Archives: Register your trademark in China

Someone left this comment yesterday on a post we did back in 2011 on sourcing product from China by using Alibaba:

They steal ™ names and photos and post them on their site.  90% of the images and Google search are stolen TMs Alibaba uses to get traffic to their site.  They define fraud.

Guess what?  This is simply not true.  At all.

Let me explain.

Nearly every week one of our China lawyers will get an email from someone making the above claim and asking us whether we can help.  Got one of these just yesterday with the subject “Alibaba fraud, what else?”

Not fraud and not what else.  The body of the email talked of how there were 186 “counterfeits” of this company’s products on Alibaba and so far Alibaba had been unwilling to remove them.

Right.  And here is why: Alibaba is following Chinese law and you are essentially ignoring Chinese law.

Again, let me explain.

Alibaba International has a formal procedure for requesting and securing the removal of links to material on its website that infringe another company’s IP rights.  To secure the removal of such material, one must follow Alibaba’s procedure to the letter.  Among other things the process requires documentation proving the IP owner’s existence and rights to the IP in question. If everything goes smoothly, it takes Alibaba a few weeks to remove an infringing link.  We have not once failed to secure the removal from Alibaba of product that violates our client’s trademark rights when we have sought that removal from Alibaba.

Filing a complaint requires submitting: 1) a copy of the client’s “business license” — typically, a Certificate of Incorporation or a Certificate of Good Standing; 2) a copy of any formal IP registrations relating to the infringing material, such as trademark or copyright certificates. We translate these documents into Chinese to make things easier on Alibaba and to speed thing up.

My law firm has registered an account on Alibaba.  This makes us eligible to seek removal of links that infringe our clients’ IP.  We do this by submitting proof of identification and authorization, as well as information regarding the IP which is being infringed upon. This is accomplished by our providing the following to Alibaba: (i) our client’s “business license,” (ii) any formal IP registration documents and (iii) a power of attorney signed by the client, authorizing us to file the complaint on its behalf. We also submit the following information: the IP registration number(s), the title of the IP, the name of the IP owner, the type of IP, the country of registration, the time period during which the IP registration is effective, and the period during which the IP owner wishes to protect its IP rights. After submission, it typically takes Alibaba 2-5 working days to verify our information.

Once Alibaba has verified the information that we have provided to it, we can immediately request the removal of any infringing links. We only need to provide the infringing link. For complaints concerning patent rights, we also need to provide the reason for complaining (i.e., proof of the connection between the infringing material and the IP which is being infringed upon). Alibaba normally takes 5-7 working days to process a complaint, which typically consists of passing along the complaint to the infringing party.

If the infringing party does not respond to the complaint within three working days of receipt (either by deleting the infringing link pursuant to the request or by filing a cross-complaint), Alibaba will delete the infringing link. Absent prior written permission from Alibaba, the infringing party would then be prohibited from posting the same information on Alibaba again. If the infringing party files a cross-complaint, we would then need to deny the cross-complaint, and then Alibaba would handle the “dispute.” Alibaba normally takes about 2-5 working days to resolve such disputes.

As you would imagine, most (so far for us it has been all) counterfeiters do not file a cross-complaint; they just slink away.  But, and here is the kicker, every time we have gone through this procedure with Alibaba, our clients have had the offending items removed, and quite quickly to boot. Of course, each time our China lawyers have gone through his procedure we have done so on behalf of our clients with trademarks registered in China.

We have achieved similar results with China’s other leading and legitimate online marketplaces.  But as you would expect, China’s smaller and sketchier marketplaces are more problematic when it comes to IP protection.

Just another reason why you should register your trademark in China.

 

We wrote on China domain name scams last year, but since we are seeing an increase in these from our clients and readers, we are going to write on it again.  Just about everyone doing business in China or doing business with China gets or will get one or more of the following:

1.  Preventing someone in China from registering your domain name;

2. Registering your domain name in China, “just in time” to prevent someone from beating you to it;

3.  Making sure that your domain name registration in China does not expire.

DO NOT RESPOND.

