High volume of Chinese trademark applications undermining value of global registries

High volumes of often non-market motivated Chinese trademark applications are responsible for undermining of the value of global IP registries, according to a January, 2021 United States Patent and Trademark Office (USPTO) paper entitled: Trademarks and patents in China: The impact of non-market factors on filing trends and IP systems.

The report noted that the volume of trademark and patent applications in China is the highest in history. In 2019, for example, relevant authorities in China received 7.8 million trademark applications and 1.5 million utility patent applications, accounting for nearly half of global totals. This and a growing number of suspect trademark applications filed in the United States from China, prompted USPTO to conduct this study.

Non-market factors help spike Chinese trademark applications

Trademarks help provide commercial value by distinguishing goods and services in the marketplace. They also help brand owners forge commercial relationships and access capital. Non-market considerations for IP registrations (including subsidies, government mandates, bad faith filings, and good-faith countermeasures) are now abundant in China, undermining the reliability of trademark registries.

The study also found:

  • Subsidies in China have helped spur an increase in the volume of fraudulent trademark applications to the USPTO.
  • Subsidy-motivated trademark applications have stretched China’s trademark examining and review capabilities, cluttering the country’s trademark registry.
  • Cluttered registries complicate clearance searches and limit the scope of protections for good faith mark holders.
  • Bad-faith registrations are creating obstacles to legitimate commerce.
  • Defensive filings can increase the cost of using China’s trademark system for good-faith participants.
  • Non-market factors on patent filings undermine the commercial value of subsequently issued patents.

Chinese IP holders should seek more foreign registry protection

Licensing serves as a primary means to commercialize IP. However, Chinese patent applicants are much less likely to seek foreign protection than U.S. inventors. In 2019, the United States accounted for 32.5% of total global licensing receipts, while China accounted for just 1.7% (despite China’s position as world’s leading exporter of goods) — placing the US first in IP receipts as a percentage of total trade, while China ranks 44th. As patenting abroad is an indicator of the commercial value of a patent, its inventors should, the authors advise, commercialize their IP more often through foreign filings.