Which Comes First, The China Trademark Or The China OEM Contract?

I am paranoid about my clients registering their trademarks in China, pretty much before they do anything else. For a few examples of my feelings on this, check out, "China Trademarks -- Do You Feel Lucky? Do You?" "China Trademark Law: Simple And Effective" and "Trademark Protection In The Global (And China) Marketplace." The bottom line is that if you have a trademark or trade name worth protecting and you are doing any business at all in China, you absolutely must register your trademark at your earliest opportunity.

But lately I have been having my doubts. Just a little.

Not that long ago, a client came to us having reached a tentative agreement to sell millions of dollars of product to a Chinese city government. The deal looked good from all angles and my firm was hired to draft the contract. I discussed with my client the need to register their product's trademark in China before anyone else beat them to it. My client was concerned about this because a number of people knew it would soon be doing a substantial business in China. So it went ahead and registered its trademark in China right away as it continued to negotiate the final terms of its contract with the Chinese city.

To make a long story short, my client was unable to turn its oral agreement with the Chinese city into a written one due to various disputes regarding payment terms and IP protections. Rather than compromise, my client made the decision not to go into China, at least for now. But its China trademark has been bought and paid for and approved for filing and so, in a couple years (yes, it does take that long), it will have a registered Chinese trademark that will only have value for it if it is either selling its product into China or having it manufactured there. In other words, in hindsight, its filing its trademark there came too soon.

I thought of this prior matter this week because I am involved in another situation where I am worried that my client's trademark filing might end up being for naught. This client has a very strong brand name and it is in negotiations with a Chinese manufacturer regarding having one of its products made in China. Interestingly, if my client does not reach agreement with this particular Chinese manufacturer, it will have its product made in another country. So does it register its trademark now, so as to be sure to beat everyone else to it, or does it wait and see whether it can reach agreement with its Chinese manufacturer? Hate to give away the punchline, but this client too chose to go ahead and register its trademark. But what if it had only a very limit amount to spend?

Though the odds of someone "sneaking in" and filing "your" trademark while you are negotiating a contract are low, the cost of missing out on being able to register your trademark are so high, that as a lawyer, I think I have to advise clients to register their trademark every time. But might there be circumstances where a company should take a wait and see approach to registering its trademark?

Comments

Dan,

I am not sure of what the costs associated with filing the paperwork (and your fees) are going for these days, but I have been advising clients to file for patents no matter what their plans (short term or long term) are for China.

Simply put, this is a layer of protection from firms (foreign and domestic) from picking up a widget at a show in Las Vegas and copying it in China.

Sure, there is a chance that the money might be "wasted", but when balancing the lost income that could arise from the alternative (r at the very least the money required to fight a legal battle after the fact), I would say that the money is well spent as a defensive tactic.

Posted by: All Roads | June 14, 2009 11:47 PM

I agree with what you're saying. I agree more with want the previous comment says.

Based on my knowledge of Chinese IP law, once you've signaled you are entering the Chinese market the risk of trademark infringement increases or someone stepping in to steal your name. Also it's important to register the Chinese version of you company name encase someone tries to take that as well.

Posted by: Brendan | June 15, 2009 4:59 AM

I don't know how much it costs to get a TM in China exactly, but it can't be more than a thousand or so US dollars all told, including the Chinese trademark attorney's fees (say, 150 USD per mark per class), registration fees (another 160 USD per mark per class). Given this relatively low cost, I can't think of any circumstances under which it would not be worthwhile for a company planning a production run in China to go ahead and register.

There's no way that you as their legal adviser can know that the deal is going to fall through, you have to presume that they are serious about doing what they say that they want to do. Anyway, the trademark may very well be useful in the future, although non-use over a long enough period of time (3 consecutive years) may render it vunerable to cancellation proceedings. I suppose the one drawback is that people may attempt to swing in and grab the mark through such proceedings after the deal falls through.

Posted by: FOARP | June 15, 2009 8:24 AM

I agree with both Richard and Brendan. I can't see why anyone would put it off. Think of it as basically a insurance policy, even if you end up changing plans. An ounce of prevention is worth a ton of cure over here.

Also make sure to get ahold of your company's .com.cn and .cn addresses here as well. First to file is first (and only) in right ...

Posted by: robert | June 16, 2009 7:48 AM