Near as we can tell, every single one of these that we have seen (and we have seen at least one hundred of these (because clients and readers are always sending them to us to review) are a scam. Number 3 above may not be a scam if you actually have a Chinese domain name, but if you do not, it is.

You also may get emails from someone claiming to have already registered some iteration of your company name (or one of your product names) and seeking to sell it to you. For example, if your company is called “xyz” and you already own the xyz.com domain name, your email may come from someone who has purchased and now wants to sell you the xyz.cn domain.

STRATFOR did a China Security Memo on how these emails would increase when ICANN ( Corporation for Assigned Names and Number) started accepting applications for domain names with non-Latin characters (i.e., Chinese) and that appears to have been the case now that ICANN has done that.

So what should you do when you receive an email offering to protect you from “others” who are seeking to register a Chinese translation or variant of your name or product or someone seeking to sell you an already registered translation or variant.

First off, as soon as possible, register whatever domains you need to protect your company or brand. Determine now what domain names you care about so you do not need to make this determination with a gun to your head. Right now is the time to think about Chinese character domain names.

Secondly, if someone has already actually registered a domain name that is important to you and they are now offering to sell it to you, you essentially have three choices. One, let the domain name go. Two, buy it from the company that “took” it from you. Or three, pursue legal action against the company that took it from you.

Preemption by registration is your best and least expensive protection. In other words, if you do not want someone taking your company name or one of your product names (or some variant of these) and using them for a domain name, register those as domain names right now. You should also figure out whether it makes sense for you to register your trademark in China or wherever else you do business.

What are you seeing out there?

Interesting article in today’s Daily Telegraph, written by the Telegraph’s Beijing correspondent, Malcolm Moore.  The article is entitled, “Asda in China? That’ll be Mr Liu in Shenzhen: The Chinese love for Western consumer brands is well known,” and it is on UK companies that have had trouble with “trademark squatters” in China.  The article focuses on British companies that have had “their” trademarks registered in China by Chinese individuals or companies.  I am quoted fairly extensively in it.

Before I talk about the article itself, I want to first set out the basic trademark laws/rules for China:

  • China is a first to register country.  What this means is that, generally, the first to register a trademark in a particular class gets it. England (and the United States), by contrast, is a first to use country. This means that, generally, the first to use a trademark gets it.
  • If someone in China registers “your” trademark in bad faith or if someone in China registers “your” trademark and your trademark is a well-known brand, you can go to the Trademark Review and Administrative Board (TRAB) or to a court to get the trademark revoked.
  • It is very difficult and expensive to prevail on a bad faith trademark claim.
  • It is very difficult and expensive to prevail on a well-known brand claim. If you do actually have a well-known brand, nobody else can use that brand in China in any class. What this means is that if you are Starbucks, nobody can legally use the Starbucks name on anything, be it coffee or be it t-shirts.
  • If you do not have a well-known brand and you register your brand as a trademark in the trademark class that includes coffee, everyone is pretty much free to use your brand as their own brand on t-shirts or computers, etc.

The article begins by discussing how a bunch of “High Street names are being registered by Chinese individuals in their droves.”

Stalwarts of the retail industry such as Sainsbury’s and John Lewis have had their names registered in China, potentially posing problems should they ever choose to take their brands to the Asian powerhouse.

The Hangzhou Buluna Garment & Accessories company owns the “Sainsbury’s” name. When contacted the Hangzhou company declined to comment.

Sainsbury’s also kept quiet when asked about third parties registering its trademark, but did say that it began registering its trademarkets in China several years ago to support growth plans.

In the southern city of Shenzhen, a man named Liu Mingxi has the right to produce garments, shoes and belts under the “Asda” label until 2018.

John Lewis and Waitrose are registered to the Li Can International Investment company while Dixons, together with its Chinese name Di Ke Xun, is owned by the Shenzhen Basicom Electronics company, which makes 10m mobile phones a year. Dixons declined to comment, while John Lewis said the business constantly keeps its trademark and brand protection strategies under review.

