Recent actions taken by Beijing’s IP court reveal that foreign entities must provide legalized evidence supporting the power of a signatory on certain corporate documents, including powers of attorney (POAs) and certificates of good standing. This heightened evidence standard has had more effect on American companies than their European counterparts.
In the People’s Republic of China, the China National Intellectual Property Administration (CNIPA) administers the registration of trademarks for entities seeking to sell goods or services within the country. Trademark applicants who are dissatisfied with an adverse decision at the CNIPA’s Trademark Office can ultimately appeal the decision to the specialized intellectual property court in Beijing, which has exclusive jurisdiction over appeals of CNIPA trademark actions. However, recent analysis from IP professionals working in China has revealed that foreign companies, especially U.S. corporations, now face heightened requirements for submitting legal documents required when appealing Trademark Office decisions to Beijing’s IP court.
According to analysis provided by Paolo Beconcini, an IP consultant at Squire Patton Boggs who has 16 years of experience working on Chinese IP matters, recent actions taken by Beijing’s IP court reveal that foreign entities must provide legalized evidence supporting the power of a signatory on certain corporate documents, including powers of attorney (POAs) and certificates of good standing. Such documents are required by the Beijing IP court to accept appeals from foreign entities and a signature from a board chairperson has typically sufficed for the court in the past. Recently, the court has begun requiring foreign parties filing appeals to provide evidence in company bylaws or relevant statutes to show that a signatory to corporate documents has been specifically authorized to sign those documents. Without submission of this legalized evidence, the Beijing IP court has indicated that it will reject appeals from the Trademark Office.
In an interview with IPWatchdog, Beconcini noted that he had never come across this issue in his years of experience consulting in Chinese trademark appeal issues until recently. Although he couldn’t pinpoint a date regarding the change, he said that requests for such evidence from the Beijing court began with appeals filed in the November/December time frame. “The Beijing court has been coming back to clients and asking them where the chairman derives his power to sign these documents in place of the board,” Beconcini said. “They’re asking for board resolutions, corporate bylaws or state laws to support the chairman’s power to sign these documents.”
Appeals of trademark decisions at the CNIPA are common for various reasons. Beconcini noted that the issue of trademark squatting in China means that even well-established U.S. companies can find themselves required to file cancellation actions on existing trademarks registered in China’s first-to-file system. When registering trademarks, an examiner will often reject a Chinese trademark application if they find that a similar trademark has already been registered. If a trademark registration or cancellation action is rejected, the first appeal is made to China’s Trademark Review and Adjudication Board (TRAB), which institutes an administrative review process. If that appeal is unsuccessful, the next recourse is filing an administrative lawsuit against the TRAB at the Beijing IP Court. It’s at this point that a foreign company will need to produce the heightened legalized evidence that the Beijing court has recently begun to request for such appeals.
Beconcini added that the heightened evidence standard has had more effect on American companies than their European counterparts appealing decisions from China’s Trademark Office. While some might chalk this up to retaliatory politics given the current context of U.S.-China trade tensions, Beconcini believed that the issue isn’t political in nature but rather comes down to a Chinese court that is trying to be more thorough in authenticating corporate documents. “I think that much of it has to do with the way that corporate records are kept in Europe versus the United States,” he said. The European Business Register, where information regarding European corporations is recorded, already indicates corporate representatives who can act as a proxy for the board. The process of registering a corporation in the U.S. doesn’t involve the identification of such proxies.
Further, the enhanced awareness regarding the authorization of POA and certificates of good standing may signal the alignment of Chinese courts with cultural and economic practices within the country. “In China, there’s a lot of sensibility about the authentication of documents because it’s a country where forgery has been the rule,” Beconcini said. Chinese corporate documents aren’t signed but rather “chopped,” or affixed with a red stamp or seal which serves as legal authorization for corporate documents. “It’s possible that the Beijing IP court thinks that this heightened requirement could help American companies by making sure that there are no fraudsters trying to file documentation on a corporation’s behalf without the corporation knowing,” Beconcini said. In any event, the fact that this change in practice regarding corporate documentation, which hasn’t been prompted by a change in statute, has taken place under the radar indicates that there’s nothing retaliatory in nature about the change.
What to Do
Any U.S. company that wants to operate in the Chinese market should think about making the requisite changes to corporate bylaws or passing a board resolution to signify a particular corporate proxy for signing POAs or certificates of good standing, Beconcini said. This includes companies that might not think they want to file for a Chinese trademark. Unlike the U.S., there are no Chinese common law protections for trademarks, so registering a mark is the only way to protect a brand. “I might tell a client not to worry about making the change immediately,” Beconcini said, “but as soon as you receive that first rejection at the Trademark Office, you might want to start preparing.”
Staying ahead of an appeal to the Beijing IP court would be a major benefit to U.S. companies because of cost and timing issues, Beconcini said. Trademark appeals to the Beijing court must be filed within three months of a rejection or invalidation issued by China’s Trademark Office and, because correspondence with the Beijing court can take a period of weeks, it’s easy to lose a large chunk of valuable time just trying to get corporate documentation properly legalized. “Sometimes companies have to create solutions right on the spot and you can easily imagine situations where a company misses the deadline,” Beconcini said. He added that the Beijing court has also declined scanned copies of bylaws or board resolutions granting proxy power to the signatory, asking instead for original copies of such documents.
Further, the cost of filing an appeal to the Beijing IP court is about 10 times the cost of an appeal to the TRAB within the Trademark Office and if a company cannot prove that corporate documentation has been legally authorized, that company could lose anywhere from $12,000 USD to $15,000 USD by having its appeal rejected. “That’s money that a client could use to refile a trademark application,” Beconcini said.
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