Trademark embodies the goodwill of a company and is one of the core assets of the company. Therefore, unless there is a special need, enterprises usually may not transfer their trademarks. However, in trademark administrative cases, we also often see trademark assignments. The reasons are mainly as follows:
1. The applicant applies to register a trademark, but it was blocked by cited trademarks. So if the applicant cannot remove the cited marks by opposition, non-use cancellation or invalidation or if the applicant fails to remove the cited trademark in opposition, non-use cancellation or invalidation, then the applicant may consider assigning the cited marks into their own name.
2. Another situation is that other companies or individuals maliciously rush-register a trademark so the true owner needs to get the mark by assignment. This situation was very common before 2019 - usually applicants from foreign countries used the trademarks and obtained certain reputation outside mainland China. However, it has not entered the Chinese market, so some Chinese owners have maliciously rush-registers the marks. Their purpose is also to identify the future value of the mark in Chinese market, and then attempt to sell the trademark at a high price through trademark transfer. After 2019, the CNIPA intensified the provision on malicious registrations without real use purpose, i.e. Article 4 of China Trademark Law. Such cases have become much less and less, but there are still cases where individual registrants preemptively register others' well-known foreign trademarks in small quantities. Since it is difficult for the true owner to invalidate or oppose to the mark according to Article 32 of China Trademark Law, the preferred strategy should be to assign the trademark.
So in the possible trademark assignment negotiations, we need to pay attention to the following issues:
1. Under the first circumstance, the other party may not be willing to transfer the trademark, especially if the mark is currently in use or the owner intends to use it. If the other party insists on not considering selling its trademark, then our transfer negotiations will have to be stopped. If the owner of the cited mark does not use the trademark, then we can further discuss with the other party about the price issue and transfer details. Note that in this case, the cited mark and the client's trademark are similar but not exactly the same, and the designated goods are also somewhat different, so it is unlikely that the client can directly use the trademark after purchasing it. The only purpose of the client purchasing the trademark is to clear the obstacles in the process of applying for trademark registration, so we have to keep the price as low as possible. On the other hand, since the owner of the cited mark does not register the cited trademark in bad faith, he often does not have high expectations for the assignment price.
2. Under the second circumstance, the owner is more willing to sell the mark, so sometimes he has a very positive attitude. Because the purpose of registering the mark is not to actually use but to sell it at a high price to make a profit, when someone contacts the owners to negotiate trademark assignment, the owners' attitude is generally more positive and the price offered is higher. In order to avoid the other party's request for high trademark transfer fees, we can consider hiding the client's true information and conduct the negotiations anonymously first.
The following issues are common and we need to pay attention to them during the assignment negotiation:
First of all, for trademarks that have not been approved for registration, i.e. for marks that are still under substantial examination, or have been preliminary approved but still in the opposition period, we do not recommend filing assignment before their registration is published. The reason is that the status of the mark is unstable and may eventually become invalid due to rejection or opposition. If the trademark is ultimately not approved for registration due to various reasons, then the transfer of the trademark is essentially unnecessary. In addition, there may be a risk that the client's down payment for purchasing the mark will not be returned. In this case, if corresponding relief methods are not agreed upon in the assignment contract, the client will be more passive in subsequent procedures.
Secondly, it is best to stipulate in the trademark assignment contract that "from the date of signing the contract to the date of the trademark assignment recordal is published, the assignor shall not claim infringement against the assignee for the use of the trademark." Before the assignment recordal is published, the assignor is still the legal right holder of the trademark, so the market behaviors of the assignee constitute trademark infringement. In order to avoid this problem to the assignee, we also recommend that the above terms be stipulated in the assignment contracts.
Finally, it is necessary to write into the assignment contract the clauses regarding the assignment of all of the existing same/similar trademark over same/similar goods and services, and the prohibition on applications of any other same/similar mark over same/ similar goods and services, because this will effectively solve the similar trademarks problems.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
