Welcome everyone to another edition of my China Tech Law Newsletter. Is it a newsletter, is it a blog? Honestly I’m not so sure there’s a huge difference but yes it probably is a bit more of a blog. The name is simply to square it with the original Linkedin labeling this new publishing option as a Newsletter.
OK this edition’s topic is a primer on trademarks in China. I’ll use this as a starting point for more specific pieces later on.
The inspiration is a win by a Spanish brand Manolo Blahnik after 22 years of fighting an imposter in China! Yes, 22 years. More details here by FT (but there's a paywall).
As Reuters sums up in a nutshell:
“While the Manolo Blahnik brand has been well-known internationally since the 1970s, China has different intellectual property (IP) restrictions compared to countries such as the United States, which require companies to prove prior use or intent to use a trademark before it can be registered.”
We can’t say it enough in advice to clients. Unlike say the US, China is a “first-to-register”, not a “first-to-use” jurisdiction. This of course is an open invitation for bad actors to “squat” on legitimate brands’ trademarks. When cross-border travel was easier, would-be-trademark squatters would often stalk the aisles of trade fairs to look for brands that seemed to be coming to China but had not yet registered their brands here.
When that company did finally reach a critical mass of sales or want to setup operations directly here, they would find their brand already registered. And then be in the unenviable position of having to negotiate with the squatter to get the rights back to their own brand held hostage by the squatter. Especially considering how relatively easy it would be for a squatter to make up a minimum amount of “use” of the trademark here to defeat any direct challenges by the real foreign brand owner.
So the moral of the story is register early and often. Early meaning as soon as you have any inclination you could eventually be selling to China. Often meaning (1) in as many product categories as you think you could conceivably be selling in (each category needs its own registration), and (2) in both English and a Chinese version of the brand name. Particularly for consumer companies, it is important to get your own chosen Chinese name into the market and registered as soon possible, before the market chooses and a squatter registers it for you.
If there’s a conflict with a registered mark, you’re in for an uphill battle. If that mark’s been registered for more than 5 years, that hill is going to be incredibly steep to climb as its so difficult to actually prove the bad faith of the first person to register the mark (though it has gotten a bit easier starting in 2019 with new regulations).
You can submit proof of sales (online and offline) predating the squatter’s registration, and/or evidence of your showing the products at trade fairs, all of this ideally in China. Of course, if you had a long history of prior use like this in China, you probably would have registered and not be in this situation in the first place, right?
A squatter might easily generate fake records of past use of "their brand” to counter any claims you make for an action of non-use cancellation. Noting though that authorities are getting better and more vigilant at routing out fake usage, again with the aid of recent regulations.
Sometimes a more effective way to deal with a squatter operating online is to go directly to the major e-commerce platforms such as Taobao and file a complaint directly with the site operator. They usually take these complaints quite seriously as they have more incentive not to be accused of selling or facilitating the sale of counterfeit products.
That process would, of course, still be infinitely easier if you had your brand already registered in China. So perhaps its more accurate to say going directly to the platforms with complaints is a more efficient means to a remedy than going to court, once you have a proper registration. As you can imagine, it is a bit of a game of whack-a-mole in trying to route out counterfeiters as they can just re-appear elsewhere on the site. But repeat offenders will eventually be flagged enough to be sufficiently blacklisted from the platform. At a minimum, it makes their life much more difficult.
Absent any significant traction above, you’re going to have to simply sit down and negotiate a “buy-out” of the right to use your own brand here in China with the squatter. It sucks, and this of course is rewarding bad behavior. Again, like a hostage situation, its a bit of a moral hazzard to negotiate as much as it is a game of chicken with the threat of continuous legal action to restore the mark to its original owner. Just ask the folks at Manolo Blahnik.
Throughout this whole process of sorting through trademark registration and conflicting marks, remember, you are not the only one. Often times you may have to buy out a mark that is just coincidentally similar to yours but which someone has already registered but not heavily used. The problem being that the trademark authorities here routinely take a broad approach to finding conflicting marks, labelling things (which no objective consumer would find confusing) to be flagged as a conflicting mark which prevents your brand’s registration without a non-use cancellation action.
Moving past the registration stage, its also important to constantly monitor for brands which are clearly infringing your properly registered mark. You can setup a team (or outsource to a specialty firm) to continuously scan websites and platforms to look for infringing products or promotional materials. Aside from the online selling they undertake on their websites and social media pages, most prospective infringers have e-commerce shops and online stores on e-commerce platforms.
Monitoring can also include coordinating with Customs both passively and actively. Passively by registering your mark with Customs in advance. Actively by perhaps a trademark owner spotting a brand that looked way too similar to theirs or even a clear counterfeit and then submitting a formal written request to customs officers to set up an alert for these products' customs movements and flag them for possible detention.
So the lesson again here is register early and often, otherwise set yourself up for a legal battle or unfortunate buy-out mandate. The costs are relatively small to register, and the benefits enormous.
That's it for another edition of my China Tech Law Newsletter. If you haven't already, please subscribe, and see you back here in 14 days!
*This blog may be considered attorney advertising. It is for informational purposes only and does not constitute legal advice.