Trademark squatters – Important tips when choosing production country

 In China, Counterfeit, E-commerce, Intellectual Property, Trademark

This is the first article of three in our new series of articles on e-commerce and the problems that can arise from a trademark perspective. The series can be used as a checklist for you who run an e-commerce company and want to make sure that you have protected your products in the right way. This first part highlights one of the potential risks regarding where you as an e-commerce company, put your physical production, the phenomenon of trademark squatters.

Part 1 – Production

A non-existing phenomenon 10 years ago, trademark squatting rose with the growing popularity of e-commerce and China continues to be the largest production country especially for retailers of, for example, watches, sunglasses, sportswear, household items, children’s products, toys and so on. What not everyone knows is that certain countries, especially those with a “first to file” trademark system are subjects for this type of organized crime. Trademark squatters operate by obtaining trademark registration for a foreign brand that is not yet registered in that specific country.If we take the example of a watch company that has placed its production in China but not yet registered its trademark there, they run the risk of having their watches confiscated at the Chinese customs as fraudulent products. The trademark squatters take advantage of the registered trademark rights by offering to sell back the trademark to the brand owner at a much higher price. As a way to defend from this in 2019 China amended their trademark law to better help combat trademark squatting.

At Otmore, we have even seen examples of Swedish trademarks that have been applied for trademark registration in China, just days after their trademarks have been published and announced via the Swedish Companies Registration Office. This means that when a Swedish trademark is registered, the Chinese trademark squatters take notice and then file for the Chinese trademark protection before the Swedish company do so themselves.

 Ways to avoid these risks

  • The best way to stay on the safe side of the trademark squatters is to file for protection before you launch your brand, a good timing is usually when deciding the production country.
  • Do note that when you file for trademark protection you have the right to priority in several countries through the Paris convention which gives you the option of claiming the same date as on your original application for up to 6 months.

Next week we will dive into how to plan before entering new markets and how to avoid unwanted trademark related surprises.


Article written by Sergio Villamizar & Matti Aulaskari

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