"Small" Trademarks, "Big" Trouble: How Can Entrepreneurs Effectively Avoid Pitfalls? | Code Brain Episode 14

Code Brain

Issue 14

Code Brain is a flagship component of Source Code Capital's systematic, productized post-investment service system. It represents our commitment to equipping Ma Hui entrepreneurs with the knowledge upgrades they need. At every stage, we strive to deeply understand and continuously explore founders' evolving needs, iterating on Code Brain in real time so entrepreneurs at different phases receive sustained intellectual nourishment. Our goal is to make post-investment services truly "helpful" — creating distinctive value for founders.

In today's business landscape, intellectual property has long been a critical pillar of a company's competitive moat.

As China's market evolves rapidly, more and more enterprises are prioritizing trademark design, registration, promotion, and protection from day one — particularly consumer-sector startups, for whom trademarks are central to brand and product-market strategy.

As China integrates with global markets and domestic competition intensifies across industries, trademarks — as a key element of IP protection — have become increasingly contentious. Civil, criminal, and administrative cases involving trademarks have grown rapidly. Market abuses persist: bad-faith registrations, malicious infringement, and copycat schemes where the fake is indistinguishable from the real remain rampant.

How can companies ensure comprehensive trademark registration? How should they manage trademarks effectively on a day-to-day basis? How can they defend their rights when harmed? To address these questions, we invited Dr. Qi Fang, partner at Fangda Partners and a renowned IP attorney, to share his expertise online with our Ma Hui entrepreneurs.

Partner, Fangda Partners. Primary practice areas include IP-related transactions and litigation, as well as antitrust litigation.

Named one of China's top 100 lawyers by China Business Law Journal. Also recognized as a recommended lawyer in IP by Chambers and Asia Business Law Journal.

Represented basketball legend Michael Jordan in a series of lawsuits against Qiaodan Sports Company across multiple Chinese courts for using Jordan's name and likeness as its trade name and trademark, securing favorable judgments.

Represented Tesla in successfully recovering ownership of its "Tesla" trademark and related corporate names and domain names from a malicious squatter who had registered identical marks.

Dr. Qi Fang: Hello everyone! I'm very glad to have this opportunity to discuss trademark registration and protection with you. Today's presentation has three parts: first, trademark registration and management; second, trademark rights protection; and third, mitigating trademark infringement risks.

I. Trademark Registration and Management

1. Trademark Registration and Application

1) What registration strategy should startups adopt?

Whether we're talking about trademarks, patents, or copyrights, IP always begins with ownership — only then do questions of protection or third-party use arise. Obtaining a trademark involves application and registration. For an early-stage company, or one without clearly defined business areas or a finalized mark, how should it proceed with application and registration? As lawyers, our advice is: register early. China operates on a first-to-file system. Registration grants nationwide protection and can prevent other companies from registering or using similar marks on similar products. So early application is crucial.

2) Design considerations for registered trademarks

First, before applying, you need to know what mark you're applying for. When designing your mark, you should understand what kind of design won't conflict with others' prior rights. Conflicts with prior rights can lead to subsequent disputes.

Prior rights include prior trademark rights, so you need to check for similar existing marks — especially popular designs that may have been preemptively filed by others. If assessment shows registration will be very difficult or unlikely, the company needs a backup plan early: either apply for a different mark, or try to register the original while simultaneously applying for alternatives.

Second, regarding whether to use text or graphics, many companies want their trademark to convey product information — but this carries risk of non-approval. Take the beverage "Six Walnuts" (Liu Ge He Tao). The mark did ultimately register; the applied-for mark suggested the drink contained walnuts. Traditional Chinese medicine holds that walnuts have nourishing effects, but "Six Walnuts" was actually very difficult to register. It finally succeeded by demonstrating long-term use prior to application, proving the mark had established association with the company.

A trademark's primary function is to link the owner and its products. Consumers should recognize your product at a glance, but the mark shouldn't communicate quality, ingredients, or other product information. If it does, from a trademark law perspective, the mark lacks distinctiveness on one hand, and appears to monopolize the field on the other. These are factors to consider in pre-application design.

Third, a trademark has two main components: the mark's design, and the categories of goods and services. Only together do they define the scope of protection. Registration must specify which categories of goods or services the mark covers to receive protection there.

Finally, the mark must be permissible under trademark law — it cannot be harmful to socialist moral values, a relatively objective standard. Recently, the Trademark Office has increasingly applied this provision. For example, a Shanghai trading company applied for a four-letter mark "MLGB"; both the Trademark Office and courts deemed it in poor taste with bad connotations, harmful to moral standards. Another factor: the company had applied for multiple borderline marks, leaving authorities with the impression it was exploiting the registration system to secure objectionable marks. Article 10(1) of the Trademark Law lists eight categories of marks that cannot be registered or used, including national flags and emblems, foreign country names, and names of major cities.

