Chinese filers at the USPTO: a timeline

A rise in filings from a given jurisdiction is not itself a bad thing. It can be an indication of brand building and the use of IP rights to sustain economic growth. It can also benefit the organisations tasked with maintaining the register (see "The EUIPO experience"). However, the rapid increase in US filings from China has become a divisive topic, with worries over register clutter and the legitimacy of (and motivation for) a number of applications. Figure 1 shows just how significant that rise has been.

November 2017 – Concern voiced over specimens

As Figure 1 illustrates, the volume of filings from China really started to increase around 2016 and in November 2017 the first concerns were vocalised. At the USPTO Trademark Public Advisory Committee’s quarterly meeting, then-trademark commissioner Mary Boney Denison warned: “There has been a dramatic increase in Chinese filings which don’t appear [to be] legitimate. Many people are sending in fake specimens as part of applications; we are working on a suspicious specimens email box to help with this.”

The introduction of an email address for third parties to report suspicious specimens was the first of many measures that the office would put in place to identify and tackle suspicious specimens. The same month, WTR published the first in a series of investigations into suspicious specimens – in particular, the use of digitally altered images and the application of trademarks onto generic items (see "From the WTR archive: how suspicious specimens became a blight on the US register").

February 2019 – USPTO proposes rule change

On 15 February 2019 the USPTO published a proposal to change federal trademark law to require all foreign-domiciled trademark applicants, registrants and parties to TTAB proceedings to use an attorney who is licensed to practise law in the United States. The move was intended to combat the problems posed by “foreign trademark applicants who purportedly are represented pro se (ie, one who does not retain a lawyer and appears for himself or herself) and who are filing inaccurate and possibly fraudulent submissions that violate the Trademark Act and/or the USPTO’s rules”.

During the subsequent comment period, INTA highlighted another cause for concern. “Foreign applicants and registrants may, without permission or consent, fraudulently use the address and contact information of US attorneys, but nonetheless continue to handle matters pro se,” the association warned. By this time, reports were already circulating of a solicitation email to US lawyers from an entity in China asking to use their details in filings. Moreover, after being informed that she was the subject of an Office of Enrolment and Discipline misconduct investigation, a Canadian patent agent discovered that her name had been used in hundreds of US trademark applications on behalf of Chinese-based applicants.

August 2019 – Rule change causes a stampede of filings

The US Counsel Rule was introduced on 3 August 2019. Perhaps unsurprisingly, the preceding month saw a surge in applications (see Table 1). Seemingly in a bid to lodge applications before the new requirements came into effect, over 55,000 filings were made by Chinese applicants at the USPTO – accounting for 36.5% of the office’s total filings that month.

February 2020 – The calm before the storm

Filing numbers from China dropped in the initial months after the rule change. In late February 2020, WTR visited the USPTO and met with Meryl Hershkowitz, who was serving as acting USPTO trademark commissioner before David Gooder took up the role on a permanent basis in March 2020.

At the time, Hershkowitz noted: “We are very happy with the results of the representation rule change. It is still very early but before the rule was implemented, there was a large spike in foreign applications. Since that time, things are levelling off, so we are back to a more ‘usual’, more average, level of filing numbers for foreign applications. We have definitely seen a levelling off and are seeing more compliance with the rule.” She also reported that the level of refusals due to digital manipulation had dropped substantially.

October 2020 – Problems remain as application levels ramp back up

Speaking at the WTR Connect event in early October 2020, USPTO trademark commissioner David Gooder provided an update on efforts to protect the integrity of the trademark register, which included a post-registration audit programme designed to clear out dead wood. At the time, 1,648 first action letters had been issued and 1,016 registrations had been cancelled for failure to respond. To tackle suspicious specimens, the office had created a dedicated task force and developed various tech tools to identify images that may be fraudulent. However, Gooder noted other concerning behaviours. “There is unauthorised use of attorney details, improper signatures, false applicants that don’t exist, and we are now seeing unauthorised changes of correspondence information,” he stated.

December 2020-January 2021 – High demand continues, with significant pre-fee rise spike

Towards the end of the year the USPTO confirmed that it would be adjusting its trademark and TTAB fees from the 2 January 2021 in a move that it predicted would result in a $76 million boost in trademark-related income for fiscal year 2021. This led to a significant spike in applications in December 2020 as applicants rushed to push their filings through at the lower rates. In fact, USPTO filings jumped from just over 56,000 the month before to more than 90,000, with Chinese applicants accounting for roughly half (see Table 1). Nevertheless, January 2021’s figures still beat those of January 2020 as high demand continued unabated.

January 2021 – USPTO signals concern

On 13 January 2021 the USPTO published a report on the influx of trademark applications from China, claiming that many “lack value and clutter the trademark register”. The document, “Trademarks and Patents in China: The Impact of Non-Market Factors on Filing Trends and IP Systems”, charts the rise in applications by office financial years, rather than calendar years as previous records have done.

A key concern for the office is escalating clutter and the threat to the integrity of the register posed by fraudulent filings among Chinese applications. The report states: “A cluttered registry complicates clearance searches and can narrow the scope of protections available to mark holders engaged in the legitimate sale of goods and services. Many of the same observations apply to trademark applications filed in bad faith. Rather than serve as a useful source identifier for goods and services, bad-faith registrations are obstacles to legitimate commerce. The practice also gives rise to defensive filings of unused marks.”

As to the motivation of applicants, the report points to “non-market factors” including what it terms ‘Shenzhen subsidies’. Expanding, the report states that China has reportedly adopted more than 70 sub-national trademark subsidy measures, including for domestic and foreign applications and registrations. It contends that, because the amount offered by these subsidies often exceeds the cost of registering a trademark, it provides a financial incentive to apply for rights even where there is no intention to use the mark in commerce.

As an example, it notes: “In 2013, Shenzhen issued operating procedures that allowed applicants to seek a subsidy of Rmb5,000 (approximately $750) for trademark registrations in eligible foreign countries, including the United States. After the USPTO lowered the fee for its lowest-cost, fully electronic applications to $225 in 2015, the cost to file at the USPTO was substantially lower than the amount of the subsidy. In four years (fiscal years 2013-2017), US trademark filings from China increased by 1,264%, with applications from Shenzhen accounting for more than 42% of applications from China in fiscal year 2017.”

As well as subsidies, the USPTO states that in March 2020 the Chinese government directed its state-owned enterprises to increase trademark filings under the Madrid System by 50%. “This government mandate is an example of a second non-market factor driving trademark applications.”

Looking ahead

Following the passing of the Trademark Modernisation Act 2020, the USPTO is now tasked with developing new procedures to allow third parties to “more readily challenge pending applications and issued registrations that may be spurious”. It is understood that this stipulation was added because of the influx in filings by Chinese applicants.