China Trademarks
by Meaghan O’Malley. http://bit.ly/2nE4kcw

The Boston-based hamburger chain Wahlburgers, founded by Hollywood star Mark Wahlberg and his brothers, recently announced plans to open three restaurants in China, with an ambitious goal of opening up to 100 restaurants in China over the next ten years.

The project was announced as a joint venture between Wahlburgers and the Shanghai-based Cachet Hospitality Group. I have no opinion on the deal Wahlburgers struck (aside from a general lack of enthusiasm for joint ventures), but I do have an opinion about their trademark protection: they don’t have enough.

According to the Chinese Trademark Office website, the only trademark registration for “Wahlburgers” is in Class 43 for restaurants (餐馆). Yes, covering restaurant services is essential, but it’s really the bare minimum, and almost certainly won’t provide as much protection as Wahlburgers would want.

To understand why, it’s important to realize how the Chinese trademark system works. With few exceptions, a trademark registration for goods or services in a particular subclass only provides protection for that particular subclass. That’s a double-edged sword. It means that you don’t have to worry about your trademark being rejected because someone else has a confusingly similar trademark in another class (or even another subclass within the same class). But it also means that your trademark registration won’t prevent third parties from registering your exact trademark in other classes.

Here, Wahlburgers should have filed a trademark application to cover not only restaurants but also food. Their trademark registration prevents third parties from operating a restaurant called Wahlburgers, but has zero effect on anyone calling their hamburgers “Wahlburgers.” Moreover, anyone else could register the trademark “Wahlburgers” to cover hamburgers and other food, and then use the tagline “Home of the Wahlburgers®” on their menu and in their advertising. I’m sure that wouldn’t sit well with the Wahlbergs or with their Chinese partners.

It’s possible Wahlburgers was under an actual or imputed contractual constraint, as the US registration for “Wahlburgers” had already been licensed from Tom Wahl’s, a Rochester, NY-based hamburger chain whose website proudly proclaims it is “Home of the Wahlburger®.” But any dispute about who had the right to file trademark applications in China should have been sorted out quietly before holding a press conference to announce that Wahlburgers would be opening branches in Shanghai, Hangzhou, and Wuhan. If Chinese trademark squatters haven’t already filed applications for Wahlburgers to cover hamburgers and other food, they will soon.

It’s 2017. American companies going to China need to get their trademark act together. When you’re filing for trademarks in China, don’t think that the same rules apply as in the United States. Operate within the system as it actually is, not as you think it ought to be.

China entertainment lawyesSeveral stories came out this past week reporting on the recent failure of Chinese investments in Hollywood. Wanda’s highly publicized purchase of Dick Clark Productions, long rumored to be on the rocks, has fallen through for good, because Wanda paid only $25 million out of the $1 billion purchase price. Paramount’s deal with Huahua Media and Shanghai Film Group is foundering because Paramount hasn’t seen a red cent of the promised $1 billion. And more than a few people doubt whether Recon Holding’s $100 million deal to purchase 51% of Millenium Pictures will close.

Most – okay, all – of the lawyers who deal with China on a regular basis saw this coming from a mile away. Some context:

  1. Hollywood deals fall apart all the time. It’s the nature of the business, and hardly unique to Chinese-invested projects. But those deals have been getting more attention lately because so much of the money coming in is from China.
  1. Chinese investors have developed a not-completely-undeserved reputation as “tourist investors,” particularly when it comes to Hollywood: arriving with great fanfare, taking meetings with players across town, kicking the tires of every studio and production company that may be interested in Chinese investment (which is to say, every studio and production company in Hollywood), suggesting that a deal might be imminent … and then going back to China without agreeing to anything. See China Business Deals: What China Business Deal and China MOU. Like I Really Care.
  1. Because the Chinese yuan is a regulated currency, it’s always been difficult to get money out of China. We’ve been writing about this for a while, and in fact almost exactly one year ago I wrote a post in which I said, “Long story short, we can expect to see more US-China film deals fall through for lack of funding, and it won’t necessarily be the fault of the Chinese company.” Then my colleague Mathew Alderson wrote a three-part series of blog posts during the summer, followed by Dan Harris’ own five-part series in December. Chinese film companies are simply not free to do whatever they want with their own money; the government gets to decide.
  1. Chinese regulators are clamping down on any foreign investment deals, both because of the hundreds of billions of dollars leaving the country as capital flight, and because as a policy matter China wants to discourage “inefficient, uncreative Chinese companies that are simply achieving growth through acquisition.” Add to that increased scrutiny from U.S. politicians, and it’s not exactly Springtime for Renminbi.

