As China has become the world’s second-largest economy, the demand for trademark protection from domestic and international entities has surged. Regrettably, this has led to malicious trademark squatting, in which applicants exploit legal loopholes to register trademarks without any intent to use them. This practice strains limited resources and disrupts market orderliness. In response, revisions to both the Trademark Law and the Provisions on Regulating Application for Registration have been implemented to deter such activities.
Despite these efforts, bad-faith registrations, such as those related to COVID-19 and Olympic champions, continue to plague the system. Further measures are necessary, including post-registration supervision and legal improvements to crack down on fraudulent applications, optimise legitimate consumer rights and establish fairness within the Chinese marketplace.
To curb malicious trademark squatting, the Chinese National Intellectual Property Administration (CNIPA) introduced penalty measures, including restrictions on trademark business and the free transfer of squatted trademarks to rightful holders. However, these sanctions have proven insufficient, as they impose minimal costs on offenders and fail to deter future crimes. Consequently, legal liability must be increased as a more effective deterrent. Specifically, the CNIPA may consider barring perpetrators from engaging in similar activities for three years or compelling them to pay compensation equal to the standard application fees.
In addition to imposing penalties on squatters, China has proposed regulations requiring them to bear the protection costs of legitimate rights holders. Further, restrictions should be placed on rights for registered trademarks that remain unused after filing, potentially leading to cancellation if necessary due to lack of usage. Under the current system, registered trademarks are valid for ten years and can be renewed upon expiration. However, applicants must provide evidence of use within three years before renewal application, or the CNIPA may initiate cancellation procedures.
With almost 40 million valid trademarks in China, many still need to be used or explored, impeding genuine applicants from securing their interests and obstructing established brands in commercial markets. This affects competition law compliance assessment systems and necessitates proactive measures by the CNIPA to address malicious squatting. According to the PRC Trademark Law, the CNIPA has the authority to invalidate maliciously squatted trademarks, and in line with this article, it has recently cancelled 43 registered trademarks.
Declaring preemptively registered malicious trademarks null increases the cost of infringement and restores confidence among law-abiding businesses in China. Effective implementation would eradicate malicious squatting, promote fair competition, and ensure that economic activities remain dynamic while maintaining legal integrity.