Neither is fashion retailer TopShop immune. In July 2009, a man named Zhuo Hongxiang, who lives in a village in Fujian province, registered the Topshop trademark for selling stereo equipment, cameras, lenses and glassware. He owns the name until 2019.

TopShop insisted the registration of its trademark for cameras was not an issue and that it owns its name in China for fashion purposes. Arcadia, the group that owns TopShop, works with its local attorneys internationally to ensure it has appropriate protection.

The article then talks about how Hermes and Chivas failed to prove that they were well-known brands when someone else registered their names in China.  Both Hermes and Chivas lost because they were not able to prove that their marks were famous in China when the Chinese companies/individuals secured them.
If you take away nothing else from this post, please take away that it is very difficult to show that your brand is a well-known mark in China and if you can just register your trademark in China, that is going to be by far the safer approach.  About all I can tell you is that I have never once been so confident of a client’s having a well-known brand as to rely on that sufficiently to warrant not registering that brand in China.
The article then quotes me on how it is that these British companies might have gotten themselves into trademark trouble in China:

“Too many companies were told not to bother registering their trademarks because China does not enforce its laws,” said Dan Harris, a lawyer at Harris & Moure, an American firm specialising in China. “Many others were told nothing at all.”

I then am quoted about how difficult it is to get “your” brand back for China once it has been “taken”:

In fact, China strictly enforces trademarks, in favour of whomever has registered them first. And Chinese courts look dimly on Western companies who complain their brand has been registered by another party in “bad faith”.  Mr Harris said: “The cheapest and easiest thing to do [if your brand has been hijacked] is to set up in China under a new brand.

“When you call up the Chinese party, they think they have won the lottery. They ask for a million dollars. We never call up, because if it comes from an American law firm the price is two million”.

The article concludes with a few somewhat humorous examples of Chinese trademark squatting:

Nor are companies the only victims. The Chinese and English names of ITV’s The X Factor and BBC’s Strictly Come Dancing are owned by Chinese individuals, as is the generic name “Savile Row”. In Guangzhou, someone owns the rights to “Justin Bieber” while a Shanghai company owns the rights to “Angry Birds”. A spokesman for the BBC said it was not aware of the Strictly registration.

Bottom Line:  Way back in 2007, in China Trademarks — Do You Feel Lucky? Do You? we made clear our position regarding the need to file your trademark in China at your earliest opportunity:

Our advice to all our clients is to register their trademarks in China before they go there. China is a first to register country and this means that whoever registers the trademark first gets it. Yes, there is an exception for famous trademarks, but unless you are Coca-Cola, it is lunacy to bank on a Chinese court holding your trademark is famous when just going ahead and registering it costs so little. Most firms charge less than $5,000 for this. So even if the Chinese Court rules your trademark is famous, you will almost certainly have spent well over $5,000 in making your case.

Nothing has changed…

When we first started this blog way back in 2006, we would constantly tout how if you want to protect your IP in China, you have to register your IP in China.  Our thesis was (and is) that if you don’t bother registering your IP in China, you really have no right to complain about someone using “your” IP in China.  For a representative article with these thesis, check out, China Trademarks — Do You Feel Lucky? Do You? The flip side of this thesis is that if you do register your IP in China (i.e., your trademark, copyright or patent), your chances of protecting it will go up exponentially.

Back in 2006 and 2007, the media was constantly writing about U.S. companies with IP problems in China. The amazing thing about virtually all of those articles, however (especially the ones in the local press) was that they never mentioned one way or the other whether the complaining American company actually had any legal basis for its complaints. In other words, they were completely silent as to whether the American company had actually registered its IP in China. I must have called at least a half a dozen reporters behind stories like those and in every single instance, they admitted it had simply never occurred to them to ask whether the subject of their stories had actually registered its IP in China or not. It had never occurred to them because, without even thinking about it, they had just assumed that what is good in the United States is good for the world; if you have a trade name in Peoria, that alone ought to be enough to prevent anyone in Timbuktu or Tianjin from using it. WRONG.

