Your Biggest Trademark Risk Might Be Your Business Partner: An Analysis of Article 15 of China's Trademark Law

business partner risk

by Seven Liu

Many companies assume that the greatest trademark risks come from competitors.

In reality, some of the most difficult trademark disputes arise from people who already know the business well.

A distributor who sells a company's products, a local agent responsible for market development, a supplier involved in manufacturing, a consultant participating in negotiations, or even a former employee may become familiar with a brand long before the trademark owner encounters any legal problem. Because these individuals and companies often have direct access to the brand, they may also be among the first to recognize its commercial value.

In some cases, that knowledge leads to a familiar problem. The party that learned about the trademark through a business relationship files an application in its own name.

 

China's Trademark Law specifically addresses this issue through Article 15, of the Chinese Trademark Law, which contains specific provisions:

"Where an agent or representative, without authorization, seeks to register in its own name a trademark belonging to the principal or represented party, and the principal or represented party files an opposition, the registration shall be refused and the use of the mark shall be prohibited. Where an application is filed for a trademark that is identical with or similar to another person's prior-used but unregistered trademark on the same or similar goods, and the applicant has a contractual, business, or other relationship with that person, other than the relationships specified in the preceding paragraph, and knew of the existence of that person's trademark, the registration shall be refused if the prior user files an opposition."

This provision is intended to prevent trademark squatting by parties who, through specific commercial relationships, gain knowledge of another party's trademark and subsequently attempt to register it in bad faith.

For both Chinese and international businesses, understanding this rule is important because many trademark disputes are not the result of strangers copying a brand. Instead, they arise when someone who was once trusted attempts to claim ownership of it.

The Problem Article 15 Was Designed to Solve

Trademark systems generally operate on a first-to-file basis. In China, registration is often obtained by the party that files first rather than the party that first created or used a mark.

While this system provides certainty and efficiency, it can also create opportunities for abuse.

Imagine a foreign company entering China through a local distributor. During the course of cooperation, the distributor becomes familiar with the company's brand, products, marketing materials, and future business plans. Before the foreign company files its own Chinese trademark application, the distributor files the trademark first.

A similar problem can arise when a former executive, employee, consultant, supplier, franchise partner, or licensee decides to register a mark that they encountered during the business relationship.

 

In these situations, the issue is not simply who filed first. The issue is whether the applicant obtained knowledge of the trademark through a special relationship that should have prevented such a filing in the first place.

Article 15 was introduced to address exactly this type of conduct.

More Than Agents and Distributors

Many people believe that Article 15 applies only to formal agency relationships.

The provision is broader than that.

The law certainly covers traditional agency and representative relationships. However, it also extends to a wide range of business connections where one party becomes aware of another party's trademark through commercial dealings.

Modern business relationships rarely fit neatly into traditional legal categories. Companies cooperate through distribution agreements, manufacturing arrangements, licensing projects, strategic partnerships, investment discussions, technology collaborations, and other commercial structures.

Chinese trademark authorities and courts increasingly focus on the practical reality of the relationship rather than the title attached to it.

The central question is often whether the applicant knew about the trademark because of its connection with the trademark owner.

If that connection exists, Article 15 may become relevant even where there is no formal agency agreement.

Why Evidence Matters So Much

One of the most important aspects of Article 15 cases is proving the relationship between the parties.

Many businesses discover too late that they never properly documented their cooperation.

A company may have worked with a distributor for years without a comprehensive written agreement. A brand owner may have conducted extensive negotiations with a potential partner but failed to preserve communications. A foreign company may have relied on informal business practices without creating a clear record of discussions concerning trademark ownership.

When a dispute later arises, proving the existence and nature of the relationship can become difficult.

Chinese authorities and courts often examine contracts, correspondence, purchase records, invoices, emails, meeting records, promotional materials, and other evidence showing how the parties interacted.

The stronger the evidence demonstrating that the applicant had access to the trademark through the relationship, the stronger the argument that the filing was made in bad faith.

Trademark Ownership Should Never Be Assumed

One common misconception is that everyone involved in a business relationship automatically understands who owns a trademark.

In practice, this assumption can create serious problems.

 

Parties frequently focus on commercial terms while paying little attention to intellectual property ownership. Distribution agreements may discuss sales targets and pricing while remaining silent about trademarks. 

Cooperation agreements may describe marketing activities without addressing future trademark applications.

When ownership provisions are absent, disputes become more likely.

Clear contractual language identifying the trademark owner, defining permitted uses of the mark, and prohibiting unauthorized trademark filings can significantly reduce future risks.

Such provisions not only clarify the parties' intentions but can also serve as valuable evidence if a dispute eventually arises.

Prior Use Can Strengthen Protection

For some Article 15 disputes, particularly those involving parties outside a traditional agency or representative relationship, evidence of prior trademark use can become extremely important.

This is an issue that international companies sometimes overlook.

A business may have invested heavily in developing a brand but failed to preserve evidence demonstrating when and how the mark was used.

Sales records, advertising materials, website archives, exhibition participation, packaging samples, media coverage, and customer communications can all help establish that a trademark was already being used before the disputed application was filed.

Importantly, Chinese law does not always require the prior use to reach the level of fame or widespread market recognition required under other legal provisions. What matters is demonstrating that the mark was already being used and that the applicant became aware of it through the parties' relationship.

Similar Goods Are Not Always the End of the Analysis

Many trademark disputes focus on whether the parties' goods or services are identical or similar.

While this remains an important consideration, Chinese authorities do not always approach the issue mechanically.

Modern brands often operate across multiple product categories and commercial channels. A company may develop a successful online game that later expands into merchandise, toys, entertainment services, and consumer products. A fashion brand may diversify into cosmetics, accessories, and hospitality services.

As a result, trademark disputes increasingly require a broader assessment of the commercial relationship between the parties, the nature of the brand, and the likelihood that consumers would assume a connection between the products or services involved.

The analysis often extends beyond simple classification rules and examines the overall commercial context.

Prevention Is Far Less Expensive Than Litigation

The most effective strategy is not winning an Article 15 dispute. It is preventing one from arising.

Businesses entering China should consider trademark protection at the beginning of a commercial relationship rather than after problems emerge.

  • Trademark applications should be filed as early as possible.
  • Cooperation agreements should clearly address trademark ownership and usage rights.
  • Communications relating to branding should be documented and preserved. 
  • Evidence of trademark use should be collected continuously rather than assembled only after a dispute begins.

These measures require relatively little effort compared with the time and expense involved in recovering a trademark from a former business partner.

A Reminder About Trust and Intellectual Property

Article 15 reflects a simple principle.

Commercial relationships create opportunities for cooperation, but they also create opportunities for misuse of information.

 

A party that learns about a trademark through a business relationship should not be allowed to take unfair advantage of that knowledge by seeking registration for itself.

For Chinese and international businesses alike, this principle serves as an important reminder. Trust remains essential in commercial relationships, but trust should always be supported by proper trademark filings, clear contractual protections, and careful record keeping.

When a trademark dispute arises between former business partners, the question is often not who knew about the mark.

The real question is who can prove it.