Influx of Trademark Applications at the USPTO Subsidized by Chinese Government, Include Doctored Product Images

Intellectual property activities involving both the Chinese government as well as private entities within that nation have been the source of much consternation within the United States in recent years. Enforced tech transfer rules for foreign entities looking to enter the Chinese domestic market, along with the outright theft of U.S. intellectual property and trade secrets, has led the administration of President Donald J. Trump to institute a probe into deceptive IP practices committed by the Chinese government. This has resulted in the imposition of tariffs on Chinese imports to the tune of $50 billion to recoup some of the American economic loss caused by Chinese IP theft, which by some estimates reaches nearly $600 billion each year.

But it’s not just patents and trade secrets where the Chinese government has proved itself to be vexatious in the world of intellectual property. Recent news reports indicate that the U.S. Patent and Trademark Office is dealing with a glut of trademark registration applications from Chinese nationals. In many cases, not only are these trademark applications subsidized by either Chinese national or provincial governments, but they also appear to be fraudulent, including the registration of trademarks for many use cases which trademark applicants do not appear as though they actually intend on selling in the U.S. domestic market. Not only has this greatly increased the work of trademark examiners at the USPTO, it has also exacerbated the onus on holders of U.S. trademarks who have to navigate this thicket of trademark applications which may or may not have been filed in good faith.

A good summary of the situation comes from an article published on the official website of Gerben Law Firm by that firm’s founder and principal, Josh Gerben. As Gerben notes, the influx of trademark applications from China was referenced as an issue by Commissioner of Trademarks Mary Denison at a recent meeting of the Trademark Public Advisory Committee (TPAC). Gerben also provided research into subsidies offered by the Shenzhen provincial government which indicates that Chinese nationals in that province who are successful in registering a trademark in a foreign jurisdiction, including the United States, can receive nearly $800 USD for each registered trademark.

According to Eric Perrott, a trademark and copyright attorney with Gerben Law Firm, chatter among U.S. trademark officials and attorneys regarding the increase of potentially fraudulent Chinese applications became more serious about a year ago. At that time, people were noting an increase of applications from specific Chinese provinces including Shenzhen, considered by many to be the Silicon Valley of China. “There’s a clear pattern that you can tell with some of the applications,” Perrott said. “They appear to be marks with arbitrary names or made-up jumbles of words.” Perrott notes that filing for marks that have no translation in a foreign language allows an applicant to file a trademark application on the cheapest basis possible, removing the need to file a $50 translation fee.

Another sign that these trademark applications may be fraudulent in nature are the doctored images which are supposed to show authentic versions of the articles which would be covered by the registered U.S. trademark. “In some cases they would leave the trademark of the original article,” Perrott said. “For instance, they’d take a Cartier watch, leave the Cartier mark on it and add their own name to it, so that led to an obvious refusal.” Perrott said that he has noted various doctored images which come from stock image databases like Getty Images which have been Photoshopped to add the mark claimed by the Chinese applicant. A specimen report filed by Perrott with the USPTO shows one such doctored photo of a Getty Image stock picture which has been edited to include a digital tag depicting the mark “GALAVAVA.”

Statistics provided by Perrott on the number of “in use” trademark applications filed from Shenzhen province alone tells a story of the massive increase of Chinese trademark application filings with the USPTO. Between 2014 and 2015, 1,214 trademark applications were filed and this increased up to 4,061 the following year. Then between 2016 and 2017, such filings ramped up to 11,016 applications, and then Shenzhen trademark filings nearly doubled between 2017 and 2018 up to 19,664. Thus far through 2018, 9,291 trademark applications have been filed with the USPTO from Shenzhen province alone. A screenshot of recent Shenzhen trademark applications filed at the USPTO shows that applicants are claiming what appear to be nonsensical word marks like “GZSMHD,” “CGMIBAS” and “DJM4.0.”

Although many of these trademark applications appear to be fraudulent, part of the issue with this situation is that many of the filings involved in this drastic increase may actually have been filed in good faith. “A lot of these applications are going to be valid registrations from Chinese entities looking to enter the U.S. market,” Perrott said. Anecdotally, Perrott noted a conversation he had with a friend that a lot of this increase could be the natural result of the U.S. government pushing the Chinese to take intellectual property seriously and improve their IP system. “My pragmatic assessment is that many of these applicants are focused on online retail through platforms like Amazon and a registered trademark can help with the brand registry required by those sites,” Perrott said.

Regardless of the nature of these trademark applications as either fraudulent or genuine, the increase alone could be problematic for the USPTO especially given the fact that the agency is funded through user fees. “There’s a short-term issue in whether or not they can keep up with the filings,” Perrott said. “Long-term, the agency is ramping up hiring to handle the influx and it could cause a huge gap in the budget.” The USPTO hires trademark applicants based on the number of applications and if many of these applications are filed in bad faith, there’s the possibility that the USPTO loses out on renewal fees that it expects after a five-year period. “That’s a huge unknown,” Perrott said. The situation could also leave many people question the integrity of the Federal Register for registered trademarks. “That’s what seems to me to be more urgent, making sure that a registered U.S. trademark is worth something,” Perrott said.

Although Perrott sees a more pragmatic reason why Chinese applicants would be filing more trademark applications with the USPTO, he concedes that the timeline for increased application filings does match up with the U.S. government’s increased pushback on China over IP-related issues. “If this was a coordinated effort, it seems like they’d be doing a better job at it,” Perrott said, noting that the applications which are obviously doctored are refused with regularity. “Whether this is the effort of a group of Chinese businesses or the Chinese government itself, that’s the million dollar questions.”

Perrott noted that the USPTO has taken steps in order to stem the tide of Chinese applications, especially those that are obviously fraudulent. The agency has taken steps to blacklist certain filing applicants, including correspondents that are listed when attorneys of record are not included in the application. Commissioner Denison has also suggested rules that would require trademark applicants to use U.S. counsel when filing for trademark applications, Perrott said, although the downside to that proposal could be that trademark filings could become cost-prohibitive for some foreign applicants who are engaging in good-faith trademark application filings.

“The conclusion that I’ve come to is that the government does not have a lot of options when it comes to dealing with these applications from a personnel standpoint,” Perrott said. Though there could be technological solutions to spotting fraudulent trademarks, such as image recognition technologies, that kind of specialized tech would be very expensive to implement. “This issue is very hard to deal with from the perspective of the systems that they have in place right now,” he said.