As American companies step up their efforts to sell their products into China, we are constantly having to deal with various trademark issues.
If the American company is selling product to China on its own, from the United States or even within China, the trademark issues are relatively simple. The American company needs to register its trademarks in China.
If the American company is using a Chinese distributor or distributors to sell its product in China, we tell the American company (our client) to register its trademarks (and its other registrable IP such as patents and copyrights) in China and then license to the Chinese distributors the right to use those trademarks until such time as the distribution arrangement terminates.
Lately though we have been facing a third scenario where our client is a US company that knows China and its markets and is working to get product into China for another American company. In these situations, our client is usually extremely China savvy, while the American company that makes the products is usually not well-versed in China at all. Our client has usually secured the American company by promising to handle everything related to China so as to make China entry easy for the product manufacturer. Our client’s compensation is usually at least somewhat tied to China sales.
In these situations the big issue is in whose name to put the China trademarks. Do those trademarks go into the name of the US company that makes the product and owns the trademark in the United States or should it go into the name of the intermediary company that has been tasked with “everything China”?
We just today dealt with that situation and fielded a question from our client, the China savvy intermediary, regarding who between it and its own client (a consumer company) should own the consumer company’s China trademark. We gave the following advice regarding trademark ownership (with names redacted):
1. As you no doubt already know, China is a “first to file” country for trademarks. Accordingly, under Chinese law, it is perfectly legal for either you or Consumer Company to register in China Consumer Company’s name, logo, or any other trademark Consumer Company might own in the US.2. Whichever entity registers the Consumer Company trademarks in China will have all of the attendant rights and obligations of ownership, such as pursuing infringement actions against counterfeiters and defending challenges to the marks.
3. If the marks are registered in Consumer Company’s name you will want to make sure that consumer company licenses to your company the right to use (and defend) all of Consumer Company’s China IP. This will allow your company to use the marks legally in China, and will also allow your company to license the trademarks to a Chinese distributor — because the distributor will surely want those rights. Actually, the Chinese distributor will probably tell you that they need to register the trademarks in THEIR name, but that’s another issue.
4. If your company registers the marks and the relationship between your company and Consumer Company subsequently ends, Consumer Company would want your company to transfer ownership of the trademarks to Consumer Company. This takes several months.
5. Regardless of which entity legally owns the Consumer Company trademarks in China, Consumer Company would not have to do much besides provide initial information about their products as well as some jpegs/pdfs of logos. Beyond that, most of the interaction would be between our firm, our China trademark agents (as required under Chinese law), and the China Trademark Office.
In sum, it can work either way, and it’s ultimately a business decision for you (and Consumer Company). If you own the trademarks yourself, you have near-complete control of the marks and your obligations to Consumer Company are purely contractual. If Consumer Company owns the trademarks, they have complete control of the marks and your rights are purely contractual.