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How To Protect Your Trademark In China; How To Stop Your Distributor From “Stealing” Your Trademark

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As often as we write about the need to register your trademarks in China, we have never written about how common it is for your China distributor to take your trademark and of how easy it is to prevent that.  I thought of this last week after receiving yet another phone call where this had happened.

The “this” is something along the lines of the following:

And the US company just stops there.  No contract.  No trademark registration.  No licensing of any trademark. Big mistake.

If you are going to use a distributor of your product in China, you should have a contract with your China distributor that, at the very minimum, protects you from your distributor destroying your reputation in China (or even possibly subjecting you to liability) by providing a terrible product or terrible service and makes clear that you own your name and logo (and whatever IP is important to you) and are merely licensing it to your distributor.  You then must register that licensing agreement with the appropriate Chinese government authorities for it to be valid.

We usually get calls from American SMEs to complain about how they are not getting paid for their product being sold by others in China.  Then when my law firm looks deeper into the situation, we learn that the American company never registered its IP in China and that someone else has — presumably the Chinese distributor.  We then try to get the trademark “back” for our client.

If the Chinese distributor wishes to continue maintaining a relationship with the American company, we usually are able to persuade the Chinese company to assign over the trademark to our American client. This is usually the case when the real money is in the manufacturing of product for the American company for sale by the American company outside of China.  But in a few cases, the Chinese company has refused to assign over the trademark either because it does not manufacture product for the American company at all or because it views its ability to sell the product in China as more valuable than manufacturing product for sale by the American company elsewhere.  Oftentimes the worst thing about this is how the Chinese company now has increased incentive to sell “your” product outside of China as well.

There is one easy solution to prevent your Chinese manufacturer or distributor from “taking” your trademark for China. Register it yourself in China and do not allow anyone to use it without a properly registered license to do so.  This is how to protect your trademark in China from your China distributor and if you do these two things, you should be fine. But, if you do not, you are putting yourself at risk of forever losing your name in China.

What are you seeing out there on this front?

  • Sun Simon

    Protecting your interests overseas is one thing and building long-term relations with your distributors is quite another more challenging matter. A good channel can help A LOT especially when the circumstances are against you.

  • Shawn S

    Thank you for your help and presence on the web! I had no idea some issues were as bad as they are!
    If I can, may I bother you to comment on an aspect of this issue, and to answer a question? I’m somewhat familiar with the concept that mainland China and Hong Kong like to- or at least act- as separate entities. (I lived this first-hand with a significant consumer purchase issue.) The Wikipedia entry for (use this as a search term there) “Hong Kong Trademark Law” basically states that the same issue you explain here- exists entirely separately in Hong Kong. This suggests to me that trademark owners should be concerned about a SECOND entity out there to which they should apply for protection! What is your view on this aspect?

    The second thing I wanted to mention- and would love to read comment on- is that I suspect that there are those in China who are working to identify unregistered trademarks, (and patents??!!), and extort fees from their owners.

    While it makes sense that the legal firms invested in this “market,” (registering trademarks in China for outside companies,) would be a grand source for such activity, I am certain that others have similar interest.

    I know for a fact that the State SPONSORS (pays for, directly) all sorts of pro-China activities- that many westerners have no knowledge of whatsoever. Of course, this is done to further business and success in- and for- China.

    The most incredible example I witnessed was a propagandist injecting pro-China rhetoric into a forum operated by a manufacturing trade magazine. The post- , in a discussion that touched on the [unfair?] tariff schedule between the US and China- prompted a new user to begin responding. After facts were disseminated among the posting audience, and it was clear he was chaning no opinions there- he publicly admitted that this was a full time career for him. (Specifically, finding disparaging comments about China, and rebutting them in FORUMS.)

    If they bother to think at all, It is obvious to most that the potential for viewing propaganda from China and other countries does exist. However, posting to an open, “public” forum is a very covert, and effective, way to promote ideology without making it clear from what chair you are typing. Ahh, the anonymity of the ‘net.

    I digress… I’d really like to hear your take on what I think!

    Thanks again!