Register your trade mark prior to doing business – or risk losing your right to register and use it in China.
Is your business thinking about going to China to develop relationships, to conduct research and development, set up distributorship or to manufacture products? Are you thinking of using e-commerce platforms like Alibaba or JD.com to sell products to Chinese consumers? If so, make sure to register your trade mark in China before doing business.
It’s not uncommon to hear stories of companies going to China to have products manufactured or to set up a distributorship, only to find out later that the Chinese company they’d dealt with had registered their trade mark without permission.
One client exhibited a range of wines at a trade expo in China, and subsequently found that a Chinese wine distributor had applied to register their trade mark after the exhibition without permission. It may have been the case that the Chinese distributor had taken this action to ‘encourage’ a business relationship with our client. We were able to help our client retrieve rights to their trade mark in this case, but theft of intellectual property (‘IP’) in China is not always straightforward to resolve.
There is no doubt that the Chinese Government is improving its laws to reduce IP theft. This being the case, Australian companies can still be held to ransom which, for smaller players, can result in significant costs for example to rebrand, or in product recall and in the worst case, can even cause a business to shut down.
The opportunities for Australian companies to do business in China are huge. China’s annual online-retail sales are estimated to reach $610 billion by 2018. The potential exposure to Chinese consumers via e-commerce platforms is now bigger more than ever, but brings with it increased risks particularly for IP theft.
How does trade mark theft happen?
In China exclusive rights to a trade mark will normally be given to the entity who first files a trade mark application market the Chinese Trade Mark Office. If the application is registered, they are then potentially in a position to prevent others from using that trade mark within China.
Chinese Law also enables the owner of a Chinese trade mark registration to prevent the export of products bearing that trade mark from China. This therefore presents a concern for the rightful foreign owner of the trade mark who may be prevented from using their trade mark in China, but also from importing to or exporting from China.
- Before you do anything, apply to register your trade mark. There are two legal avenues to protect your trade mark – either by (1)direct filing or (2) under the International System known as the Madrid Protocol. If you are protecting your trade mark in multiple jurisdictions, including China, filing an application under the Madrid Protocol has cost-benefits. With either approach, making sure that your application is compliant with the Chinese system of classifying goods and services is important.
- Have some certainty that you can use and register your trade mark in China. Just because you have registered your trade mark in Australia, does not guarantee registration in China. Through searching the relevant databases, clearance searching will determine whether someone has already registered a mark similar or identical to yours in China. IP theft is not the only reason for the existence of a prior registered Chinese trade mark that is similar or identical to yours. Such prior rights can block your ability to protect and use your trade mark in China.
- Given that English is not readily understood by the Chinese, think too of adopting a Chinese language trade mark. Also protect a Chinese language trade mark early, in addition to protecting your English language mark. If the market adopts a Chinese language equivalent of your English trade mark before you do (which happened to Pfizer and their ViagraTM product), you could lose the rights to that mark.
- Consider protecting your trade mark in a Chinese domain name (ending with, for example, .cn) as a defensive maneuver.
- If your trade mark is a logo, seek copyright registration in China. As a recordable right in China, and because the effective date of protection can be backdated to the date of its creation, copyright can be a very- effective fallback position where IP theft has occurred.
It can be rare for a Chinese entity that has registered a misappropriated trade mark to have a genuine intention to use that trade mark themselves. If the Chinese entity hasn’t used the trade mark in China for a period of three years after its registration, it may be possible to apply for cancellation of the trade mark.
Challenging a pending trade mark application or prior registration for your trade mark that has been filed/registered without permission can also be surprisingly cost-effective, if:
- Your company had a business relationship with the Chinese entity before the filing date of the trade mark application; and
- Your company was the original creator and user of the trade mark. This is because Chinese Trade Mark Law allows removal of a trade mark where a foreign company had a prior right over the trade mark; the foreign company had used the trade mark prior to the Chinese entity filing the trade mark application; and the trade mark enjoyed some reputation. This option is particularly effective for a foreign company if it has taken advantage of the availability of copyright registrability in China.
If your business plan includes accessing the Chinese market, directly or remotely via an e-commerce platform , have a ‘China plan’. Proactively protecting IP, such as trade marks, should be an aspect of that plan. It’s difficult to pursue opposition or cancellation proceedings In China, because a foreign company must be able to provide sufficient evidence to support their petition if they are to have any chance of succeeding. Significant costs are therefore likely to be incurred.
The best advice is to make sure your trade mark application is in place before doing business because as they say, prevention is better than cure!