USPTO Imposes Sanctions on Flagrant Fraudulent Filer

“The sanctions imposed Friday mean that a) all proceedings involving submissions filed by Huanyee Intellectual Property Co. are terminated and b) the company is precluded from further correspondence or submissions.” Friday, December 10, the United States Patent and Trademark Office (USPTO) issued a “Show Cause Order” imposing sanctions against Huanyee Intellectual Property Co., Ltd. and its Executive Director, Yusha Zhang, for violations of the USPTO’s trademark rules of practice relating to improper trademark submissions. The 198-page Order, comprised mostly of an exhibit listing all of the company’s trademark filings, indicates that the respondents named in the Order “have filed more than 15,000 trademark matters before the USPTO” and “engaged in the unauthorized practice of law, provided false domicile information for applicants, impermissibly entered the signature of the named signatory on declarations and verifications, and violated other USPTO Rules and the USPTO’s website terms of use.”

The Order is the result of “an extensive administrative orders process to investigate improper trademark submissions and to protect the integrity of the U.S. trademark register,” according to a USPTO release.

Tackling the Fraud Problem

This is the latest episode in a continuing crackdown by the USPTO on fraudulent trademark filings, which was further bolstered this year by implementation of the Trademark Modernization Act. In June, USPTO Commissioner of Trademarks David Gooder reported in a blog post that the USPTO had received 63% more trademark applications (211,000 additional filings) through June 17, 2021, when compared to the same period in 2020. Part of that was attributed to the growth of the internet economy during the COVID-19 pandemic, but in August 2021, the U.S. Department of Commerce Office of Inspector General (OIG) published a final report on the audit of the United States Patent and Trademark Office (USPTO) trademark registration process. Since 2015, the USPTO has seen a rapid uptick in potentially fraudulent trademark applications, and a previous audit in 2012 found that more than 50% of audited trademark maintenance filings contained goods/services not in use in commerce. And in January 2021, the USPTO issued a report on Chinese patent and trademark filing activities showing that government subsidies and other non-market factors are likely playing a much larger role in encouraging fraudulent applications from Chinese entities, rather than organic invention or economic activity.

Although the Chinese government has publicly said that it will eliminate all government subsidies offered by provincial governments for patent application filings by the year 2025 and has amended trademark law to make it simpler for legitimate brand owners to challenge bad faith filings by trademark squatters, Chinese entities are still encouraged to file many bad faith applications to cover trademarks that are in actuality owned by unrelated third parties.


Effectively Banned from Filing

The sanctions imposed Friday mean that a) all proceedings involving submissions filed by Huanyee Intellectual Property Co. are terminated and b) the company is precluded from further correspondence or submissions. Among the specific violations cited in the Order are that Ms. Zhang is not a U.S. licensed attorney, nor does Huanyee have any U.S. licensed attorneys on staff who supervise Respondents’ work; the respondents provided false applicant domicile addresses to circumvent the U.S. counsel rule; the respondents had impermissibly entered the signatures of others; and that the respondents had misused and TEAS accounts by registering and sharing access to at least three separate accounts including the name of Yusha Zhang.

Megan Bannigan of Debevoise & Plimpton said the Order is significant because of the sheer volume of fraudulent filings involved. “The amount of fraudulent applications deriving from this party was staggering – over 15,000. The order is big news because it sends a strong message that parties who circumvent USPTO rules – and file fraudulent trademark applications – will be caught and sanctioned.  This is all part of the stronger crackdown by the PTO against fraudulent filings, with several investigations commenced over the last year into large volume filers and the attorneys who represent them.”

Bannigan added that “it remains to be seen if parties with lower volumes of fraudulent applications will be as easy to target or readily caught,” but said it is still a positive development: “The order is certainly another positive development in weeding out flagrant fraud and a step in the right direction to restore the integrity of the Trademark Register and make it more reliable,” Bannigan explained. She added that the new proceedings recently implemented under the Trademark Modernization Act will also help.

“With the implementation of the new cancellation and expungement proceedings brought about from the Trademark Modernization Act, the USPTO and practitioners will have even more tools at their disposal to fight fraudulent filings and deadwood on the register.”

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