Apr 26, 2023Legal
Patexia Insight 176: Chinese Trademark Filings Decline After a Decade

Tomorrow marks the release of our third annual Trademark Intelligence Report, which focuses on trademark filings made between January 1, 2018, and December 31, 2022. A total of 2,939,200 trademarks were filed during this five-year period by 206,722 U.S. and foreign trademark applicants. The USPTO processed 2,510,218 trademark applications, out of which 1,565,486 were registered and 944,732 were abandoned, resulting in a registration rate of 62.4% percent. One highlight of this report is the decline in trademark applications originating from China, which had shown steady growth for a decade and was previously ranked among the top countries in terms of year-over-year growth.

Over the past three years, China has drawn considerable attention for its increasing number of patent and trademark applications filed with the USPTO. As covered in Patexia 136, in 2021, China surpassed South Korea for the number of patent applications, becoming the second-most-active foreign country after Japan. This trend continued in 2022 as China closed the gap with Japan and widened it with South Korea. A similar pattern is observed in the trademark landscape. In Patexia 137, we reported that there was a significant influx of trademark applications from China to USPTO for two consecutive years, namely 2020 and 2021.

Over the course of the study period covered by Trademark Intelligence Report 2023, the USPTO received trademark applications from a total of 218 countries. Among these, entities based in the United States were the most active, accounting for nearly two-thirds of all applications filed, equivalent to 1,889,477 applications. China followed with 20.1% of applications, or 592,088. According to our data, China has been one of the most active countries in trademark filings during the past decade. The chart below displays the filing activity of China from 2013 to 2022, revealing an upward trend over time.

Between 2013 and 2022, the number of filings from China rose significantly from 4,048 to 114,139. The most substantial increase occurred between 2019 and 2020, with an additional 100,953 filings, representing a 144% increase. This growth could be attributed to various factors, including the Chinese government's policies that promote innovation and entrepreneurship, the rapid expansion of e-commerce in China, and the country's increasing integration with the global economy. However, the recent surge in filings is disproportionate and cannot be solely explained by these factors. The USPTO has attributed this growth to "non-market factors." Government subsidies in China that exceed the cost of filing at the USPTO may have contributed to the rise in trademark filings. However, this has also led to misconduct and fraudulent filings, with some applicants altering images and attempting to register trademarks with no commercial use. Some studies show that over 60% of fraudulent filings are made to create a clutter of trademarks, posing a risk of trademark depletion. Bad-faith applicants have also been a problem, "ransoming" legitimate trademark owners through squatting or selling products that closely resemble other brands. Despite these issues, legitimate trademark owners have been pushed to register their marks to prevent others from doing so, leading to a further increase in trademark applications.

In 2022, there has been a significant decline in trademark applications from China for the first time in over a decade, which may be due to a larger trend of declining trademark filings globally. The decline was also reflected in reports of a sharp drop in trademark filings by the European Union Intellectual Property Office (EUIPO) in Europe. Moreover, in the first three quarters of 2022, trademark applications from China declined by 18.18% compared to the same period in 2021. While the exact reasons for the decline in trademark applications from China are not entirely clear, there are a few factors that may have contributed to this trend.

To address issues such as fraudulent filings and bad-faith practices, the USPTO has taken actions such as suspending trademark attorneys found to be representing clients with rushed and sloppy trademark applications. Such action may have prompted other attorneys to be more cautious in representing their clients for trademark applications and ensuring the credibility of both applications and applicants. The USPTO has also taken measures against individuals and entities engaging in fraudulent practices, demonstrating its commitment to protecting the interests of legitimate trademark owners.

The EUIPO has also launched IP Key China to improve the examination of trademark applications originating from China. The project involves specialized training for examiners, as well as enhanced communication and cooperation with Chinese trademark authorities. The goal is to improve the quality and accuracy of trademark applications from China, while also reducing the risk of fraudulent filings.

Additionally, China's National Intellectual Property Administration issued a Draft Amendment to the Trademark Law aimed at reducing the malicious registration of trademarks and enhancing the overall quality of applications. These measures might have resulted in a decrease in Chinese trademark applications globally, while their effectiveness will be observed in the coming years.

While the decline in trademark applications originating from China is a significant development, it is essential to keep in mind that Chinese trademarks still constitute a considerable portion of the global trademark landscape. The fact that one out of every five trademark applications filed in 2022 came from China, underscores this point. Therefore, it is crucial to continue monitoring the trademark registration trends in China and to remain vigilant against fraudulent and unethical practices in trademark filings. As the various regulatory bodies work towards improving the quality and accuracy of trademark applications, it remains to be seen how this will impact the global trademark landscape in the years to come.

The full Trademark Intelligence Report delves deeper into providing data on trends in filing and registration, office actions, extensions, and design search codes among others. We have evaluated 206,722 U.S. and foreign trademark applicants, 26,274 trademark firms, and 32,904 trademark attorneys who represented these applicants or owners. The report includes their rankings that are based on Activity and Performance, and we have identified the top 2,000 attorneys, law firms, and companies.

Stay tuned as in the following weeks we will be covering additional statistics from this report, along with highlighting some of the most active and best-performing companies, law firms, and trademark attorneys.

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