How Venture Companies Should Deal with Trademark Squatting?

(By You Yunting) Recently, a news article sparked concern that the Qihu Investment Company (a similar Chinese name to Qihoo 360 Technology Co., Ltd) had rushed-registered hundreds of trademarks belonging to internet venture companies. Even though Qihoo 360 Technology Co., Ltd later clarified that it had nothing with the Qihu Investment Company, the news still attracted attention from both venture companies and lawyers. In today’s post, we would like to address how venture companies should resolve trademark squatting.

  1. The general trademark squatting situation in China

After much research on the Trademark Office website, we have concluded that trademark squatting is usually  concerned with some influential venture companies, such as “虎嗅”“虎扑”,” “蝉游记”, “猿题库”, “团800”, in the Internet industry. Early in the period between 2012 and 2013, these rush-registered registrants had applied for these trademarks under class 9 for computer hardware and also under class 38 for instant messaging systems. However, only a few applications were approved for preliminary examination and entered into the announcement phase of the Trademark Office, whilst the majority of applications were refused entry into the announcement phase of the Trademark Office.

  1. Legal consequences of trademark squatting

Our Trademark Law implements the first-to-file principle. When making a preliminary examination, generally the Trademark Office just prefers reviewing whether or not a prior application other than the one examined exists without taking into account whether these trademarks are rush-registered. Therefore, the probability of rush-registration cannot be considered low. If the trademarks of venture companies succeed in rush-registration, one consequence of this is that these venture companies will be deprived of the exclusive rights of their trademarks for their products and services, and may expose themselves to legal risks and administrative obstacles when using their trademarks in China. The registrants may claim any rights of their trademarks, with the result of continued use of these trademarks by these internet venture companies being trademark infringement.

The trademark was rush-registered under Class 9 for computer hardware, which is of great importance for internet companies. In addition to traditional software, Class 9 for computer hardware is similar to the applications classification used for smartphones and tablet computers. Even though there is no final conclusion about what class mobile applications fall within, Class 9 would be the very close to mobile applications. However, if the venture companies do not file a civil litigation, there is the possibility that the rush-registered registrants may complain to the administration for industry and commerce, as well as the mobile application markets on the grounds of trademark infringement.

I once encountered with an extreme case of trademark infringement in a dispute concerning 115 Storage, resulting from cross-class conflicts between Class 9 and Class 42. The cause was that the exclusive right holder of “115” trademark under Class 9 continuously complained to different application markets against the exclusive right holder of “115” trademark under Class 42, with the result that many application markets did not list the 115 storage apps for download for a long time. With our assistance and after much discussion with different application markets, Apple Inc’s App Store and other Android application markets restored the 115 Storage apps. However, this still caused substantial damages to 115.

  1. Recommended solutions

There are three solutions to deal with trademark squatting in the following, some of which are palliatives while others address the fundamental problems, not the symptoms.

1) Firstly, oppositions can be filed for those unapproved rush-registrations.

Despite the fact that some marks have been rush-registered, the venture companies may still file an opposition against the pending application to protect their rights. According to our Trademark Law, it is the Trademark Office that shall make the preliminary examination, approve an application to register a trademark and announce it. After the Trademark Office has approved the application, any person may file an objection to a trademark application that has been published after a preliminary examination and approved within three months of the date of publication. As such, the venture companies may file an opposition against the rush-registered trademarks in this period.

A question about the probability of success of registration may arise. In our experience, if the marks are truly rush-registered, it is safe to reproduce their trademarks through our agency. The venture companies may rely on the Article 31 of the Trademark Law, which stipulates that “the trademark application shall not infringe upon another party’s prior existing rights, and shall also not be a means to register a mark that is already in use by another party and enjoys substantial influence.

A company in such a situation must apply for a trademark in the name of its company during the period of opposition. If the opposition proceedings are successful in cancelling the rush-registered trademarks, the venture companies can apply for trademarks to protect their rights and interests with immediate effect.

2) Secondly, a cancellation procedure could be filed for these being approved trademarks.

If the rush-registered trademarks are approved by the Trademark Office, the venture companies may use Article 41 of the Trademark Law to revoke rush-registered trademarks with the Trademark Review and Adjudication Board. The Trademark Law stipulates that the owner of a trademark or any interested party may, within five years from the date of registration, request the Trademark Review and Adjudication Board to make a ruling for cancellation of the registration. If the trademark was registered for more than 5 years, the owner of a trademark may not revoke the rush-registered trademark. In the event that the interested parties are dissatisfied with the ruling of the Trademark Review and Adjudication Board, they may initiate legal proceedings in the Beijing No.1 Intermediate People’s Court.

As such, the venture companies are advised to apply for a trademark registration, so that the venture companies may receive their exclusive right of the trademark immediately.

3) Thirdly, trademark protection must be improved to protect valuable trademarks.

Venture companies usually apply for trademarks for their products and services at the very threshold of their career. Many times venture companies make no applications for their products and services by virtue of fund constraints, which is a significant risk for the long-term development of the company. Within the highly competitive internet industry, if a competitor rush-registers their trademark and makes continual copyright complaints, it will be devastating for the venture companies. Another common situation occurs where the registration is inadequate for trademark protection due to the fact that the trademark application was not filed under the most relevant class. For example, an educational mobile app might decide to register its mark under Class 41 for education, rather than under Class 9 for computer hardware, leaving serious hazards that can give rise to future legal risk. In addition to the dominant classification, venture companies should apply for trademark registration under all relevant classifications in order to strengthen their trademark protection against cross-class litigation. In the WeChat Trademark and Tencent’s Problem in Trademark Management article, we stated that “the question is, all the products have their own process of development, some originally bland products could be the “star” product someday in the future. By then, the question of whether the trademark and other IPR protection measures of the company can keep pace with this development is essential to the company, otherwise problems could be foreseen.” If a company as large as Tencent has such a problem, then the same statement rings true for other venture companies. Due to the fact that there are substantial fund constraints preventing the application for trademarks under many different classifications immediately, if venture companies have strengthened considerably, trademark protection must be improved in a timely manner.

As for how to apply for the completion of trademarks, in our Uber’s China Imitator Didi Taxi Meets Trademark Problems article, we once suggested that “Many mobile apps always provide O2O goods and services with various trademarks under many different classifications. As such, when an app applies for a trademark classification…. the enterprise should apply for trademarks under different classifications in accordance with its goods or services provided. ”

No matter the refinement of society, the above three solutions, regardless of which of these methods are used, may not be completed by the venture companies themselves. However, It is the venture companies that must draw attention to the importance of vigilance in intellectual property protection. With this new found awareness of intellectual property protection, the venture companies should engage some professional trademark agencies who are familiar with the intellectual property laws of the internet and the market and legal situation in China to improve and perfect their trademark protection.

Lawyer Contacts

You Yunting86-21-52134918

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