What Is Behind The Increase In Fraudulent Chinese Trademarks?

Judith Soto,

In February 2019, USPTO issued a warning to attorneys to beware of any foreign solicitation which offers to pay to use their information to file trademarks. The statement read:

“We've learned that U.S. attorneys are receiving emails from people in China and perhaps elsewhere, offering to pay to use their information in trademark filings. These solicitations appear to be an attempt to circumvent the proposed U.S.-counsel rulemaking.

Agreeing to such arrangements would likely be aiding the unauthorized practice of law and violating federal rules, including the USPTO Rules of Professional Conduct, 37 C.F.R. Part 11. Attorneys who violate these rules may receive discipline, including exclusion or suspension from practice before the USPTO, reprimand, censure, or probation. Attorneys disciplined by the USPTO may also be reciprocally disciplined by their state bar.”

The warning comes on the back of the controversy surrounding the Chinese government allegedly paying its citizens to fraudulently obtain US trademarks. The issue hit the headlines mid-2018. The Wall Street Journal ran an article at the time stating that trademark applications from China have increased 12-fold since 2013 and for fiscal 2017 totalled thousands more than the combined filings from Canada, Germany, and the U.K.  

Around one in every nine trademark applications reviewed by USPTO agency is China-based, according to government data. It is suspected that people and companies are being paid up to $800 per registered trademark.

According to a transcript, the patent office’s trademarks commissioner, Mary Boney Denison, stated at a Trademark Public Advisory Committee meeting in the fall of 2017:

“There’s been a dramatic increase on Chinese filings. A lot of [them] seem to be not legitimate.”

The question is why? If the Chinese government is actively encouraging this type of fraud, what is it aiming to achieve? And how can trademark Attorney’s spot a fraudulent application?

Disrupting the integrity and efficiency of the USPTO?

In an article published on the official website of Gerben Law, founder and principle, Josh Gerben states there is a concern that the Chinese government is “encouraging or adopting policies designed to undermine the U.S. trademark registration system”.

“In response to an influx of trademark applications, the U.S. government may struggle to meet predictable examination schedules. Delays in the examination process can lead to harm and uncertainty for U.S. companies trying to decide how to proceed with investing in a brand, ultimately affecting commercial progress.”

Mr Gerben also says there has been evidence of Chinese authorities encouraging individuals or companies to register overseas trademarks by “any means necessary” since 2016. That year, a Chinese representative to the WTO, under Article XVI:1 of the GATT 1994 and Article 25 of the Agreement on Subsidies and Countervailing Measures, provided a list of subsidies contributed by 20 out of 32 of China’s provinces. Many of these policies have now expired or been replaced; however, some showed that incentives for registering trademarks abroad were in place.

Signs of fraudulent applications

According to trademark attorneys, many suspect applications come from specific provinces; one being Shenzhen, a growing tech hub and considered to be the Silicon Valley of China. Many potentially fraudulent applications follow a pattern, such as having jumbled words and multiple nearly-identical images of the same consumer product with a different word on the brand tag, for example, FORLISEA, CINYIFAAN, ENJOYSWEETY and GOOKET.

To qualify for a federal trademark the product or service must be “used in commerce”. However, if the application goes unchallenged, little evidence is needed to show ‘use’. According to the Wall Street Journal, there have been situations where ‘market activity’, is demonstrated by submitting a screenshot of a pre-existing, digitally altered Amazon or eBay listing.

To combat the use of digitally altered images, the USPTO initiated the Trademark Specimen Protest Pilot Program. The program allows trademark owners to send an email to TMSpecimenProtest@uspto.gov during a trademark application Opposition Period if they can prove the images submitted with the new applications have been digitally altered. However, if fraud is discovered, the original owner of the trademark still must file cancellation proceedings, which can be prohibitively expensive for some businesses.

Many applications are genuine

It would be wrong for attorneys to assume every request for assistance regarding filing a trademark that comes from China is fraudulent. Although it is clear there are dishonest applications; many are genuine. The increase can be partly explained by the encouragement of the American government to get Chinese businesses to take IP seriously. Having a US registered trademark is also crucial for those trading on Amazon, as the site rewards officially trademarked products with higher visibility and search-generated listing results.

The USPTO’s response to the flood of non-domicile trademark applications

In response to the increase in foreign applicants filing trademark applications that have inaccurate and possibly fraudulent statements regarding use, the USPTO issued a Notice of Proposed Rulemaking in February 2019 stating that foreign applicants will no longer be able to represent themselves before the USPTO and must instruct a US-licensed attorney.

The rules are not yet in place; however, the announcement triggered a series of solicitation emails which resulted in the warning set out at the beginning of the article. Below is an example, taken from an article which appeared in the World Trademark Review:

"Can I use your attorney address? We help customers apply for US trademarks, but we need you to provide attorney information and US recipient address. About submit US trademark, and reply to review comments are submitted by us, authorized email also writes us. Just use your attorney information, how much is it for one class/one trademark? I am looking forward to your reply. Thank you very much".

The key action for trademark attorneys is to ensure they have clear due diligence policies and procedures in place to detect suspect requests. However, there have also been calls for the USPTO to urgently update its filing system security.

Fraudsters have a way of circumventing even the tightest systems. Josh Gerben told the World Trademark Review:

“Since this is just a proposed rule, it will likely take some time to get implemented. My guess is that the bad actors who will try to get around the rule will likely go into high gear around the time the rule is implemented.”

Therefore, the need for caution surrounding Chinese trademark applications will be required for some yet.

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