A flood of new trademark applications coming from China — many of them believed to be fraudulent — is swamping the U.S. system, making it harder for homegrown companies to register their products and defend themselves against intellectual property theft.

The surge in filings has arisen in part due to government financial incentives offered to Chinese companies in recent years to seek trademark registrations in countries like the U.S. and U.K., as China seeks to bolster its reputation for innovation.

But American attorneys say the incentives — which are often of greater value than the cost of filing for a trademark in the U.S. — provide an opportunity for Chinese interests to make a quick profit from bogus applications, all the while clogging up the process for companies filing for genuine trademarks.

That’s a concern shared by the U.S. Patent and Trademark Office. In a report published in January, it pointed to Chinese subsidies and rise in ‘bad-faith’ trademark applications coming from the world’s second-largest economy. Another investigation carried out by World Trademark Review in May found a significant number of suspicious trademark applications originated from China during a typical week in 2019. 

“It delegitimizes the U.S. trademark registry,” says Josh Gerben, a Washington D.C.-based trademark attorney and founder of Gerben Intellectual Property, adding that he now advises clients that registering a trademark will likely take 12 to 15 months, up from 8 to 10 months in the past. 

Such delays are troublesome because while businesses are waiting to get their trademarks approved, their products are unprotected from counterfeiters. That protection is especially important for anyone selling products on platforms like Amazon and Alibaba, as it gives them the ability to pursue legal recourse against intellectual property theft.

Gerben says his firm gets several inquiries a month from people or firms in the U.S. whose trademark applications have been denied because of what appears to be a fraudulent Chinese trademark. Many, though, are individuals or small businesses, which often can’t afford to spend the $2,000 to $5,000 needed to cover the filing and attorney fees to make a challenge.

“Sometimes clients can really be stuck in this sort of No Man’s Land of having to wait for their trademarks to register before they can do any kind of enforcement around issues that they’re seeing with infringement,” says Gerben. 

The surge in Chinese trademark applications in recent years shows little sign of abating. The USPTO had received 77,305 filings from China as of May 31 this year — just under half of the total filed by U.S.-based businesses, and a more-than three fold increase over the same period last year. 

It delegitimizes the U.S. trademark registry.

Josh Gerben, a Washington D.C.-based trademark attorney and founder of Gerben Intellectual Property.

Over the past decade, several Chinese provinces have offered cash incentives to local businesses to obtain trademarks in eligible foreign countries — some 77 sub-national trademark subsidy measures were in place as recently as 2019, according to the USPTO in its report this year on Trademarks and patents in China. 

In one example, the southeastern city of Shenzhen in 2013 started offering a subsidy of RMB 5,000 – roughly $750 – for trademark registrations overseas. That led to a sharp rise in applications coming from the area, especially after the USPTO reduced its electronic trademark filing fee from $275 to $225 in 2015. By 2017, some 42 percent of all trademark filings from China to the U.S. had originated in Shenzhen.

Shenzhen has since reduced its subsidy to RMB 1,000, or about $150. Even so, with other generous support schemes still available across China, the number of trademark applications from the country has remained high. The USPTO’s move to increase its online filing fee back up to $275 per application earlier this year has also done little yet to stem the tide.

“It’s really cluttering the registry,” says John S. Miranda, a trademark and copyright attorney for law firm Abelman Frayne & Schwab in New York, who worked as a trademark examiner for the USPTO from 2015 until 2020. 

Miranda says the USPTO would often receive what appeared to be fraudulent trademark applications for names composed from random letters and symbols that occasionally resembled an English word or phrase. The applications would often come with doctored photos, used as ‘proof’ of a product’s existence and usage.

“They would take a picture of a toy dinosaur and they would put it into Photoshop,” says Miranda. “And they would type their trademark on the top of the toy dinosaur — just to make a fake specimen.”

The Wire reached out to the U.S. Patent and Trademark Office for a comment, but hadn’t received a response in time for publication.

It’s hard to know for sure how many trademark applications from China aren’t genuine. However, Barton Beebe and Jeanne C. Fromer, two law professors at New York University School of Law, found that two-thirds of the trademark filings originating from China in 2017 in the apparel goods category alone were fraudulent. The authors, who studied photo evidence submitted with the trademark applications and published their findings in a study published in the Columbia Law Review last November, estimated that roughly 40 percent of these fraudulent filings still proceeded to registration. 

In an attempt to counter fraudulent applications from China and elsewhere, the USPTO from August 2019  started to require foreign businesses to have a U.S.-based attorney to submit applications on their behalf.

“It was a lovely idea but a bit naïve,” says Robert Reading, head of content strategy in the IP Group at London-based research firm Clarivate Analytics, who analyzes trademark filings across the world. 

Reading believes Chinese businesses have sought out U.S.-based attorneys willing to sign-off on applications already filled-out for them. That would explain the large number of trademark filings from China last year submitted by small U.S.-based law firms: All but one of the top 50 representatives for trademark filings in the U.S. were new entrants in 2020, on a list normally dominated by major law firms, according to Reading. 

Josh Gerben of Gerben Intellectual Property says his firm has received many inquiries from Chinese businesses, asking them to sign already prepared trademark applications for a small fee of $50 or so. He says the firm has never accepted.

John Miranda, the former USPTO employee, says the agency has started to train staff to recognize digitally-altered specimens submitted as proof of trademark use, for example by recognizing unnatural shading and the unusual bend of words on products. 

Late last year, Congress passed The Trademark Modernization Act of 2020, designed to address the issue of fraud by offering trademark owners and seekers new tools to make it easier to challenge fraudulent trademarks. And by the end of this year, the USPTO is planning to introduce additional tools to strengthen the integrity of the federal trademark register., including new procedures to make it easier to cancel unused trademark registrations. 

John B. Farmer, intellectual property attorney at Leading-Edge Law Group in Richmond, Va., says the best way to resolve the issue of fraud is to start requiring proof of use for every product and service an applicant tries to claim.

“The trademark office is doing a pretty good job of trying to attack this with a bunch of tools, it’s just none of them is perfect,” says Farmer — adding that as long as financial incentives for fraud remain, it will likely always be an issue.

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