China Law Blog

I am always preaching how foreign companies must register their trademarks in China if they are going to be doing business in or producing product in China (see, for example, "China Trademarks -- Do You Feel Lucky? Do You?"). And in most cases, companies should register their trademarks in China now. Right now.

China is a first to file country, which means that, with very few exceptions, whoever files for a particular trademark in a particular category gets it. So if the name of your company is XYZ and you make shoes and you have been manufacturing your shoes in China for the last three years and someone registers the XYZ trademark for shoes, that other company gets the trademark. And then, armed with the trademark, that company has every right to stop your XYZ shoes from leaving China because they violate its trademark.

But saying a company must register its trademark if it is going to do business in China does, at least to a certain extent, beg the question as to when that company should register the trademark. I always tell our clients and potential clients that they should register their trademarks right away. My thinking on this is that if they are going to be doing it anyway, they should do it right away so as to make sure nobody beats them to it.

But what if you are an American company that is thinking of introducing your product into China in a couple of years? What do you do? Well if you are a massive company with a lot of money, you go ahead and register your trademark right now. But if you are a small company, spending the money now may or may not make sense. Where and how do you draw the line? There is no one answer here; it is more a case of knowing it when you see it.

I thought about all this yesterday because I received a call from a small company that was referred to me by a China sourcing company we represent. The China sourcing company had the foresight to tell this other company (let's call it Company A) that it needed to register its trademark in China before the sourcing company started going out and trying to find manufacturers for Company A's product. But when I spoke with Company A, it immediately became clear to me that its funds were very limited and that it was very unsure if it would even be able to find a manufacturer at a price that would make sense and if it did find that manufacturer, whether its product would catch on in the US or not. Company A's not unreasonable plan was to make a limited quantity as a test run and then, if that worked, secure financing to ramp things up.

Company A: Is a trademark really necessary in China?

Me: It is necessary if you are going to be sure to protect yourself from someone taking your name from you. How important is your name to you? If someone takes it, could you stamp a different name on your product for the next go round?

Company A: I really like our name, but I could always come up with a new one if that were to happen. Do you really think someone is going to register our trademark right away in China?

Me: The odds certainly favor you, but you just never know. You can consider waiting until after you see if your product will have legs.

Company A: I would prefer to do that. Am I taking a huge risk?

Me: A lot depends on whether the worst case scenario of having to come up with a new name is terrible for you or not.

You will never get me to say anything other than how important it is to register your trademark in China right away (because I do not want anyone to be able to blame me if "their" trademark is registered by someone else), but obviously the decision on when to register is sometimes a bit more complicated than that.

What do you think?