What virtually all of these articles had in common though was that they would quote the “offended” American company as though it were spouting gospel and blame the Chinese company as though it was solely responsible for the American company’s problems.

I thought of those good/bad old days today after reading an excellent post over at the Learn China Business Blog, entitled, “Are Chinese Copycats Convenient Scapegoats for Poor Preparation?” The post is about a USA Today article, entitled, “Chinese copycats challenge U.S. small businesses.” The article highlights a U.S. recreational camper trailer company called SylvanSport. SylvanSport professed “shock” at learning that a product very similar to its own was being made in China and sold in Korea and Japan, two countries where SylvanSport had been seeing strong sales.  Syvlan’s owner seems to see SylvanSport’s legal problems as a political matter:

“Our politicians, when they describe the companies that are necessary for the economic recovery, (they are talking about) companies like ours,” he says. But because of SylvanSport’s lost sales, “There’s a very real chance that the Chinese company could be the survivor here and we could go out of business.”

The USA Today article does NOT make the mistake of failing to investigate the IP protections secured by its subject company and, in fact, it flat out notes that SylvanSports did not file for a China patent and that its Chinese competitor, Wuyi Tiandi, did:

Wuyi Tiandi received a patent on its camper in China in November, according to Tang. SylvanSport received various U.S. patents for its product between 2008 and 2010, Dempsey says.

While Wuyi Tiandi might not be able to sell its products in the U.S. because of SylvanSport’s patents, Tang says, “We can still sell our trailer everywhere else.”

The article goes on to describe SylvanSport’s case as a “cautionary tale about small businesses’ need to protect their intellectual property” and notes that “only 15% of small companies that do business overseas realize that U.S. patents and trademarks protect them only within the U.S., according to the U.S. Patent and Trademark Office.” The article rightly points out the need for US companies to “file patents and trademarks in countries where their products will be made and sold, as well as where they’re based.”

Sylvan’s owner never contests his lack of legal standing, but instead puts forth the vague notion that things ought to be different:

While Dempsey realizes the limits of U.S. patents, he says that Wuyi Tiandi should not be able to get a patent in China based on his product.

I’m sorry, but color me skeptical and indifferent.  Heck, I’ll even go a step further than that and flat out blame the “victim” here and say that whatever SylvanSport is going through is its own fault.

I deal with companies like SylvanSport every day and here is how my conversations with those companies often go:

Company: I have a great product and I am not sure what sort of IP protection I am going to need for it.

Me: Where are you making this product and where will you be selling it?

Company: I am making it in the United States, but I am selling it throughout the world.

Me: Do you have any patents or trademarks or copyrights related to the product?

Company: Yes.  I just filed for a patent here in the United States and I also have registered trademarks here too. One for my company name, one for the product name and our logo.

Me:  Good.  Ummmmmm. Okay. Let’s talk about your sales. You say you are selling your product all over the world, but can you break that out for me a bit more.

Company: Yes. Right now, about 70% of our sales are in the U.S., 10% are in Canada, 5% are in Australia, 5% in England, and maybe 5% in France, Belgium and Germany combined.

Me:  Okay, you said “right now.” Do you anticipate those numbers changing?

Company:  Yes.  We have been getting a lot of interest from Japan and Korea and we are about to sign a deal with companies in both of those countries to distribute our product there.

Me:  Okay. So here is how I see it. If you were an Apple or a Microsoft, this would be easy. I would just tell you to register your trademark and your patent in pretty much every country in the world, including South Sudan and Afghanistan, figuring your product will eventually go everywhere and figuring you can afford it. But that doesn’t make sense here.  So here is what I tentatively suggest, subject to our talking further and our getting back to you on registration pricing for each country.

