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May, 2018

Washington warily eyes surge in trademark applications from China

Original article: The Wall Street Journal

Thousands of Chinese are filing trademark applications in the United States as they try to cash in on subsidies offered by local governments to Chinese citizens who register a trademark in a foreign country. U.S. officials are concerned that the applications are full of false information. Josh Gerben, a trademark lawyer based in Washington, D.C., told The Wall Street Journal: “The significant number of fraudulent trademark filings being made from China is disrupting our trademark system,” he said.

Analysis:

40 years after launching economic reforms, China still retains elements of a command economy. A central-planning ethos underlies its big policy initiatives. Just as the central government is focused on boosting the number of patent filings, it now wants to do the same with trademarks. 


The emphasis appears once again to be on quantity over quality. In the case of patents, China surpassed Japan last year to reach No. 2 globally after the United States. Chinese entities filed 48,882 patents, up 13.4 percent year-on-year, compared to 56,624 U.S. patent applications. But most of the patents filed were in China, while the U.S. filed many more applications globally. China's approval process for patents is not considered as stringent as in the world's advanced economies. 


In a November 2016 article, The South China Morning Post points out that China's patent system is domestically oriented because of its dependence on state subsidies. "Raw patent numbers are similar to steel production during the Great Leap Forward," Fordham law professor Mark Cohen told the SCMP, "with an overproduction that doesn’t necessarily reflect quality."


Beijing appears to have realized that filing trademarks overseas may boost the credibility of Chinese brands. But its core numbers-driven approach remains the same. Chinese state media has been highlighting that China led the world in trademark applications last year, which rose almost 56% to hit 5.7 million. At the end of 2017, China led the world with 14.92 million qualified registered trademarks. 


Unfortunately, many of the trademarks are suspected to be illegitimate. Chinese applicants are gaming the system, according to the U.S.-based Trademark Policy Advisory Counsel. "So, they’re filing [a use based] application and sending in a photograph of, say, some shoes with a tag on them. It looks like a great specimen until you see the same pair of shoes with the same shadow in the photograph 10 times filed by different applicants with different marks," the Commissioner of Trademarks was quoted as saying on the Gerben Law Firm's website. 


On the Gerben Law Firm's website, attorney Josh Gerben points out that the Chinese government is paying Chinese citizens about $800 per successful U.S. trademark registration, of which profit can reach $525 after filing fees. "Given that the median monthly income for a Chinese citizen is around $1,000, the government payments make it possible for someone in China to have a full-time income by registering just two US trademarks per month," Gerben wrote. 

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