3) How many categories should a trademark cover?

As applicant, you must consider how many categories to cover. A mark can apply across multiple categories — 45 classes total, with each class containing anywhere from several to dozens of subclasses.

(1) More categories mean higher costs. Most applicants register for core products or services. Cosmetics register for perfume, skincare, or soap; athletic shoes for footwear and perhaps leather goods.

(2) The specific scope depends on your understanding of current core offerings and anticipated future expansion.

(3) Also consider competitors entering your market and where they might build trademark goodwill. A competitor may not currently enter a particular field, but that field could still connect with your products in consumers' minds. Toy cars and automobiles belong to different classes, for instance, but consumers easily associate them.

4) Time costs of trademark registration

From application to decision, the Trademark Office previously took one year; accelerated review now takes six to nine months. Without advance analysis, you might wait nine months only to learn of non-approval. You can then seek review from the Trademark Review and Adjudication Board, but this consumes more time with no guarantee of success.

2. Trademark Maintenance and Management

What happens after registration? Companies need trademark management systems with dedicated personnel. Trademarks depend on use to maintain vitality, validity, and recognition — all inseparable from actual use. Non-use after registration risks cancellation for non-use. Trademarks exist so consumers can associate products bearing the mark with their source. If unused in the market, the mark loses its purpose; hence the law's three-year non-use cancellation mechanism.

Maintenance requires management systems and responsible personnel. Management begins at application: identifying needs, tracking processes, monitoring status, evaluating use. Any management system requires financial resources. Coordinate with company promotion to monitor use, broadly divided into two areas. First, from a management perspective, responsible parties must know which marks the company uses, which it doesn't, and whether marks are used on the registered goods and services. If a mark registered for clothing now extends to a new perfume line, immediate application in fragrance and cosmetics categories is essential.

Second, maintain records of trademark use: scope, circumstances, and examples. These become evidence for defending your mark in disputes. In practice, even many large multinationals do poorly at documenting trademark use.

3. Trademark Use

Registration doesn't mean perpetual, exclusive rights. Trademarks are tied to ongoing use. Use must be proper. Some companies don't use their registered mark as filed — a clothing brand might find its mark too complex with English, Chinese, and graphic elements and use only the English portion. Others alter the mark's form or font for advertising. These are improper uses. As emphasized, trademarks must be used, and use must be documented. Improper use may not count as trademark use at all, and may infringe others' rights.

We generally recommend adding ® or ™ when using marks, making clear this is trademark use.

Moreover, use the registered mark on approved goods — that is, in a way that associates a product with its producer.

II. Enterprise Trademark Rights Protection

1. Administrative Penalties and Civil Infringement

When third-party marks resemble your registered or used marks, or infringe your prior rights, administrative procedures allow opposition or invalidation. In the Qiaodan case I handled, Jordan believed Fujian Qiaodan's registrations infringed his prior rights, so we filed for invalidation; the Supreme People's Court ultimately invalidated some marks. If a third party uses an identical mark for identical goods, you can file administrative complaints for penalties, or sue for civil infringement, seeking cessation and damages. Both achieve cessation, but administrative penalties don't provide damages. Criminal procedures offer greater deterrence but have higher thresholds — requiring hard evidence of illegal profits, for example.

2. Trademark Opposition and Invalidation

When can you oppose or invalidate a registration application? Several points matter. When does conflict arise? When another party applies to register, and you as rights holder believe it shouldn't be approved. Articles 30 and 31 of the Trademark Law address conflicts between marks — I have a prior mark and don't want this one registered.

A broader, more contested area involves conflicts with prior rights. Prior rights include copyright, trade name rights, name rights, even personal rights. Holders of these rights may believe subsequent trademark registration infringes them. However, under trademark law, merely having prior rights doesn't automatically prevent subsequent registration or secure invalidation. The prior right must carry certain renown — it must be known to the public. Under trademark theory, what marks cannot be registered? Those causing consumer confusion, or leaving consumers uncertain whether products bearing your mark come from the prior rights holder or the applicant. To meet the confusion standard, the prior right must be influential.

This involves trademark squatting, a matter of national concern. A foreign company develops in the United States, then enters China to find its mark registered. The squatter certainly filed after the U.S. company's first use, having learned of the company. But the prior company, not yet in China, has minimal Chinese market presence. How to demonstrate sufficient influence to support opposition or invalidation? This is heavily disputed.

