While the Chinese system of trademark registration shares many common elements with the European regime there are subtle differences that present a trap for the unwary.
Even Donald Trump had a long standing battle with a Chinese businessman, who registered the name ‘Trump’ in China preventing the US billionaire from using his own name for construction services.
That battle is now over, thanks to a recent ruling of the Chinese authorities which recognized the US President as the legal owner of the ‘Trump’ brand. Chinese intellectual property legislation has been notoriously difficult for Western companies to deal with.
Chinese trademark problems
In 2012, the tech giant Apple Inc. had to settle a $60 million lawsuit with a Chinese firm, Proview, in order to use the ‘iPad’ name. A steep price for not getting in early, and, one which is set to be even steeper for the new Apple iWatch as we wrote in our blog “iWatch Trade mark – Apple In Multimillion Dispute”.
However, Apple is not the only company to fall on the wrong side of Chinese trademark issues. Pfizer had not registered the Chinese equivalent for the name ‘Viagra’ and consequently ended up losing the name to a local Chinese company that had claimed ownership over it. Luxury fashion brands Burberry and Hermes have also run into trademark problems. The importance of your company’s name has never been as critical as it is today.
In 2015, a New Balance affiliate was ordered to pay $16 million in compensation to a Chinese show manufacturer who had registered the Chinese brand name “Xin Bai Lun.” New Balance knew about the trademark but continued to operate under the impression that there would be no consequences.
If you are manufacturing or selling in China, undertaking the correct international searches and working with intellectual property lawyers and translators is crucial.
Our Intellectual Property Advice
- Know Your Name
While in the UK, and Europe generally, you often only need to consider the English language trademarks that you use with your products, there are other dimensions to consider when securing trademark protection in China. The original brand name may be a priority, but your business, products or services will also become known by a name in a local dialect. Unless you develop a strategy early on, you may find that the market has chosen a brand name for you. This is what happened in the early 1990s, when Chinese businesses began using Chinese characters to approximate the sound “Coca-Cola”. Unfortunately, though the wording used may have had a similar pronunciation, actual translations of the text included “female horse fastened with wax” and “bite the wax tadpole”.
Well in advance of taking steps to extend your brand into China, you should decide how you would like to be known. Beyond your domestic branding, you will need to consider translation or transliteration of your name, whereby you either use words in a local dialect to approximate the sound, or translate the meaning of your trademark into Chinese. Coca-Cola were lucky to find a Mandarin pronunciation which had a positive meaning (“Ke Kou Ke Le”, roughly “permitting the mouth to rejoice”), but you may not find it so easy. You will also need to consider registering your trademark in Chinese characters, and the position is further complicated by the fact that may different characters have the same pronunciation, so the best approach will depend on the particular name you choose.
- Move fast
Most people tend to see intellectual property as a burdensome cost at the beginning of an entrepreneurial venture. Whilst it is true that intellectual property registration can be a costly exercise, investing in your intellectual property early will save you thousands, if not millions down the line. This is true especially if you intend to take your brand to ‘first-to-file’ jurisdictions like China. There is no end to those who will try to appropriate from you, so make sure they do not appropriate your intellectual property by registering before you do.
IP squatting, whereby trademarks are registered by a local entity which then trades on your success, or which tries to sell the rights back to you, is a problem in China, where it can sometimes be big business. So, timing is important. If you wait for your plans to mature, you may find it’s too late, and a local Chinese business has already adopted your branding, as happened to Starbucks. While the coffee giant eventually won its legal battle with the Shanghai coffee corporation, it could have avoided the costly dispute if it had registered its own brand in good time.
It is typical for businesses to outsource manufacturing of their products to China, and in doing so license their Chinese partner to use their trademark for that purpose. In some cases, the Chinese manufacturer, or another entity in China, will hijack the brand, registering it as a trademark and securing ownership of the rights to it in China. Case law on this point is developing, but there is a risk that such a hijacker might bring an action against the manufacturer for trademark infringement, stopping production in its tracks. So, even if you manufacture but don’t sell your products in China, it is crucial to secure local trademark protection.
- Have An Intellectual Property Strategy
Throughout much of the world, trademarks are categorised according to the Nice Classification. This system sets out 45 classes of goods and services for which a given trademark will be used, for example class 25 covers clothing, class 9 covers software, and class 41 covers education, among other things. The same trademark name can be registered in different classes by non-competing businesses, and you can find out more about trademark classification here.
Although the Chinese trademark system does make use of the Nice Classification, it further divides these classes into narrower subcategories. This means the same mark can be registered in the same international class, for similar goods or services, provided that the registrations fall within different subclasses. For example, general footwear, and football boots, would fall in different subclasses, and the same trademark might be registered by different companies in each.
A cost effective, and efficient way to protect trademarks abroad is by using the Madrid Protocol system of international trademark registration. This mechanism lets you extend an existing application or registration into a number of different countries in one go, rather than filing in each individually. However, the international applications must be filed in the same classes, and against the same goods and services. Typically this is not a problem, but in China, while it may be cost effective at first to file using the Madrid system, you may find that you also need to file an application directly to ensure you are protected in the correct subclasses. In fact, where you have the resources available, registering a national Chinese mark may be the priority.
We are well placed to help you to take control of your intellectual property in China so your business can flourish from a secure foundation. Do get in touch for a no obligation confidential discussion.