Late last week, we did a post, Register Your China Trademark Or Go Home, screaming about the importance of foreign companies that do business in or with China (including those foreign companies that do nothing more than have their products made in China) registering their trademarks in China. That post was in response to “East Asia Company” who had left a comment saying that many companies simply cannot afford to register their trademarks in China.
That same reader, in response to yesterday’s post, backed down a little bit and seemed to recognize the importance of trademarks for those doing business in China, but then argued that most companies are not Pfizer and simply cannot afford the $28,000 required to secure trademark protection.
WRONG, WRONG, WRONG.
Here is East Asia Company’s comment to yesterday’s post:
Thanks for replying to my post. I know that trademark squatting is a problem but I was not aware that orders were held at ransom with any regularity. I know it does happen sometimes (seldom I thought). That was interesting to read and makes me think a little more about the advice I give people, which is simply do it if you can, but if you can’t then don’t lose sleep over it. I guess now the advice I would give people is ” if you can do it, great. If you can’t, just buy some Unisom and try to get a good night’s sleep.” 🙂
But however you look at it, protecting IP in China is not cheap. And you yourself said as much in a UK Telegraph article last year in which you were quoted as saying “Each trademark filing costs around £460,” said Mr Harris. “So if you are Pfizer you register your name across all 40 categories. Then you have to register Viagra across all 40, and then your logo across them all and it begins to add up.” That is $700.00 per category and a whopping total of $28,000. Well if you are not Pfizer, for whom $28,000 is crumbs, and are just ABC company in Podunk USA, how can you afford this? Mind you this is only trademarks and not patents or copyrights for written material, (children’s books for example, a current project I have). I’m sorry but I just think this is expensive. And that is doing work on the front end only. What happens when a company in China infringes on your IP? What about those costs? As you say they “add up.”
If I heeded the advice in the last paragraph of your post today, I would have to go back to some of my clients and tell them, “My apologies, bud, but you just don’t have the money to start a business. I think you should close up your online store immediately and go back to your old job whatever that was.” In fact many of these people are extremely driven, they have a good product, good sales and loyal customers; in short they have a perfectly legitimate business. They are just small and simply lack the resources to do all the things that they should do in an ideal China sourcing world. I’m sorry but I just have a hard time telling people who are achieving success to quit just because they don’t have enough money. That is like telling the kid who is 5’4″ that he/she can’t play basketball even though he/she has just drilled seven straight 3 pointers. The better advice IMHO is to encourage them, at the same time you make them aware of the difficulty, and provide them with the knowledge that will allow them to win in China. Because the fact is that small companies who do not protect their IP when they go into China can sometimes be more “successful” than large companies who do.
Right, and sometimes those who smoke live longer than those who don’t. And who is telling the 5’4″ kid that he or she can’t play basketball? I’d be telling the kid, hey kid, I realize you are only 5’4″ so here is what you are going to have to do. We are not going to make you into a great rebounder, but we are going to work on your ball handling and shooting skills and ….
More fundamentally, like so many, East Asia Company does not seem to understand the distinction between what are commonly called “offensive trademarks” and what are commonly called “defensive trademarks” and the massive cost difference between achieving good protection from the one as opposed to the other.
Let me explain by noting off the bat (I’m good with baseball analogies too), probably 98 percent of my law firm’s clients that are just sourcing product from China need only one trademark.
Pfizer does a whole lot more than just source product from China. Pfizer sells its products in China both directly and through others. So Pfizer must make sure that nobody else will be able to sell non-Pfizer products in China that consumers (or anyone else) will mistake for a Pfizer product. Let’s take Viagra (made by Pfizer) as an example. What do we commonly identify with Viagra? Many things. Its name. Its color. Its shape. The company that makes it. The way the Pfizer name looks (it has a rather distinctive “f”). The VGR that seems to always be stamped on the pill itself. I am sure there are more identifiers, but in just looking at images of the pills, these are what come to my mind. So what should Pfizer you do in terms of its trademark registration in China? It probably should, at minimum, apply with China’s trademark office to register the following:
- The name “Pfizer”
- The name “Viagra”
- The color blue
- The diamond shape
- The distinctive “f”
But wait, there’s more. Since Pfizer is selling Viagra in China (not just manufacturing it there), it should also apply to register a Chinese character name for both Pfizer and for Viagra. On top of that, since Viagra is commonly known as “Wei Ge” (meaning, “great brother”) in China, it should also register that name as well.
