Targeting China: how to ‘sell’ your business online without losing your IP

China is Australia’s No. 1 trading partner, and still the ‘world’s workshop’ when it comes to manufactured goods. While the mining boom appears to be waning, there are numerous other opportunities for Australian businesses to engage with China as highlighted by the Australian Government’s published white paper.

To this point, many Australian businesses are beginning to exploit digital media, and particularly social media platforms to target Chinese businesses and consumers. Irrespective of the digital platform chosen, caution should be taken when developing an online branding strategy for China to avoid loss of intellectual property (IP) rights.

TRADE MARKS: First in Best Dressed

It is typical for trade marks to feature prominently in the websites of Australian businesses.

One important point to note is that China is a ‘first-to-file’ country when speaking of trade mark rights. This means that the first person to file a trade mark application will generally have priority over a prior user of the mark in China. Contrast this with Australia which operates under a ‘first-to-use’ system where rights are afforded to those who can show first commercial use of a trade mark in Australia.

It is not uncommon for rights to a trade mark owned by an Australian business to be ‘misappropriated’ in China as a result of informal dealings with, for example, a Chinese distributor where there has been an exchange of business cards. While the distributor may view the misappropriation of trade mark rights simply as a means to negotiate, recovering rights can be a long and costly process. This may ultimately impact the ability to operate both in and out of China, particularly where goods are being manufactured for distribution within China for export to other jurisdictions.

Displaying or promoting an Australian business in connection with trade marks online could result in the same misappropriation of trade mark rights. So, it is advisable to file trade mark applications in China as soon as possible once a commercial decision has been made to engage with Chinese businesses and consumers online.

Adopting China-Specific Translations/Transliterations

It will be beneficial to adopt and register a Chinese translation or transliteration of an English-language trade mark, and do this early.

A good example of a well-thought Chinese transliteration is The Coca-Cola Company’s adoption of the Chinese-language trade mark ‘可口可乐’. The characters are pronounced ‘KER KO KER LER’, which is phonetically similar to ‘Coca-Cola’. As an added bonus, they have the meaning ‘delicious’ or ‘tasty’. Looking at The Coca-Cola Company’s Chinese website, both the English and Chinese ‘Coca-Cola’ trade marks are used side-by-side in addition to other indicia as part of a robust branding strategy.

Failure to adopt a translation or transliteration of an English trade mark may inevitably result in the marketplace providing one. For example, it is interesting to note that Pfizer does not own the Chinese-language trade mark ‘伟 哥’ (pronounced ‘wey ger’, meaning ‘great brother’) by which Viagra is best known in China.

Adopting Chinese translations/transliterations of English trade marks early will help avoid, amongst other things, costly rebranding exercises and minimise consumer confusion in the Chinese marketplace.

Establishing Trade Mark Ownership via Copyright Registration in China

In China, as with many other countries, it is not necessary to register copyright rights for protection as they are granted automatically upon completion of a copyrightable work. However, it is possible to register copyright rights voluntarily.

Copyright registrations for logo and composite trade marks can be obtained in China, and can be particularly useful in recovering rights to trade marks which have been misappropriated by a third party. For example, where a third party applies to register logo or composite trade mark owned by an Australian business which has not already registered the mark in China, a copyright registration for the mark can be used as basis to oppose the third party’s application or cancel a subsequent registration.

Having a Chinese registration for a logo or composite mark, in addition to a copyright registration, is ideal and provides a strong IP position.

Patents

Patents for inventions and designs are obtainable in China. Where patent protected products are offered for sale in China, highlighting ‘patent pending’ or ‘patent protected’ online will aid in providing a disincentive to prevent copying.

A recent article published by Watermark highlights the point that the Chinese and Australian Patent Offices are collaborating, in part, to make it more straight forward for Australian innovators to obtain Chinese patent protection for their inventions. This should provide Australian businesses with a cost benefit.

Also, contrary to what most people believe, patent rights are enforceable in China. Statistics show that plaintiff wins in IP infringement cases in China have been at around 80% since about 2006. However, it is important to note that there are differences in patent litigation processes in China when compared to other jurisdictions, such as Australia.

Other Considerations

Watermark is a participant in the 2013 Australia China Business Week, organised by the Australian Business Forum. The Melbourne forum took place on 19 June 2013. Two points raised in the Melbourne forum are worth mentioning with regard to targeting Chinese businesses and consumers online:

  1. While obvious, it is important to take into consideration the cultural differences that exist between Australia and China when developing a China-specific online branding strategy. Metaphors and imagery that are clearly understood in Australia may not be in China, and worse, could be downright offensive against the Chinese people and authorities.
  2. Offering downloadable content, such as teaching manuals, may be an integral part of having an online presence in China and a necessity in providing training services to Chinese businesses and consumers. It will be difficult to prevent unauthorised distribution of such content in China, as it would elsewhere. However, minimising content, possibly to imagery, and/or regularly updating and varying content, will help retain value and make it difficult for third parties to offer similar content and services.
Conclusion

Without a doubt, it will be important for Australian businesses to develop China-specific online branding strategies in order to capitalise on the emergence of China as an economic power. Aligning branding strategies with IP protection strategies will reduce the risk of a loss of rights, particularly in China where misappropriation of IP rights is a problem which can be very costly to fix.

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