This is a common problem, but there are solutions provided by the China trademark law. One option is filing a revocation application against the registered trademark owned by the distributor on the basis of improper registration; the other option is to file for cancellation of the mark if the distributor has not actually used the mark in three years.
Trademark revocation refers to an administrative procedure filed with the China Trademark Office who will cancel the mark that is currently registered. In order to be successful on a revocation petition, the applicant must show that the trademark was filed using unfair means or fraud. In your case, this standard could be met by establishing the relationship between your company and the distributor, in effect proving that the distributor obviously had knowledge of your prior use of the mark.
Trademark cancellation is very similar to trademark revocation. Although the procedure and the result may be similar, the chief difference is in the basis for the application. In order to successfully prevail in a cancellation, the applicant asserts that the opposing party has not used the trademark for three consecutive years. The evidence of use does not have to be extensive, and some cases have been successfully defended on the basis of a one-time advertisement. Because this burden of proof is light and assuming that you have solid evidence that the other party had prior knowledge of your use of the mark, revocation might be your best solution.
If your mark is cancelled, you will have to make an application for registration. Between the revocation and the registration, the entire process could take up to several years. Moreover, at the present time you are technically in violation of the trademark law by using another's legally registered mark, so it is possible that you will have to temporarily stop using the mark. Because of this eventuality, you should negotiate with your distributor for a trademark transfer in conjunction with filing the revocation. It is a good idea, however, to file for revocation before initiating negotiations.