Hollywood can bemoan the spigot being turned off, but there wasn’t nearly as much money coming in as was previously thought. It’s still not impossible to get money out of China, but you should say goodbye to buying sprees by Chinese companies snapping up Hollywood assets for no other reason than to convert their currency (cf: the scrapped sale of Voltage Pictures to Chinese metals company Anhui Xinke New Materials).

In light of the new reality, here are some tips on how everyone from studios to production companies to producers should proceed:

  1. Require the Chinese counterparty to pay a nontrivial amount of money upfront, and don’t begin performance until you receive it. If your contract doesn’t pass muster with Chinese regulators, you need to know as soon as possible. Your not receiving the upfront money is a really good sign that the deal itself will never work.
  1. If your deal is with a Chinese company with no presence in the U.S., don’t negotiate or draft it like a typical Hollywood deal. We review entertainment agreements all the time that are in English, governed by California law, and enforceable via arbitration or litigation in Los Angeles – and therefore virtually unenforceable against the Chinese party. You need an agreement written in Chinese, governed by Chinese law, and enforceable in Chinese courts. Do not fall into the trap of believing that because your counterpart Chinese company appears to have a tiny U.S. affiliate company that setting up your dispute for U.S. court resolution will work, because it almost certainly will not.
  1. Instead of fixating on money that your Chinese partner can transfer to the US to finance your slate of American films, start thinking about money that your Chinese partner can spend in China. Perhaps that means a shift toward co-productions in China. It might also mean more deals like the one for Resident Evil: The Final Chapter – ostensibly a buyout, but with profit participation for the production company.
  1. Consider forming a WFOE in China and having it becoming a profit center. China generally has no problem with WFOEs remitting money to their parent companies once all of the WFOE’s taxes have been paid.

It would be a mistake to assume this is just a temporary hiccup and that Chinese companies will be back investing huge amounts in Hollywood in a few months. China still has a ton of money, but for the foreseeable future, the money is staying in China.

China NNN Agreement and China Product Development Agreement
Eight China counterfeiting myths go up in flames

1. There’s no way to protect my brand in China against counterfeits, so I may as well not try. This is both false and self-defeating. China offers a number of ways to protect your IP, and is getting better every year. The first and most important step is to file a trademark application in China as soon as possible to cover your goods and/or services. This will provide you with a first line of defense against counterfeiters and trademark squatters. Once your trademark is registered you will be able to submit takedown requests to Chinese e-commerce sites, request Chinese customs to seize goods, and bring lawsuits for trademark infringement. And, at the same time as you file your trademark application, you can begin to craft a comprehensive IP protection strategy that incorporates copyright and patent registrations.

2. My Chinese trademark registration for my blockbuster movie will allow me to take action against people using “my” trademark on other goods, like clothing or breakfast cereal or toilets. Trademark protection in China is limited by the classes and subclasses of goods and services covered by your registration. If you want protection for other products, you need to register in the appropriate classes AND subclasses to cover those products. For some companies this means registering in all 45 classes. For other companies it means figuring out which products or services you really, really don’t want someone else to be selling under your name. And for most everyone, it is critical to file directly in China and not in Madrid.

3. You can remove counterfeit goods from Chinese e-commerce websites with a US trademark. Alibaba has been amenable to removing listings from Alibaba and Aliexpress, its foreign-facing sites, with just a US or a European trademark registration. But to remove listings from domestic Chinese e-commerce sites like Taobao and 1688.com you typically must have a Chinese trademark registration. Many other e-commerce or social networking sites require a Chinese trademark registration and every site will take action more quickly with one. When counterfeit goods of your product are being sold, time is literally money.