I could go on and on. But I have only gotten started because I have not even addressed the classes and subclasses within China’s trademark system in which Pfizer should seek to file the above. If Pfizer misfiles its trademark application and, let’s say, files for the above names/logos in the class for “clothing,” rather than in the class for pharmaceuticals, anyone would be free to sell pharmaceuticals using those names and logos. So obviously Pfizer should file its trademarks/trade-names in the class for pharmaceuticals. But does Pfizer want someone to start a chain of medical clinics in China called “Viagra Medical Clinic”? Probably not. How can Pfizer stop that? By securing the Viagra name in the medical services class. In fact, Pfizer probably does not want people making t-shirts with the name Viagra and the blue pills on them either, so it probably should register its trademarks/trade-names under the clothing class as well. Very expensive. Complicated too.
But let’s pretend for just a minute that we are dealing with a small company called Seattle Fish that has its one product manufactured in China. This one product is a fish net called “The Iron Trap.” Seattle Fish’s yearly sales have been pretty steady over the last few years and they are as follows:
- $2 million to the United States.
- $1 million to Canada
- $500,000 to the United Kingdom
- $300,000 to Japan
- $200,000 to Korea
- $25,000 to France
- $20,000 to Spain
- $7,000 to India
- $7,000 to Saudi Arabia
- $6,000 to Burkina Fasu
- $5,000 to Myanmar
- $5,000 to Poland
- $2,000 to Egypt
- $1,000 to Brazil
- $1,000 to Mexico
- $1,000 to Afghanistan
Seattle Fish expects its future sales will roughly track the above, but with one exception: it plans to enter into a distribution agreement with a Mexican company to sell its product throughout Mexico.
Seattle Fish puts its “Seattle Fish” name on its product, along with its “Iron Trap” brand name. Seattle Fish has a rather non-distinctive logo of a fish on its product.
What should Seattle Fish do? Here would be our advice:
1. China Trademarks. Register the name “Iron Trap” in China, for “defensive” purposes. Do this to prevent anyone else from registering that name and blocking Seattle Fish product from leaving China. We would advocate for registering that name in only one class because registration in only one class is almost always enough to ensure product can leave China without being stopped for trademark infringement.
Do not bother trying to register the name Seattle Fish because China does not allow registering place names. We would confirm with Seattle Fish that it would be no big deal if it had to change its fish logo and we would then probably tell them it is up to them to decide whether to seek to register that logo as a China trademark.
So that’s it. Probably just one China trademark. And if Seattle Fish were not using “Iron Trap” on its product or its packaging, it would not even need to register that. We have a client that has around fifty pieces of massive equipment made in China a year. Rather than bothering to register a trademark in China, this company has the equipment shipped to the United States where it pays someone at the port a few bucks to bolt on the company’s identifying information. It does this because its trade-name has already been taken in China. Because it never uses its trade-name in China at all, it faces no risk of having its machines seized at the China border for having violated someone else’s trademark.
2. United States, Canada, England, Japan, Korea Trademarks. Because Seattle Fish has substantial sales to these five countries, we would strongly recommend that it register its trademarks in each of these five countries.
3. France, Spain, and Poland. We would inform Seattle Fish of the cost to register its trademarks in each of these three countries and we would also look into whether it might not be cheaper for it to register its trademarks with the European Union (this is called a Community Trademark or CTM), covering all three of these countries and the United Kingdom as well.
4. Mexico. We would advocate that Seattle Fish register its trademarks in Mexico and then license their use to its distributor there.
5. The other countries. We would suggest Seattle Fish not bother registering its trademarks in these other countries, but we would suggest that once it has secured its China trademark that it register that trademark with China’s customs authorities. The reason for doing this is that China customs will then forbid any product from leaving China that infringes on Seattle Fish’s trademarks. This is a relatively cheap way of securing trademark protection (to a certain extent anyway) for the entire world. For more on how to determine where to register your trademarks, check out Trademark Protection In The Global (And China) Marketplace. For more on using customs to protect your IP, check out Using Customs To Protect Your Brand From China Counterfeits.
Now let’s pretend for a minute that Seattle Fish is just starting out. It has never sold a product anywhere, but it has this one great product with a great name: Iron Trap. It is planning to start out selling its product only in the United States, but it might have random sales to other countries through its website.
In this case, we would suggest that it register its Iron Trap name in China right away and consider registering its other trademarks in the United States either right away or when its sales numbers justify it. That’s it.One China trademark.
So what is a sourcing company that handles product sourcing for small companies to do? We suggest they have a provision in their contract with those companies that makes clear that it the product company (not the sourcing company) is responsible for figuring out what to do about its own trademarks and other intellectual property.
That contract should also recommend that the product company secure its own lawyer to figure out its own trademark and other IP issues. Sourcing companies that don’t have such contracts are at risk of getting sued if their product company has its trademark “taken” anywhere in the world. Small product companies that hire sourcing companies far too often see their sourcing company as their “China expert” tasked with handling anything that has to do with China. So when a China trademark problem happens, the product company’s first response is going to be to go after the sourcing company. Trust me when I tell you that I am saying all this based on real world experience.
Register Your China Trademark!
Who’s with me?