What will probably make sense is for us to look into the most cost effective way to get you trademark and patent protection in the United States (where it sounds like you are probably already completely covered), Canada, Australia, England, France, Belgium, Germany, Japan and Korea. It will probably end up making sense for you to do an EU filing to cover all of the EU countries, not just those we have already discussed.  Do you have any plans to manufacture your product outside the United States?

Company:  No immediate plans, but I as this thing really takes off, I could see us looking at China, Vietnam or maybe even Indonesia for manufacturing.

Me: Okay. Well then we should get back to you with pricing on those countries as well. By the way, who did your United States patent work?  I ask this because I will want to talk with them about exactly when your patent was filed and what sort of filing was undertaken because that will impact whether or not you are too late to file patents on your product in any other countries. We don’t do patent work, but we can recommend patent lawyers to you in the relevant countries, though I am guessing that your patent lawyer can probably do so as well and we find it generally makes sense to have your US patent lawyer head up and oversee your foreign patent filings as well.

The point of my setting out the above is to show the basics of what companies typically go through in determining what to do to protect their IP around the world. SylvanSport should have gone through the same sort of thing with its lawyers and if it did and then chose not to register its patent in Korea or Japan (where it is now complaining of lost sales) or in China (where it is now complaining of a copied product), it made its own choice. If SylvanSport was advised on what it needed to do to protect its IP and then chose not to spend to do so in China, Korea or Japan, then it appears it made a cost-benefit analysis that it now regrets. If Sylvan was never advised on what it needed to do to protect its IP around the world, then it made the decision not to bring in counsel capable of assisting it with this issue.  Either way, it was SylvanSport’s choice not to spend the money it needed to spend to secure the IP protection it now seems to wish it had.

One more thing about the article that struck me. SylvanSport might be right to complain about how Wuyu Tiandi should not have been granted a Chinese patent. Patents in China require, among other things, “novelty” and if something has already been patented, it probably is not novel. Invention patents in China are substantively examined but utility patents are not. If SylvanSport is concerned about Wuyu Tiandi having a Chinese patent, SylvanSport should retain a Chinese lawyer versed in China patent litigation to figure out whether it has grounds to challenge Wuyu Tiandi’s patent and invalidate it. It is probably too late for SylvanSport to secure its own patent in China but invalidating Wuyu Tiandi’s patent would at least allow SylvanSport to manufacture and sell in China some day, if it so wishes.

Learn China Business raises THE important question: “In SylanSport’s case, how can they feel victim to any Chinese company selling a product similar to theirs without coming to the table with a Chinese patent protecting their ownership interests?” I’d like to know the same thing.

Got an email the other day from a friend whose company is getting ready to source from China. The email asked me what the company needed to know “to protect their butts in China.” I told them they needed to know/do the following four things.

1.  Choose a good factory. This is the sine quo non of China sourcing. I am always saying that I can write the world’s best contract, but if the party on the other side is a thief, the contract will have no value. How do you pick a good factory? The first thing you do is make sure that you have actually picked a factory, and not a broker claiming to be a factory. The best way to pick a good factory is to go and look at it yourself. The second best way is to have a qualified person you trust go and look at it. The third best way is to rely on the views of others.   

2.  Use an OEM Agreement suited for your situation.  You need a good written contract between you and your supplier, the official version of which should be in Chinese. For more on this, check out “China OEM Agreements. Why Ours Are In Chinese. Flat Out.” This agreement is the road map between you and your Chinese supplier. It will do at least three things for you:

  • It will make clear to both you and your Chinese supplier the terms and conditions of your relationship.
  • It will let your Chinese supplier know exactly what it must do to comply with your requirements and to stay within the law. By doing so, it will greatly decrease the likelihood of your having problems with your Chinese supplier.
  • It will position you well should problems arise.

3.  Set up a Quality Control System.  Even with a good supplier and a good contract, you will almost certainly still face at least some quality control problems. The big question is when will you discover them. If feasible, check for quality before you pay for you product and before your product is shipped.

