Combatting Trademark Squatters: New CTMO Guidelines

China’s Efforts to Combat Trademark Fraud: Proposed Guidelines

The China Trademark Office (CTMO) recently unveiled a draft guideline titled “Several Provisions on Regulating the Application for Registration of Trademarks” for public review. This initiative aims to establish a screening framework to detect and reject fraudulent trademark applications by malicious entities. The draft represents a significant step toward curbing trademark squatting and penalizing perpetrators and their agents.

The Issue of Deceptive Practices

China operates under a first-to-file trademark system, a factor that has led to the proliferation of professional squatters—entities or individuals filing unregistered trademarks of others with the intent of exploiting them. Until now, the lack of stringent regulations facilitated such malicious filings. CTMO required minimal personal information from applicants, without verifying their intention to use the filed mark for genuine business purposes. Existing laws primarily focused on post-application remedies rather than preventing fraudulent acts.

While certain patterns—such as filing excessive trademarks, non-utilization, or attempts at resale without usage—were identified as indicators of deception, no significant changes were made in the examination process to differentiate genuine applications from malicious ones.

Proposed Measures and Screening Process

The recent draft introduces provisions empowering trademark inspectors to scrutinize new applications, identifying potential illegal filing patterns. This proactive approach aims to reject such applications upfront, reducing the burden on genuine rights holders and CTMO offices, which often expend resources combating fraudulent claims.

Curbing Squatting Through Enhanced Documentation

Presently, applicants in China are not mandated to provide substantial documentation proving their intent to use a trademark. However, once the proposed legislation is enacted, inspectors will have the authority to investigate application patterns and request evidence of genuine business intent. Articles 2 and 3 of the draft specifically require applicants to demonstrate legitimate business purposes for trademark registration, maintaining good faith and refraining from filing “irregular applications.”

Addressing Misconduct Among Trademark Agents

The draft guidelines also aim to hold trademark agents accountable for any involvement in irregular trademark registrations. Agents engaging in such activities risk being blacklisted, with severe cases possibly resulting in the suspension of their licenses.

Enforcement and Long-term Implications

Additionally, allowing organizations and individuals to report abnormal trademark applications may lead to the development of private software that aids in identifying such cases, augmenting traditional monitoring methods.

The draft guidelines signify a proactive step by China to tackle trademark fraud, fostering a more secure and transparent trademark registration process.