Chinese Trademark Surge Signals Possible U.S. Market Entry

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By Anandashankar Mazumdar

China-based entities are flooding the U.S. Patent and Trademark Office with trademark applications, a trend attorneys say means more Chinese brand-name products are coming to the U.S. market.

Applications from China to register trademarks on an array of goods, including consumer electronics, have shot up more than 1,000 percent—from about 4,000 in 2013 to almost 48,000 in 2017, PTO statistics show. As of Oct. 27, over 41,000 China-based applications had landed at the agency in 2018 so far. The agency is hiring scores of new examiners to try to keep up.

The surge is a sign that Chinese companies are getting ready to flood the U.S. market with their own brand-name goods, attorneys say, rather than concentrating on manufacturing U.S. brand-named products, as they have in the past.

“The explosion in trademark applications being filed by Chinese companies and Chinese entrepreneurs shows that China is on the verge of becoming a major player in branded consumer as well as industrial and commercial products and services in the U.S.,” trademark lawyer Mark Peroff of Peroff Saunders PC, New York, told Bloomberg Law.

Jordan Weinstein, a trademark lawyer with Barnes & Thornburg LLP, Washington, told Bloomberg Law that the Chinese government may be trying to stem complaints about counterfeits and knockoffs coming from China.

“Perhaps they’re trying to get their act together with respect to the counterfeiting issues that were plaguing the trade relationship between China and the United States,” he said.

The applications cover a range of products and services, topped by sophisticated electronic devices and clothing. Peroff said that might suggest that Chinese companies are on the verge of competing with trademark-holding U.S. businesses rather than silently producing goods for U.S. brands such as Apple.

Weinstein told Bloomberg Law that many of the Chinese applications were for coined terms, that is, words that don’t currently have any meaning in English.

For example, on Nov. 1, Xu Bin, an individual with an address in Zhenzhou, China, filed applications to register “Biok,” “Kooun,” and “Keeou” as trademarks for a wide range of goods, including sporting goods, pet accessories, and cosmetic goods.

Those applications now account for one in 10 trademark applications at the agency, four times as many applications as from any other foreign country. The Chinese Embassy in Washington, DC, didn’t immediately respond to a Bloomberg Law request for comment.

‘Money to Grow’

Fast economic growth is a likely explanation behind the spike in trademark filings, Rod S. Berman of Jeffer Mangels Butler & Mitchell LLP, Los Angeles, said.

“China is a big country,” Berman told Bloomberg Law. “They’re growing very fast. They obviously have plenty of money to grow. They want their industries to grow.”

Chinese government agencies offer incentives for businesses to register trademarks around the world, China-based trademark lawyer George Chan of Simmons & Simmons, Beijing, told Bloomberg Law.

“China has adopted a ‘Go Global’ strategy which aims to promote Chinese investments abroad,” Chan said. “Trademark filings have not only increased significantly in the U.S., international registrations through WIPO are also on the rise by Chinese companies.”

The trademark office hired 61 new examiners this year and plans to hire 100 more to deal with the deluge and check the quality of the submissions, Commissioner for Trademarks Mary Boney Denison told Bloomberg Law.

The agency may see a revenue boost to help it pay its new examiners. Fees from China-based applications brought in $11 million from 2013 to 2017, Denison said. It’s not clear whether the applicants will pursue their registrations to completion, which would mean more fee payments to the agency. It’s too early to tell whether the applicants’ fees will eventually cover the PTO’s increased examination costs, she said.

Foreign-based trademark registration applications filed with the PTO
Bloomberg Law Graphic
‘Growing Very Fast’

Besides adding staff, the patent office is considering requiring foreign trademark applicants to have a U.S.-licensed attorney. The PTO plans to issue a proposal in November and seek comment on it until February 2019.

Agency director Andrei Iancu is floating such a requirement as a possible way to cut down on potentially fraudulent foreign trademark applications.

Denison told Bloomberg Law that the agency has noticed registration applications that “appear to have digitally altered specimens” attached coming not only from China but also from other countries and from U.S. applicants.

The U.S., unlike some other countries, requires proof that a trademark has been used before it will register it. Applicants who want a U.S. registration but haven’t actually used a trademark, then, might submit doctored photographs or other fraudulent supporting materials to demonstrate use to the PTO.

The issue of possibly faked trademark specimens will “require further research and inquiry” by the agency, Denison said.

Trademark attorneys caution against broadly accusing China of trademark fraud.

“Whenever you think why something happens coming from China, you’re often proved wrong,” Alan Behr of Philips Nizer LLP, New York, told Bloomberg Law. “It’s part of the dynamic in trademark law in China, that a lot of things happen very quickly, so it could just be a simple competitive phenomenon.”

Trademark Scarcity

The massive number of applications has added to the already chronic phenomenon of trademark scarcity. Over the past few years, it’s been harder for companies seeking to secure rights in brand names to find unclaimed trademarks to stamp on their goods and services.

The lack of available trademarks may mean more legal clashes over them, as companies compete in court and before the PTO to grab the most desirable brand names. And if the Chinese applications lead to weak or invalid registrations, another company would still have to shell out for the legal expenses of challenging a bad registration.

Despite that, brand-name companies in U.S. and elsewhere should brace for the possibility that they will soon face strong competition from Chinese competitors.

“The number of trademark applications being filed by the Chinese portends an increase in strong competition from a competitor which was not previously in the market,” Peroff said.

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