I. New Guideline

On September 25, 2023, the Trademark Office of China National Intellectual Property Administration (hereafter referred to as the CNIPA) released a Guideline on the Trademark Assignment Procedure. (link: https://www.cnipa.gov.cn/art/2023/9/25/art_66_187778.html)

It is worth noting that the CNIPA indicates the 5 potential risks posed to trademark assignment procedure, which are summarized as follows:

(1) Potential risk of assigning registered trademarks.

a) Registered trademarks may face the risk of being declared invalid. It is important to pay attention to whether the trademark violates the provisions of Articles 44 and 45 of the Trademark Law, such as being a malicious trademark not for use intention, obtaining registration through deception or other improper means, etc. The determination of whether the trademark violates the aforementioned relevant legal provisions is generally based on the status of the trademark at the time of application.

b) Registered trademarks may face the risk of being canceled pursuant to Article 49 of China Trademark Law, namely, whether the trademarks have already become generic names of the designated goods, or whether the trademarks have been ceased for use for three consecutive years without reasonable excuses.

c) Registered trademarks may face the risk of being expired for non-renewal in prescribed time period.

(2) Potential risk of assigning pending trademark applications. 

a) Pending applications will face potential risks of being refused or disapproved for registration; 

b) Preliminarily approved and published applications will face potential risk of being opposed by any interested parties.

(3) Potential risk of assigning trademarks being pledged. Failure to submit the written consent of the pledgee will result in the disapproval of the assignment. 

(4) Potential risk of assigning trademarks being seized and preserved by courts. Failure to submit the written consent from the courts will result in the disapproval of the assignment.

(5) Potential risk of assigning trademarks being licensed to third parties. The prior valid trademark license agreement may affect the exercise of trademark rights after transfer.

II. New Practice

Along with the new Guideline, we notice that the CNIPA has imposed stricter scrutiny on trademark assignments. In recent practice, the trademark assignment applications will likely trigger office action if the assignor has a significant number of registered trademarks and the assignees are dispersed, and subsequently if they cannot provide evidence of the use of the trademark or explain the intention to use it, the trademark assignment shall be disapproved. 

With respect of the new practice, we have engaged in communication with the CNIPA to seek clarification regarding the threshold for office actions and the corresponding requirements for response. Regrettably, no unified and unequivocal standard has been confirmed thus far with regards to the response to office actions.

III. Our recommendations

During the process of handling trademark cases, there are instances where it is indeed highly effective and expedient to directly advise clients to assign the trademark. However, the implementation of the new practice has introduced fresh risks associated with the assignment of trademarks.

Therefore, in assisting clients with the negotiation of trademark assignment, we should pay more attention to the following key points:

1. Due Diligence Search

Before commencing the negotiation for assignment, we suggest conducting a comprehensive due diligence search into the Assignor to evaluate whether there is any potential risk for the assignment procedure from the Assignor’s side. The due diligence search will cover various aspects, including but not limited to conducting the trademark ownership search, reviewing the assignment records pertaining to the Assignor’s trademark portfolio, searching for the use status of the trademark and any previous records in trademark conflict/refusal cases wherein the CNIPA has recognized the bad faith of the Assignor according to Article 4 and/or Article 44 of China Trademark Law, etc. 

2. Respond to the official notification actively 

Upon receiving the official notification regarding the assignment recordation, we strongly recommend responding proactively by providing evidence of the use or intention of use of the assigned mark, thereby demonstrating the bona fide nature of the assignment. Considering that the review of the response largely rests on the discretion of the examiners, there remains a reasonable opportunity to persuade the CNIPA to approve the assignment recordation.

3. Backup Option

If the client's intention in acquiring the trademark is to remove obstacles for their own trademark registration application, we tend to recommend client to negotiate with the owner of prior marks for possible withdrawal/deletion as a preferable option.

Furthermore, in the case of a target mark that is clearly a plagiarism of other famous brand or the owner of the target mark has obvious bad faith, we recommend filing opposition or invalidation proceedings to try to clear it. 

Above all, under the new practice, we need to comprehensively consider various factors in order to formulate a more prudent and rational strategy for the client.