Important matters in trademark trading and transfer

In recent years, trademark trading has developed rapidly. In November this year, the Guangdong-Hong Kong-Macau Greater Bay Area Intellectual Property Trade Expo was in full swing, where it was evident that trademark trading has increasingly aroused some widespread concerns. Trademark transfer is a necessary administrative procedure for trademark trading to be executed according to law. In this article, the key steps and important points requiring attention in trademark negotiation and transfer are introduced.

Matters requiring attention of transferor (often trademark registrant)

For the transferor, the most important thing is to determine the real purpose of the transferee for obtaining the trademark, and to determine the trademark trading price and payment terms.

Matters requiring attention of transferee (often trademark buyer)

(1) Determining the legitimacy, integrity, validity and stability of the transferor’s rights to the trademark, including:

a. Checking whether the trademark is out of malicious registration. Maliciously registered trademarks do not have the basis of right protection from the beginning. At present, there are some trademark applicants who hoard trademarks and sell them as commodities. All trademarks under such applicants’ names risk being deemed as “maliciously registered trademarks not for the purpose of actual use”. For this kind of trademark, even if the transferee obtains it in good faith, the trademark cannot be “whitewashed”, and may still face the fate of being rejected or declared invalid;

b. Determining whether the trademark is jointly owned;

c. Determining whether the trademark has been rejected, challenged, invalidated or revoked, etc.;

d. Determining whether the trademark is frozen, licensed, pledged, etc.;

e. Determining whether the trademark is facing the risk of being revoked after suspension of use for three years; and

f. Determining the effective registration date and renewal of the trademark.

(2) Determining the subject qualification of the transferee. Pursuant to the provision in article 42 of the Trademark Law, that: “The trademark office shall not approve the transfer that is likely to cause confusion, or result in other unfavourable effects”, the trademark office will conduct a substantive examination on trademark transfer. For example, the Standards for Examination and Trial of Trademarks provides that, “If there is a substantial difference between the name of the enterprise contained in the trademark and the name of the applicant, it constitutes the situation of article 10.1.7 of the Trademark Law, that is, “likely to cause public confusion in terms of the origin and source of goods or services”. In the practice of trademark transfer, a common situation is that the trademark registrant transfers a trademark consistent with its full name to its affiliate. Obviously, it is impossible for the name of the trademark transferee (affiliate) to be consistent with the trademark, and the trademark transfer will not be approved, according to the examination standard.

(3) Determining whether the transferor has other identical and similar trademarks that need to be transferred together on the same or similar goods and services.

(4) The transferor should be required to issue a notarised declaration of consent to trademark transfer or transfer contract, and keep it properly, to avoid the situation that the transferor refuses to co-operate when the trademark office requires submission of documents proving the true intention of the transferor, and eventually results in the transfer not being approved.

(5) The transferor shall be required to hand over the original trademark registration certificate. After completion of the transfer, the right in the trademark can be exercised only when the trademark transfer certificate and the trademark registration certificate are used together.

(6) The transferor should be required to sign the authorisation document for exclusive use of the trademark without consideration, that is, the transferor should be required to authorise “the transferee to exclusively use the trademark without consideration before the trademark transfer is approved”, to encourage the transferor to co-operate in the trademark transfer and avoid the risk of infringement. This revelation comes from the iPad trademark ownership dispute, which caused a nationwide sensation more than 10 years ago.

In September 2000, Proview Technology (Shenzhen) applied to the China Trademark Office for registration of two “iPad” trademarks on category 9 “computers; computer peripherals” and other commodities, which were approved for registration in June 2011.

On 17 September 2010, Apple launched the iPad tablet with the same name in mainland China.

On 17 December 2009, Taiwan Proview signed a trademark transfer agreement with IPADL (an affiliate of Apple), and transferred the iPad trademarks, including the trademark in question, to IPADL at a consideration of £35,000 (US$47,000). In February 2010, IPADL signed a right transfer agreement to transfer the two trademarks in question to Apple.

The application for trademark transfer was not accepted by China Trademark Office, and Apple was soon facing a huge risk of trademark infringement.

In June 2012, Apple and Shenzhen Proview reached a mediation agreement, and Apple paid US$60 million to Shenzhen Proview. As a consideration, Proview transferred the “iPad” trademarks in question to Apple.

In this case, if Apple could have obtained the exclusive-use licence of the trademark, it would not have faced infringement risk when using the trademark within the permitted scope, even if the trademark transfer was not approved, and the transferor would be more motivated to co-operate in the completion of the transfer.

Matters requiring attention of both transferor and transferee

(1) Trademark transfer requires the transferor and transferee to jointly submit an application to the trademark office.

(2) Both paper submission and electronic submission are acceptable, but the documents signed in these two ways are completely different. Transferor and transferee shall determine the submission method according to the actual situation, and sign corresponding and correct documents as required by the trademark office.

The matters involved in trademark trading and transfer procedures are tedious, but crucial. A little carelessness may result in failure to achieve the purpose of the trading, or even cause huge property loss. It is recommended that a professional trademark agency should be entrusted to handle these matters.

Claire Zhao is a partner, attorney-at-law and trademark attorney at Sanyou Intellectual Property Agency