My Tesla case from several years ago is illustrative. Upon entering China, Tesla found its English and Chinese marks, its iconic T, and its domain all registered — while having ambitious China plans. We initially negotiated to buy back the mark, but the squatter's price was unacceptable, so we filed for invalidation. Fortunately, we discovered Tesla had sponsored an event before the squatting. That event's influence provided at least some evidence, and Tesla recovered its marks.

Another point: well-known marks. As noted, conflicts between two registered marks require similar marks and similar goods for the latter to be blocked. If the latter registers on dissimilar goods, the prior mark cannot stop it. But if the prior mark is well-known, it gains protection beyond similar goods — the "cross-class protection" often discussed in trademark law.

Trademark disputes ultimately concern consumer confusion. We must return to trademark's purpose: why have a trademark system? To help consumers identify which company provides products and services bearing a mark. All conflicts over trademark and registration rights boil down to whether consumer confusion would result.

III. Addressing Trademark Infringement Risks

Addressing infringement risks corresponds to points raised in registration and application. Improper use creates infringement risk, as does whether use constitutes trademark use at all. Proper use both mitigates infringement risk and builds evidence of trademark use. Only through use does a trademark gain recognition and gradually expand its protection scope — a fundamental principle.

1. Strengthen Your Own Trademark Use

Improper trademark use (splitting, altering text, graphics, or colors, changing distinctive features, exceeding approved goods/services scope) may create infringement risk. Pay attention to use in all contexts: product packaging, promotional materials, press releases (where prominent text descriptions may constitute trademark use); promptly communicate with business teams, reviewing product packaging and promotional materials.

2. Non-Infringement Defenses

Argue no consumer confusion (submit evidence of actual use, consumer surveys, etc.); argue trademark holder's bad faith (maliciously registered marks shouldn't receive judicial protection); assert prior rights defenses (trade name rights, merchandising rights, prior trademark use rights), as well as prior use defense, exhaustion of rights defense, fair use defense, etc.

3. Take Countermeasures to Pressure the Other Party

Assert bad-faith IP litigation by the other party; file infringement claims against them.

---

Question 1: I have two use-related questions. First, regarding trademark protection across potentially relevant categories, while facing potential non-use cancellation risk — how should a company specifically handle this?

Dr. Qi Fang: There are two approaches. First, the "three-year non-use cancellation" doesn't fully apply to some defensive registrations — for marks very similar to the principal mark, the Trademark Office may consider them extensions of the principal mark's use. Second, for cross-category situations, we recommend reapplying every three years. This is burdensome for companies, but there aren't better alternatives.

Question 2: As a consumer goods company, we sometimes license our trademark to OEMs or packaging suppliers. How can we mitigate risks in contract terms and processing agreements? How should we protect ourselves?

Dr. Qi Fang: If licensing another party to use your mark, proper use is essential — this mark can only be used this way, only on these products and services. Proper use is critical. Also periodically verify how the mark is being used, corresponding to the "three-year non-use" issue. The core is proper use; while rights holders can easily ensure their own proper use, once licensed to different entities, you need to understand and control usage. In multiple cases, trademark licensors' failure to supervise licensees' proper use resulted in infringement of others' marks, with courts holding licensors jointly liable.

Question 3: How do you view the tension between defensive trademark registration and IP authorities' scrutiny of trademark hoarding?

Dr. Qi Fang: There's no real tension. Defensive registration presupposes a principal mark — actually used and somewhat influential — before defensive registration enters the picture. Hoarding presupposes no principal mark. Moreover, defensively registered marks must resemble the principal mark. Defense aims to prevent others from free-riding on your goodwill; where does goodwill come from? The principal mark. So defensive registrations are marks similar to the principal mark. Hoarding involves marks without direct use, registered to attack competitors or sell to genuine rights holders for profit — that's hoarding.

Question 4: How do you deal with large companies repeatedly challenging your trademark's validity on insufficient grounds?

Dr. Qi Fang: We've discussed protecting your own marks — opposing or invalidating marks similar to yours. From another angle, later applicants may have filed entirely in good faith, with no intent to attach to your goodwill. I deserve registration, but the prior mark's owner keeps filing oppositions and invalidations. There was a U.S. case: Victoria's Secret, the lingerie brand, and a lingerie store called Victoria's Secret. Victoria's Secret sued; the latter explained that the owner was named Victoria and liked using her name. After years of litigation, both sides stopped.

From the questioner's perspective, first you need your own mark distinguishable from the prior mark. As a later applicant, if possible, design distinguishing features into your mark. If the prior trademark owner remains unsatisfied, litigation is another option. If they lose their opposition or invalidation, it may establish your mark's legitimacy, eliminating future conflict concerns.

Question 5: What risks exist in launching products before trademark registration, and what if it's in gift form?

