China Law Blog

Many years ago, a very good client of mine (in a China related business) called me in a panic. The client had gone to its regular US corporate counsel and asked about using a trade name on product it would be importing from China. Its corporate counsel said it saw no problems and my client went ahead and imported the product. This turned out to be a bad move. A very bad move.

As soon as the product hit the US, it was stopped at customs as counterfeit. Within hours, my client received a fax from one of its direct (and probably most hated competitors), saying that the imported product was counterfeit and that if my client did not pay $25,000 and destroy all of the boxes with the trade name on it, it would be facing a lawsuit. For ease of reference, let's call this competitor "the enemy." My client came to me and we met with a top flight local trademark lawyer (that same afternoon) and we all determined that the enemy was absolutely right. My client was using the enemy's trade name and it was almost certainly liable for trademark violations and counterfeiting. In light of this, we advised our client to do exactly as told and to then seek to recoup its costs from its lawyers.

My client paid the enemy $25,000 and then incurred another approximately $150,000 in repackaging its product, along with another approximately $50,000 in costs having to resell the product because its original buyers were unwilling to wait for the repackaging. My client went to its insurance company seeking reimbursement and it was not only denied coverage, but the insurance company raised its premium by approximately $25,000 a year because it had misunderstood my client's product up to that point! In the end, this trademark error ended up costing my client around $250,000, though it was able to recoup a good portion of this from its (former) corporate law firm.

The two page letter "the enemy" wrote my client was so good that I saved it and my firm has since used it (with slight revisions, of course) a few times on opposing parties to very good effect. Within my firm, we even refer to using that letter as "going 'the enemy' on their ass."

Note that it was a law firm that made the mistake in the above case and note also that my firm does NOT handle US trademark matters for reasons that encompass the story above. We refer out US trademark matters or bring in US trademark counsel to assist. We believe US trademark law is best left to those US lawyers who focus on US trademark law.

Yet, with the onset of this recession/near depression, I am seeing more and more companies trying to cut costs by doing their own US trademark work. I see this as a huge mistake and it is a mistake that is starting to impact my firm's China work. Here are two examples as to how:

1. A company contacted us to have us help them with an OEM contract with a Chinese manufacturer and to have us register their US trademark in China. Their US trademark is a pretty common name so I asked them to tell me more about their US trade name registration. They told me that they are the only company using that name to make their particular product, but that someone else had already registered the same trade name to make a similar, but "very different" product. The product sounded way too similar to me and I suggested that before they pay my firm to register their US name as a Chinese trademark, they ought to first make sure their US name is valid. They agreed and we are awaiting the results.

2. Someone from China very recently emailed me saying they had registered their trademark in the United States all by themselves but they had heard that one has to use an agent in China to register a trademark there. They wrote me to see if there is a way to register one's trademark in China "cheaply." I said the cheapest way is to register one's trademark in both the United States and in China correctly and that I worried their US trademark is invalid. If so, registering that same trade name in China will likely be a waste of time and money. More importantly, it could mean this company is starting off with a name that may eventually be taken from it at a cost of hundreds of thousands of dollars when someone goes "'the enemy' on their ass."