Cash subsidies are among the incentives fueling a dramatic rise in U.S. trademark applications by Chinese filers. Thousands are said to be improperly filed and unlikely to be granted.
In a national effort to increase IP ownership China is paying companies and individuals, some of them prisoners, as much as the equivalent of $800 to register a trademark in the U.S.
“The U.S officials say many China filings show a pattern of suspicious claims about the goods in question and the qualifications of the attorneys handling them,” reports the Wall Street Journal.
China may be attempting to “disrupt” the U.S. system by flooding it with huge numbers of applications, making it potentially more difficult for business to obtain the marks they desire, especially those that may be associated with products that are sold in e-commerce.
Mark Cohen, UC Berkeley law professor and former USPTO expert on China told IP CloseUp that he did not believe there is a concerted effort to undermine the U.S. trademark system.
“China is metrics-driven, numbers-oriented society,” said Cohen, who is fluent in Chinese. “It wants to achieve government-established goals and will resort to incentives to achieve them. This planned approach can lead to the kind of spikes we have been seeing in trademark applications. The ultimate impact is unclear.”
In addition to paying cash incentives, China has been known, says Professor Cohen, to award tenure, defer income taxes and reduce sentences of prisoners who obtain marks. Similar motivations have been known to exist in the patent space, where China is a leading U.S. filer and number two globally. If the pattern continues, it will soon be number one in both trademarks and patents.
Numbers Game
This rapid rise does not necessarily lead to high quality IP rights or to appropriate use of them. But IP does apparently amount to something of a numbers came to China.
Cohen believes that many of the filers are small businesses selling online goods such as phone chargers and cheap clothing. Whether they are every in a position to enforce their marks, if infringed, remains to be seen.
Representing a number of Chinese trademark filers are foreign attorneys who are not licensed to practice in the U.S., which violates application rules.
These payments by the Chinese government amount to nearly $800 per US trademark registration that is obtained (a potential profit per trademark of $525 after filing fees), reports trademark attorney Josh Groben.
Full-time Job
“Given that the median monthly income for a Chinese citizen is around $1,000,” says Groben, “the government payments make it possible for someone in China to have a full-time income by registering just two US trademarks per month.”
The U.S. received more than 50,000 applications from China in the year through September 2017, accounting for 8.5% of all trademark filings.
It is difficult to know how aggressively legitimate Chinese trademark holders will enforce their rights against infringers. In the U.S. complete failure to enforce will lead to a weakening of an owner’s marks, loss of distinctiveness over time and potential forfeiture of certain available remedies.
Image source: creekmorelaw.com; lexology.com
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