4. China is the biggest source of counterfeit goods in the world. Totally true. According to the 2016 annual report from the U.S. Customs and Border Protection (CBP) and U.S. Immigration and Customs Enforcement’s (ICE) Homeland Security Investigations (HSI), more than 80% of all seized merchandise that infringed intellectual property rights came from either China or Hong Kong.

5. Chinese customs will seize counterfeit goods even if you only have a US trademark. Trademarks are national in scope, and with few exceptions a US trademark has no relevance in China. It certainly means nothing to Chinese customs. Imagine trying to convince U.S. Customs and Border Patrol to seize goods based on a Chinese trademark registration. It would never happen. If you want to be able to have Chinese customs seize infringing goods you need to have a Chinese trademark registration and you need to have registered that trademark again with Chinese customs.

6. The only way to have Chinese-made counterfeit goods seized is when they come in to the United States. U.S. Customs does actively inspect incoming shipments, but Chinese customs also actively inspects outgoing shipments. If you can provide the who, when, and where details about an upcoming shipment of infringing merchandise, you can have that merchandise seized by China customs.

7. My brand is famous outside China so that means the Chinese government will take action against counterfeit goods. No. Just no. The only way to be sure you have trademark rights in China is to register your trademark in China.

8. If I have my products manufactured in China, there’s nothing I can do to stop my manufacturer from selling them out the back door. Wrong. There is a lot you can contractually do to prevent your own manufacturer(s) from selling your own products as its products, starting with a China-centric NNN Agreement and/or NNN provisions in your manufacturing agreement. Using a China Product Development Agreement also often makes sense when you are in the early stages with your China manufacturer.

China copyright lawsFormally, China’s copyright laws have been in line with those of the United States and other developed countries since China became a signatory to the Berne Convention in 1992 and the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) in 2001. But it’s hardly news that you can get a pirated copy of pretty much any movie, CD, or book in China with only a modicum of effort. Years ago you could find bootleg DVDs outside nearly every supermarket and mall in the country. Nowadays it’s more difficult to find such sellers, but not because of China’s efforts to curtail counterfeit goods; it’s because the market has moved to the Internet.

But as China’s homegrown media companies like Baidu, Alibaba, and Tencent continue to pay serious money for the rights to stream tv shows, movies, and other copyrighted material, more lawsuits are being filed in Chinese courts seeking to enforce China’s copyright law, and more official efforts are underway to reduce the amount of pirated material available in China. A (slightly) more subtle form of copyright infringement is still thriving, however: creative works that coopt key elements from copyrighted material, from storylines to characters to music cues and beyond. Television shows in China will make a few slight changes to a copyrighted format and then insist it is an entirely new creation, as with The Voice of China last year. It’s not always clearly a copyright dodge, either; the popular Chinese singing competition I Am a Singer (我是歌手) is an official licensee of a copyrighted  Korean format – or was, until the title and format were altered recently in the midst of China’s unofficial restrictions on Korean content. Presumably it is no longer considered a Korean-content show, which as a side benefit probably means the show cannot be held liable for copyright infringement.

Chinese manufacturers have long excelled at taking the key elements of an existing product and incorporating them into a “new” product. So it’s no surprise that the same thing happens in entertainment. It’s been happening for decades with the most famous story in China, the 16th century novel “Journey to the West,” which has been adapted into a movie or tv series dozens of times. We complain in America about the overwhelming number of sequels and superhero movies, but at least most of them have a different plot. This would be like having one of our greatest stories – you know, like Point Break – remade multiple times in different formats every year for forty years.

