YiJu Lawyers Meihua ZHOU and Xingqian HAN Attended the Huanyi American Trademark Incident Exchange Meeting (This Article Also Attached Suggestions for Chinese Enterprises )

On the morning of December 15, the Huanyi Incident Exchange Meeting was successfully held in China (Shenzhen) Intellectual Property Protection Center. Director Yang Song, Deputy Director Aike Deng and many experts from the Overseas Rights Protection Department attended the Meeting, and experts including YiJu lawyers Meihua ZHOU and Xingqian HAN attended the Meeting online. The attending experts fully communicated on the problems exposed by the Huanyi Incident and the coping strategies.

Huanyi Incident refers to the incident that Shenzhen Huanyi Intellectual Property Co., Ltd. was sanctioned by the US Patent and Trademark Office (USPTO).USPTO recently issued a decision that given that Shenzhen Huanyi Intellectual Property Co., Ltd. has repeatedly committed improper acts such as illegal representation, signing applications instead of clients, providing false addresses, sharing the application account, etc., USPTO has invalidated all the over 15,000 U.S. trademarks represented by Shenzhen Huanyi, permanently banned it and its employees from filing applications to USPTO on behalf of clients, and prevented the respondent from making further communications or representations.

At the symposium, lawyer Meihua ZHOU said that for the registrants of the invalidated trademarks in this incident, they will face the legal risk of selling goods without brand protection in the later stage, and for such enterprises with actual demand for trademark use, they may try to entrust American attorneys to re-apply for trademark registration and provide evidence of use. In addition, one is reminded that enterprises that sell goods in the United States must promptly check whether there are any improper and dishonest acts covered in the above punishment incident in the registration process of their trademarks.

Lawyer Meihua ZHOU said that the Changes To Implementation Propositions of the Trademark Modernization Act of 2020 will be implemented as of December 18, 2021. Through this amendment, USPTO's procedures for trademark registration oppositions and cancellations were revised and new procedures were added

1. Adding two new procedures for unilateral application for revocation of registered trademarks:

① Unilateral deletion procedure of registered trademark: Within ten years after the expiration of three years from the registration of a trademark, anyone may apply for revocation of the registration of the registered trademark on some/all goods or services on the grounds that the registered trademark has not been actually used on the basis of preliminary reasonable investigation evidence, etc. In addition, the USPTO Director may also ex officio initiate unilateral liquidation procedures for registered trademarks.

② Unilateral retrial procedure for registered trademarks: Within five years after trademark registration, anyone may file an application for retrial on the grounds that the registered trademark was not actually used before the "Relevant Date" on the basis of preliminary reasonable investigation evidence, etc. In addition, the USPTO Director may ex officio initiate unilateral retrial procedures for registered trademarks.

2. Adding new cause of action in trademark revocation procedure: The applicant may initiate a revocation procedure on the grounds that the trademark owner has never used the trademark for commercial purposes, provided that it must be initiated within three years after the trademark registration. The Act includes the genuine use of trademarks among the causes for revocation, and supplements the causes of "similarity", "distinctiveness" and "prior use", which further reflects USPTO's determination to fight against false trademark applications and uphold the integrity of trademark registration. Although the above Act provides a relief channel for trademark owners to appeal to Trademark Trial and Appeal Board, the stricter examination system is bound to bring more difficulties for Chinese trademark registration applicants to apply for U.S. trademark registration.

According to Lawyer Xingqian HAN, in the Huanyi Incident, Huanyi mainly involved illegal trademark application representation, providing false information, signing instead of clients, and sharing the application account, which seriously violated USPTO's trademark application rules and was quite fraudulent. Therefore, it is difficult for the trademark applicants or obligees involved in this Incident to secure remedy.

According to the current trend of China's trademark applications with USPTO, the proportion of Chinese related enterprises applying for trademarks in USPTO was below 1% before 2010. Since then, the number of trademark applications by Chinese enterprises in USPTO has increased rapidly. Since 2021, the proportion of applications from Chinese enterprises has accounted for 29% of USPTO applications. To some extent, such rapid growth is due to the genuine intention of Chinese enterprises to use trademarks in the United States, in particular the demand of cross-border e-commerce enterprises on the Amazon e-commerce platform. However, it cannot be ruled out that there are applications made for the purposes of occupying trademark resources or seeking government subsidies.

Judging from the punishment imposed by USPTO on Chinese agencies, since 2015, Chinese natural persons and legal persons have gradually appeared as the objects of "Order to Submit Cause" issued by USPTO. It is particularly important to note that since 2015, the number of Chinese subjects who have been subject to "Order to Submit Cause" or Punishment Order issued by USPTO has increased rapidly. In particular, in 2020, the vast majority of the more than 200 subjects who were subject to "Order to Submit Cause" or Punishment Order issued by USPTO were spelled in Chinese, which may be related to Chinese enterprises and individuals. Among these, enterprises in Shenzhen accounted for a larger proportion.

With regard to the legal risk avoidance of domestic subjects in applying for trademarks in the United States in the future, lawyer Xingqian HAN pointed out that from the current trend of trademark application and punishment, USPTO has noticed the abnormal applications from China, and it is not excluded that USPTO will further introduce relevant policies to raise the application threshold in the future. Therefore, it is suggested that applicants should choose a compliant trademark agency, whether a domestic firm cooperating with a foreign law firm or directly a foreign law firm. By doing so, we can effectively avoid the consequences of possible revocation of trademark applications due to the violations by the agency.

In addition, for risk avoidance, lawyer Xingqian Han pointed out that prevention beforehand is a relatively effective way. Because once legal risks arise afterwards, they may often involve litigation and other procedures, and incur economic costs that are relatively high for general enterprises. Therefore, it is suggested that relevant departments may also actively give legal lectures to enterprises that need to apply for U.S. trademarks, to help them understand the basic knowledge and common legal risks of U.S. trademark applications.