Introduction

In recent years, the increasingly rampant malicious trademark hoarding has triggered a series of systemic problems in the field of trademark authorization and confirmation. Although legislators modified the Trademark Law in 2019 in a fourth revision to try to suppress non-use trademark registration, the new law has been implemented for three years, yet trademark registration applications in China have not decreased; the first three quarters of 2022 saw over 5.8 million new trademark registration applications, with valid registered trademarks reaching over 39.5 million.

Malicious hoarding has led to another prominent issue: on one hand, some registrants hoarding large numbers of trademarks have occupied limited trademark resources, increasing difficulty for later applicants, thereby creating robust demand for trademark trading. On the other hand, as the National Intellectual Property Administration has severely cracked down on trademark hoarding, many transferred trademarks have ultimately been declared invalid due to malicious hoarding, seriously damaging related trademark transferees’ rights and interests, leading to numerous trademark purchase contract disputes.

In such cases, transferees commonly care: Can I get my trademark transfer fee back? Below, the author analyzes and organizes legal consequences when transferred trademarks are declared invalid due to malicious hoarding, and provides suggestions on how transferees can avoid related risks.

I. Impact of Trademark Declaration of Invalidity on Transfer Contract Effectiveness

Does invalidation of a transferred trademark affect the original transfer contract’s effectiveness? According to Article 47, Paragraph 2 of the Trademark Law:

“Decisions or rulings declaring registered trademarks invalid have no retroactive effect on decisions, rulings, mediation agreements already executed by people’s courts and already enforced, and administrative decisions regarding trademark infringement already enforced by industrial and commercial departments, as well as already performed trademark transfer or licensing contracts. However, compensation shall be given for losses caused to others due to the trademark registrant’s malice.”

Generally, trademark invalidation does not have retroactive effect on already performed trademark transfer contracts, meaning it does not affect contract effectiveness. However, when trademark registrants have malice causing losses to others, compensation shall be given.

Careful observation reveals that although the law provides trademark transferors must bear compensation responsibility in such situations, it does not require this compensation responsibility to be based on contract invalidity. Therefore, even if transferred trademarks are declared invalid due to constituting malicious hoarding, the trademark transfer contract’s effectiveness is not affected.

II. Should Transfer Fees Be Returned When Trademark Is Declared Invalid Due to Malicious Hoarding?

As mentioned above, although invalidation of a registered trademark does not affect transfer contract effectiveness, when trademark registrants have malice, they shall compensate transferees’ losses, and trademark transfer fees obviously fall within transferee losses. Therefore, the key to whether trademark transfer fees should be returned lies in whether malicious hoarding constitutes the “malice” described in Article 47, Paragraph 2.

The author’s answer is affirmative, for the following reasons:

1. From literal interpretation, “malice” here has no time limitation; it is not explicitly limited to before or during the transfer.

2. Once malicious hoarding registration is established, it should have retroactive effect; this “malice” began on the trademark application date and continued throughout.

3. Registrants hoarding large numbers of non-use trademarks should know these trademarks have high invalidation risk; transferring under such circumstances is clearly unfair to transferees, therefore the transfer behavior itself carries malice.

4. From another perspective, malicious hoarding is behavior the Trademark Law focuses on cracking down on; if after invalidation due to malicious hoarding, transferors need neither refund transfer fees nor bear transferees’ other losses, this would变相鼓励不良市场主体从事此类不正当抢注和囤积行为, which clearly does not conform to the Trademark Law’s legislative purpose.

III. Risk Avoidance Suggestions for Malicious Hoarding Trademark Transfer Disputes

Although theoretically, after transferred trademarks are declared invalid due to malicious hoarding, transferees have the right to demand transferors refund transfer fees, this ex-post remedy is clearly not optimal. On one hand, transferee losses often far exceed trademark transfer fees, including substantial human, material, and financial costs for advertising and using transferred trademarks. On the other hand, after trademark purchase contract disputes arise, even if transferees have legitimate claims, transferors will not easily refund fees; disputes must be resolved through litigation, arbitration, and other procedures, taking time and effort, and even winning does not guarantee execution.

Therefore, the best way to avoid risks is not proactively purchasing suspected malicious hoarded registered trademarks. China’s registered trademark data is publicly queryable; information pages for sale-for-disposal trademarks are not difficult to obtain from the internet. If the same registrant has many trademarks for sale, and actual use information is hard to verify, transferees should be vigilant. When conditions permit, before selecting purchase targets, consult professional trademark attorneys for targeted trademark searches and risk assessments.

If transferees already know purchase targets may involve malicious hoarding but still want to quickly obtain trademark exclusive rights through transfer based on commercial schedule needs, consider the following measures:

1. Thoroughly investigate trademark applicants and holders before transfer, and include breach clauses in transfer contracts

Clearly specify in contracts that if trademarks are revoked or invalidated due to transferors’ reasons, transferors shall bear specific refund and compensation responsibility details (including amounts, periods, and delivery methods).

2. Simultaneously register the same trademark on identical or similar goods/services when handling transfer procedures

Regarding the well-known “poisonous tree fruit” theory: if a trademark’s registration application itself violates relevant Trademark Law provisions, the trademark registrant claiming their transfer behavior has no fault should not be supported by courts. However, even if transferred trademarks have identical marks and designated goods/services as original registration applications, a supplementary new application is an independent trademark registration subject to individual evaluation, not affected by “poisonous tree fruit.”

3. After trademark transfer, promptly put into actual use and preserve evidence

Although affected by the “poisonous tree fruit” theory, actual use by transferees cannot prevent invalidation. However, if transferees simultaneously file supplementary registrations, related use evidence can also serve as new registration trademark use evidence, helping transferees ultimately escape the “poisonous tree fruit” death trap.

Conclusion

In summary, although theoretically, when transferees suffer losses due to transferred trademarks belonging to malicious hoarding registrations, they have the right to pursue corresponding compensation from transferors, the author still advises enterprises to be vigilant, avoid purchasing others’ malicious hoarded registered trademarks. Even if determined to purchase based on commercial considerations, attention should be paid to conducting sufficient background investigations in advance, clearly stipulating liability assumptions after trademark revocation or invalidation during the transfer process, and actively self-rescuing through supplementary registrations and preserving trademark use evidence afterward.