It’s important to understand, however, that Chinese law prohibits the unauthorized use of a copyrighted work, or elements thereof, unless such use falls under one of the twelve specific exceptions listed in Article 22 of China’s Copyright Law:

(1) personal use;

(2) “appropriate” quotation in order to introduce, comment on, or explain;

(3) media use to report current events;

(4) republishing or rebroadcasting of another media entity’s story;

(5) publishing or broadcasting a public speech;

(6) translation or reproduction of a scientific work solely for use in teaching or research;

(7) use by a government entity “to a justifiable extent for the purpose of fulfilling its official duties”;

(8) reproduction of a work in its collections by a library, museum, etc. for display or preservation purposes;

(9) a free live performance;

(10) copying, drawing, photographing or video-recording a public artwork;

(11) translation of a Chinese citizen’s work from Mandarin into a Chinese minority language, for distribution in China; and

(12) transliteration of a published work into braille for publication.

The above exceptions are similar to the American concept of “fair use,” a doctrine that allows for unlicensed use of copyrighted material under certain conditions.

Although not always interpreted consistently, China’s fair use exceptions are quite limited. When you’re watching a Chinese reality show and hear a dozen music cues lifted from American pop songs, that’s not fair use. When you’re watching a Chinese television show that seems exactly like Mad About You, that’s not fair use either. That leaves copyright infringement (the former) and legal licensing of a copyrighted format (the latter).

As the value of copyrighted material in China increases, it’s increasingly important to take a broader view of IP protection. Licensing TV shows to China is a big and growing business. Anti-piracy efforts are still important, but it’s even more important to have a properly drafted license agreement. And to take legal action when you find another media company using your copyrighted material. If you don’t protect your own IP, who will?

China IP LawyersA few days ago the invaluable China Film Insider ran a piece about how American cable powerhouse Home Box Office is trying to stop the Wuxi, China-based HBO Studio Restaurant & Bar from using the HBO name without permission. But this movie-themed restaurant has every right to its name. As of 2013, it has owned a trademark registration for “HBO” in Class 43 for restaurant services.

HBO is perhaps emboldened by the recent, well-publicized victories of Donald Trump and Michael Jordan, who triumphed after years attempting to wrest “their” trademarks away from trademark squatters. Or by the judicial interpretation released by the Supreme People’s Court last month describing how China was going to take a stricter stance against trademark squatters.

But even if the Trump and Jordan decisions are harbingers of a new trend in protecting well-known marks, brand owners like HBO need to understand the limits of such rulings. Michael Jordan and Donald Trump only won partial victories. The trademark squatters’ rights were only invalidated with respect to those products or services for which Jordan and Trump were already famous. For Jordan: sporting goods. For Trump: construction services. Notably, the decision by the Trademark Review and Adjudication Board (TRAB) that paved the way for Trump to register “TRUMP” for construction services left intact the trademark squatter’s right to use “TRUMP” for mining and drilling services. Because, presumably, Trump was unable to show that “TRUMP” was well-known for those services.

In the HBO Studio Restaurant matter, Home Box Office faces two big problems. First of all, HBO is not well-known in China in ANY context. Until 2014, when HBO signed a streaming deal with Tencent, the only place you could legally watch HBO in China was in high-end hotels that catered to foreigners. And HBO’s brand awareness in China hasn’t exactly taken off since then. A few months ago, Chinese actor Cao Jun, the star of the HBO Asia original production “Master of the Drunken Fist: Beggar So,” admitted to knowing very little about HBO. Frankly, HBO would have difficulty invalidating ANY trademark on the basis of being a well-known mark in China. But in this case, they have to climb an even steeper hill. They need to prove that the “HBO” name is well-known with respect to restaurant services. And that is almost certainly not going to happen. In the alternative, HBO could argue that the Wuxi restaurant’s trademark was filed in bad faith, but China has been unwilling to invalidate trademarks on this basis except in the case of marks filed by serial trademark squatters and former business partners.

Don’t get me wrong: this restaurant has shamelessly coopted the HBO name in their entertainment-themed Western restaurant, and the restaurant owner’s complaints on its Weibo account about being bullied for no reason by a big American company have the air of protesting too much. But HBO’s strategy is almost certain to fail, because the Wuxi restaurant has superior rights under Chinese trademark law.