Dr. Qi Fang: Launching before registration carries risks; the magnitude depends on your assessment. Without registration, you don't know if prior marks block you. If the Trademark Office examiner searches, they'll tell you of conflicts; without registration, you don't know the search results. Companies should first assess themselves — trademarks are public and searchable online. Evaluate the risk; this should be an important business decision factor.

If purely as gifts, without production, sales, or entering distribution channels, impact may be limited. However, commercial gift-giving may still constitute trademark use, creating infringement risk.

Question 6: During brand visual upgrades, corresponding trademark visuals — fonts, colors — may change. For each version change, you reapply for trademark coverage. From application to certificate issuance takes time; during this period, products show the new version font or logo, but the certificate shows the old version. Are there risks in this process?

Dr. Qi Fang: This may reflect a misunderstanding of IP law. Trademark registration doesn't grant any right to use the mark — same for patents and copyrights. Registration or approval grants no use rights; it grants exclusivity, the right to prevent others from using. Whether you yourself can use it depends on whether third parties have prior rights. No prior rights means you can use it; prior rights mean you cannot — regardless of registration certificates.

For this question, whether you can use the mark depends on whether identical marks existed before, whether prior rights exist.

Because there's a six-month gap, without registration you may be unable to prevent others' use. But if you had a prior mark, whether it and the current mark are similar determines if you can use the prior mark to block others. Even if the prior mark can't block others, once the later mark is approved, you can still block others. Approval takes time; if someone used it during this period, there's little to be done.

My recommendation: the later and prior marks must share a core element — what consumers would call this mark, its verbal shorthand. This way consumers easily associate the later mark with the prior one, seeing it as the same mark's evolution or goodwill's continuation, achieving genuine continuity.

If suing with the later mark, you can submit prior trademark use evidence to prove consumers have long recognized this mark with high awareness and significant impact. Though the specific mark changed slightly, for consumers this forms a complete evidence chain. This depends on the degree of change; the simple answer is that combining prior and later marks to prove the later mark's influence can be accepted.

Question 7: You mentioned some trademarks, or graphic marks specifically, can be protected through copyright. I'd like to hear which scenarios suit copyright application, and how copyright and trademark priorities compare?

Dr. Qi Fang: Copyright differs from trademarks and patents — it arises automatically upon work creation. Copyright is global; protection in China is automatic, with no registration required. The copyright question presupposes you have copyright. In the Tesla case, we needed to prove who designed the T logo on the car's front, when — evidence of copyright ownership. With that evidence, anyone using the same T infringed my copyright.

But having copyright doesn't eliminate the need for trademark registration, because trademark serves entirely different purposes. Ideally, have your mark registered for needed goods and services categories, using that mark directly as your trademark — this most benefits rights holders. Copyright-based trademark disputes arise because prior rights holders lack trademarks, so they must rely on copyright, often with less ideal results than relying on prior trademark rights.

Question 8: To what extent should trademark protection go? Should we proactively attack similar marks?

Dr. Qi Fang: This is more a business decision, related to your industry, company size, and direction — not something a lawyer can answer in a vacuum. Different companies prioritize trademarks differently. Luxury and cosmetics brands heavily emphasize trademarks because their value lies in the mark, assigning special significance and dedicating substantial resources to maintenance. Technology companies may care less — precision medical device manufacturers, for instance, typically have their own brands and won't slap on others' marks, so they prioritize patents: which competitor uses my technology, how do I stop them? That's their focus.

Question 9: If other categories of our trademark are squatted, how do we challenge this?

Dr. Qi Fang: If identical marks are registered in different categories for different goods and services, one approach is coexistence — they use theirs, we use ours. Alternatively, if it affects your business operations, file for invalidation. But this requires either that your principal category mark is well-known (a cross-class issue) — with sufficient recognition and extensive evidence, you may succeed in canceling their mark — or that the squatter's bad faith is extremely obvious, such as simultaneously squatting many others' marks without intent to use, making it impossible to stop them otherwise. Another approach: file for three-year non-use cancellation. Malicious squatters typically don't actually use marks, merely seeking improper gains, so we can cancel their registration for non-use while simultaneously applying for our own mark in the squatted category.

Issue 13: Financial Opportunities in Industrial Internet

Issue 12: Strategic Thinking on Douyin Marketing for Consumer Brands

Issue 11: Inclusive Finance Under the New Economic Situation

Issue 10: Brand: Meaning, Symbol, Value

Issue 9: Stoking the Fundraising Fire

Issue 8: Digging for Gold in India: Battle-Tested Insights

Issue 7: How to Design Mini Program Virality: Acquiring Users at Low Cost

Issue 6: How to Acquire Customers Through Douyin?