On an almost weekly basis, our China IP lawyers field inquiries from foreign companies that have discovered their Chinese manufacturer has registered one or more of their trademarks. The Chinese manufacturer’s rationale for registering these marks ranges from the altruistic (to prevent trademark squatters from doing so first) to the malevolent (to sell counterfeit goods in China), but usually falls somewhere in between The manufacturer always claims its intentions were pure as the driven snow, but this explanation is hard to accept when, as is almost always the case, the manufacturer never told the foreign company what they were doing. Deep down, the manufacturer knows that owning the trademarks gives it leverage in future negotiations.
The best manufacturers operate with full transparency: they ask their foreign company clients if they have already filed for trademarks in China, and if they haven’t, they explain the importance of doing so as soon as possible. See 8 Reasons to Register Your Trademarks in China. If the foreign company then says it can’t or won’t file trademark applications in China, then—and only then—will the manufacturers file trademark applications for the brand owner’s marks, and with the clear understanding that it will assign ownership of the marks to the foreign company upon registration. But again, this almost never happens.
Back to the usual case of manufacturers filing trademark applications unbeknownst to its foreign company client. Once the Chinese manufacturer has been found out, many will claim that they are legally or logistically prevented from transferring ownership of the registrations to the foreign company. We have heard many excuses, including the following:
- Only Chinese entities can own a Chinese trademark.
- The only way to transfer ownership of a Chinese trademark is for the manufacturer to abandon the mark and then for the foreign company to file a new application, but this is dangerous because third parties might file an application in the time in between.
- It is not possible to transfer ownership of a trademark application that is under examination.
- In order to assign a trademark, each party must submit a Certificate of Good Standing or a business license that has either been issued by the Chinese government or authenticated by the Chinese Embassy, and the latter process will take several weeks.
Full points for creativity, but none of the above is correct.
- Foreign entities can own Chinese trademarks. In fact, foreign companies own millions of Chinese trademarks.
- The way to transfer ownership of a Chinese trademark is by filing an assignment statement with the Chinese Trademark Office. It is possible to “transfer” ownership by abandoning a mark and then having a third party file a separate application, but that is costly, inefficient, and risky.
- It is possible to transfer ownership of a trademark application that is under examination. That said, if the trademark is ultimately rejected, then the new trademark owner will not own anything at all.
- You do need to submit proof of both the assignor’s and assignee’s identities, but nothing needs to be authenticated. The documents required should be readily accessible.
When you find out that your Chinese manufacturer has registered your trademarks, you may need to negotiate the terms under which they will assign the marks to you – and that may take some time. But the actual assignment process is easy and relatively inexpensive and don’t believe anyone who tells you otherwise.