It appears HBO has already been down this road before; they had filed an application on March 28, 2014 to cover Class 43 services (including restaurant services), but were rejected for everything but renting cooking equipment, renting drinking fountains, and renting non-theater, non-tv studios. The basis for the rejection is not publicly available, but it is almost certainly because the Wuxi restaurant had filed its trademark application first. I note that on June 6, 2016, HBO filed a new application for Class 43 services, apparently hoping for a different outcome on their second try. I wish them well, but am going to assume that they have a Plan B.

HBO’s better strategy would have been to quietly approach this restaurant and offer to buy the trademark. Maybe HBO already tried that and failed.

I took a quick look and there are dozens of registrations for “HBO” in China, covering all manner of goods and services. And most of them aren’t owned by Home Box Office. That’s a lot of invalidations and appeals to file. Good news for China IP lawyers, but not good news for HBO. Although HBO can take heart from one thing: HBO Studio Restaurant & Bar has a high rating on Dianping, the Chinese version of Yelp.

To reiterate: the recent trend in Chinese trademark jurisprudence to protect well-known marks is heartening, but only extends to those goods or services for which brands are already well-known. If you want to protect your mark for other goods and services, you need to file in a broader range of classes before anyone else.

WeChat and China WFOEAnyone who pays attention to China knows WeChat is the biggest name in Chinese social media. But the extent of WeChat’s dominance, and the way it has integrated itself into nearly every aspect of daily life in China, has significant implications for foreign companies doing business in China.

More than 95% of Internet users in China access the Internet via mobile devices at least part of the time. And of those mobile users, about 80% use WeChat. That is a stunning number, especially when you consider that WeChat is not just for sending messages and sharing news, pictures, and video; it also offers online shopping, mobile payments for everything from groceries to Lunar New Year “red envelopes” (gifts of cash), and Uber-like vehicle for hire services. More than 300,000 retail stores have already integrated WeChat Payment into their point-of-sale systems.

Given the ubiquity of WeChat, numerous companies have opened up official WeChat accounts and regularly use them to share information about products and promotions. Companies do exactly the same thing on Facebook in other countries, but because Chinese consumers can do so much more on WeChat, dispensing information via an official WeChat account is just the bare minimum. Chinese consumers have come to expect more.

A recent story about Starbucks becoming the first foreign company to become integrated into WeChat’s Wallet feature highlights the extent to which companies can benefit from WeChat. WeChat’s Wallet feature allows people to purchase Starbucks items and give them to their friends, all within WeChat. Given the love of social gifting in China – it’s how streaming celebrities earn money – I would expect this feature will increase Starbucks sales and it’s a great example of a foreign company adjusting its business strategy to take advantage of the idiosyncratic Chinese economy.

An official WeChat account can be opened by any company. But if you want Chinese consumers to be able to access that account – which is really the main reason to open an official WeChat account – the account must be formed by a legally formed Chinese entity.

That brings us to an old China Law Blog chestnut: do you really need to form a WFOE in China to sell your products? Of course not. There are a number of perfectly good reasons why companies might want to enter the Chinese market without forming a WFOE. But the more WeChat matters, and the more you want to control your company’s message to Chinese consumers, the more important it will be to have a China WFOE (or even a Joint Venture) to take advantage of all WeChat has to offer.

China trademark lawyersOur China lawyers do a lot of work for clients seeking to remove listings of counterfeit goods from Chinese e-commerce sites. Most of these listings are for obviously, sometimes extravagantly counterfeit merchandise, offered in vast quantities at far-below retail prices, with pictures either lifted from the real manufacturer’s website or showing products of dubious quality, and often featuring product variations beyond those offered by the real manufacturer. The sellers are usually unsophisticated trading companies trying to make a quick buck, and we have no trouble removing these listings.

But for some listings, it’s not so clear the merchandise is counterfeit. The quantities are sometimes limited. The prices are not unreasonably low. And the goods appear to be genuine. Many clients still want these listings removed because the sellers are unauthorized resellers, but an Aliprotect takedown request may not be the appropriate strategy.

These goods are by and large “parallel imports” or grey market goods – authentic products legally purchased in a foreign country, imported into China, and then offered for sale. China does not have a clearly articulated position on the legality of parallel imports for trademarked goods, but courts have generally held that selling such goods in China does not constitute trademark infringement.

