‘GAOYUANWEIJIN and device’
In this case, the evidence, including the enterprise business licence, the disputed party’s identity information, the labour contract and other materials submitted by the applicant, clearly demonstrate that the disputed party signed an open-term labour contract with the parent company of the applicant, and the disputed party was appointed as the manager of the food and beverage department within the applicant’s wholly owned enterprise. Consequently, the disputed party is also the legal representative of the applicant. The aforesaid evidence can prove that the disputed party should have been aware of the disputed trademark owned by the applicant. These goods covered in the disputed trademark, such as beer, water (beverage) and mineral water ingredients, are similar to the beverage commodities associated with the applicant’s trademark. Furthermore, the disputed party was not authorised to register the applicant’s trademark over these goods. Therefore, the registration of the disputed trademark by the disputed party without authorisation constitutes the act of unauthorised registration of the represented party’s trademark, as stated in the first paragraph of Article 15 of the China Trademark Law, and thus the registration of the disputed mark was declared invalid.
In summary, the purpose of the first paragraph of Article 15 of the China Trademark Law is to prohibit the malicious pre-emptive registration of the trademark by an agent and representative, thereby preventing acts of betrayal or breach of trust. If your trademark was not filed maliciously by your agent or representative, but rather by another individual with whom you have a contractual, business or other relationship, then you can oppose or invalidate the trademark by relying on the second paragraph of Article 15 of the China Trademark Law, which could be the topic of another article.
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