China follows the “international exhaustion of trademark rights” standard, which means that once trademarked goods have been sold overseas, a brand owner’s exclusive rights to those goods in China have been exhausted, and a reseller’s use of that trademark in China does not constitute trademark infringement. The contrasting standard would be “national exhaustion of trademark rights,” which would only allow resellers to use the owner’s trademark if the first sale of the goods was in China.

But just because China has a de facto policy of allowing parallel imports does not mean that trademark owners are powerless to stop sellers of parallel imports on JD.com or Tmall. Sure, it may not be possible to stop the occasional seller of small lots brought over from America. But it’s the sellers who claim to be authorized dealers or exclusive resellers who are the real problem. And though a trademark infringement claim probably will not work against those companies, it may be possible to succeed with other claims. In the cases where the plaintiff has been able to stop parallel imports, the courts have ruled based on grounds such as unfair competition and consumer protection.

In a 2009 case before the Changsha Intermediate People’s Court, French tiremaker Michelin was able to stop the sale of parallel imports by showing that the defendant that was selling its tires had not properly obtained China health and safety certifications. And in a more recent case, French cosmetic company Pierre Fabre was able to stop the sale of parallel imports by showing that the defendant was improperly holding itself out as the “Chinese official website” and “China shop” for Pierre Fabre, and had used Pierre Fabre’s trademarks and copyrighted material on its own website in a manner suggesting a formal business relationship.

On the other hand, in the past four years courts in Shanghai, Tianjin, and Beijing, respectively, have ruled against Victoria’s Secret, the French wine group Les Grands Chais de France, and the German beermaker Köstritzer Schwarzbierbrauerei in their efforts to stop the sale of parallel imports, because in each case the seller had purchased genuine products, distributed them through standard channels, and sold the products as is without suggesting any relationship between the seller and the plaintiff.

In other words, the appropriate response to e-commerce sales of parallel imports is fact-specific and usually requires additional investigation. Needless to say, before trademark owners even consider taking action, they better make sure they have properly registered their own trademarks.

China distributorsClients sometimes come to our China lawyers with an apparent conundrum. They have found a Chinese distributor for their product, and both sides are ready to begin selling products in China right away. As in, tomorrow. So far so good. But our client sells a branded product, and they haven’t registered their brand as a trademark in China. Not so good.

The client knows (perhaps from reading this blog) that the only realistic way to get trademark rights in China is by registering them, because China is a first-to-file country.

And then they learn that it usually takes 12-18 months to register a trademark in China. At this point they become concerned about the nontrivial period when their distributor will be selling their branded product in China without any sort of trademark protection.

They should be concerned. But not too concerned, as long as they file their China trademark application right away and enter into a written agreement with their Chinese distributor. The distribution agreement should contain provisions stating that the trademark belongs to the client and the distributor may use the mark in China, but will not file any competing applications, oppositions, or invalidations.

The distribution agreement should also include appropriate contractual language protecting the IP more generally. And if you want this agreement to work to protect your trademark in China, it is much better for it to be in Chinese.

A distribution agreement with the above provisions (along with countless others, of course) will sufficiently protect your IP as against your China distributor. The remaining concern, which cannot be addressed in a distribution agreement, is infringement by a third party while the trademark application is pending.

Without a valid registration in China, there usually isn’t much you can do to stop a third party from using “your” mark. But any legitimate Chinese company is going to shy away from a strategy that only gives them 12 months to establish and profit from a brand name, after which it must stop using it or risk paying damages. That leaves the counterfeiters, for whom 12 months is more than enough time to make a profit, but who aren’t going to be interested until a brand has developed enough name recognition to be worth ripping off. Still, yet another reason to file a trademark application now. Because the distributor is going to be the one who really bears the brunt of any infringement in China. Sophisticated Chinese distributors know this and so we often have situations where American or European companies come to us after having been instructed by their potential or actual distributors to file their trademarks in China.

One final note: many foreign companies do not create a Chinese brand name before selling their product in China, only to discover that a name has been created for them and registered as a trademark – often by their Chinese distributor. If you haven’t already come up with a Chinese name for your product, do so now, and also make sure your distribution agreement requires the distributor to assign to you any Chinese-language marks that relate to your product that it has already registered.

China trademark takedown
China trademark takedowns

China’s lack of an affirmative trademark use requirement allows trademark owners to register marks in more classes and covering more products and services than what they actually sell. Starbucks is a prime example of a company that has taken full advantage of this strategy by (for example) registering “STARBUCKS” as a trademark in all 45 classes of goods and services.

The benefits of registering in a whole host of China trademark classes really comes into play when dealing with infringing goods on Alibaba and other e-commerce platforms. Many of our clients have found that infringement starts with their core lineup of products but quickly moves to things they haven’t released and perhaps never will. Any consumer product is fair game for knockoff artists. If they can imagine it, or more precisely if they can imagine someone buying it, it will turn up on Alibaba.

Though Alibaba is responsive when you request a takedown for a product covered by your trademark registration, they often will decline to take action if the product is outside the scope of your registration. So if an enterprising Chinese merchant began selling Game of Thrones brand deodorant on Alibaba, HBO might only succeed with a takedown request if it had already registered a trademark covering deodorant.

Registering your trademark is the only realistic way to gain trademark protection in China, and that protection is limited by the classes and subclasses of goods and services covered by your registration. If you want protection for other products, you need to register in the appropriate classes and subclasses to cover those products.

Registering in all 45 classes is not a realistic strategy for most company. But when devising your IP strategy for China, you should think about not just the products and services you intend to sell in China, but also the ones you don’t want someone else to sell under your name.

China trademark registrationUnlike the United States, China does not have an affirmative requirement to prove that a trademark is being used in commerce. You do not have to prove use for a trademark application to proceed to registration, and once a trademark is registered you do not have to prove you are still using it to maintain or renew the registration.

Foreign companies have come to realize that China’s lack of a use requirement is a double-edged sword. On the one hand, it allows trademark squatters to register marks for a wide range of products and services they have no intention of ever providing. On the other hand, it allows “real” trademark owners to register their marks to cover a much wider range of products and services than would be allowed in most other countries. As we have noted before, Starbucks employs this strategy better than anyone: it has registered “STARBUCKS” as a trademark in all 45 classes of goods and services.

However, China will require evidence of use if a trademark registration is challenged for non-use. The basic rule is that once a mark has been registered for three years, it is vulnerable to a non-use cancellation. At that point, if a third party files a non-use cancellation, the owner has two months to provide evidence of use within the past three years.

If you are actively marketing your goods or services in China, then it should be fairly easy to provide evidence of use. Your use of the trademark in question on packages, containers, labels, manuals, advertisements, product displays, signage or at exhibitions are all likely to be sufficient. In general, original documents are required, but when a product has a lot of ephemera this is a low bar.

Where it gets difficult is when the only use of the trademark in question is on a product manufactured solely for export. It is not completely resolved in China whether such use constitutes either (1) use in China with respect to a trademark infringement action or (2) use in China with respect to a non-use cancellation. But in our experience, the Chinese Trademark Office (CTMO) will generally accept manufacturing in China, even if solely for export, as sufficient to defeat a non-use cancellation.

But you still need original documentary evidence!

It is all too common for foreign companies to order products from their China manufacturer for years on end using English-only documents that never identify the trademark on the products, and often never even identify the product with sufficient specificity. That makes it almost impossible to prove use to the CTMO’s satisfaction. What you want is documents that are in Chinese and clearly demonstrate your use of the mark in China on the products covered by your trademark registration: documents like invoices, shipping documents, quality inspections, and customs export declarations. Photographs are helpful to provide context but, standing alone, are usually insufficient to demonstrate use.

Typically, most (or all) of the documents that can prove trademark use for export-only products are held by the factory. So while you are still on good terms with your factory, you should make sure to keep a complete, regularly updated set of documents for each of your China trademark registrations. If things go south with your supplier, you don’t want your trademarks to be at risk too.