4.  Register your trademark in China. When it comes to trademarks, China is a first to file country. This 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 widgets and you have been manufacturing your widgets in China for the last three years and someone registers the XYZ trademark for widgets, that other company gets the trademark for widgets. And then, armed with that trademark, that company has every right to stop your XYZ widgets from leaving China because your widgets violate that other company’s trademark. Trust me when I say that many foreign companies have incurred massive damages by failing to take the simple and inexpensive step of registering their trademark in China.

If you abide by the above, you almost certainly will do just fine.

What do you think?

From time to time I get calls from start-up companies about to embark on manufacturing in China. They are calling to ask what they need to do “to protect themselves.”

I tell them about NNN Agreements and how they can help prevent potential manufacturers from replicating their product. And I tell them about how important it is that they have an OEM Agreement with their Chinese manufacture

Then I tell them how if they do nothing else, they should immediately register their trademarks in China. This one usually surprises them and they often think I have misunderstood what they are planning for China. They at first do not understand why I am emphasizing the need for their filing a trademark in China when they have no plans to sell their product in China. I then explain the following to them:

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.

Then they understand.

A Chinese appellate court just ruled against Pfizer in a trademark lawsuit against Chinese drug maker Guanzhou Welman.

Full Disclosure: I own a very small amount of Pfizer stock, which means I go into this post very unhappy with Pfizer. Pfizer also bought Upjohn, the biggest and best company in my hometown of Kalamazoo, Michigan, and it just a few weeks ago announced massive layoffs that will likely devastate “the Zoo.”

So please forgive me if it appears that I am gloating when I point out that Pfizer just lost a trademark suit appeal in China. Pfizer sued Guanzhou Welman for Guanzhou’s use of the Chinese name “Wei Ge,” a commonly used local reference in China to Viagra. Wei Ge means “great man.”

The All Roads Lead to China blog summed up the case rather nicely:

  • Pfizer releases the little blue pill onto the market, and it becomes a huge success
  • The pill becomes know as Wei Ge in shops
  • Guangzhou Welman, a local Chinese pharmaceutical company also produces an anti-impotence drug and registers a trademark for it under the name “Wei Ge”
  • Pfizer sues Guanzhou Welman for using the Wei Ge name and loses and then loses again at the appellate level

All Roads then goes on to emphasize the need for foreign companies to register their trademarks early in China:

For Pfizer, today provided more support for my advice to anyone who manufactures anything anywhere: register your patents and trademarks early. The little purple [Rich, it’s BLUE!] pill has become the poster child for what can happen when companies do not plan their IP strategy, and how little can be done after the fact.

He is absolutely right. Pfizer appears to have blown it. China is a first to file country. What this means is just what it says: the first to file a trademark gets it. What this means is that you must register your trademark in China or someone else will. Guangzhou Welman understood this. Pfizer apparently did not. Now it is always possible the Chinese courts will eventually rule in Pfizer’s favor as some sort of salve for the West, but based on my understanding of the facts in this case and China trademark law, it most emphatically should not.   I discussed this case with a number of China trademark lawyers and they all agree with me on this.

Pfizer came into China and failed to play by China’s clear rules, which by the way, are the rules in most countries. I am guessing that in addition to bringing a trademark claim, Pfizer is also asserting a claim for unfair competition against Guangzhou Welman. As for the trademark, this case seems like such a clear-cut loser for Pfizer I have to wonder whether the media somehow have the facts wrong or whether Pfizer is just seeking to keep this case alive so as to avoid having to report more bad news to its already disgruntled shareholders.

Last week I attended the United State’s Patent and Trademark Office‘s two-day conference on “Protecting Your Intellectual Property In China and The Global Marketplace.”  China Law Blog’s own Steve Dickinson was asked to speak there on how to protect your trademarks and trade secrets while doing business in China, but work commitments prevented him from doing so.  Too bad, as it turned out to be quite a good conference.

I do not generally like lawyer conferences and I like China conferences even less.  They often get repetitive and a certain “we great lawyers are all in this against the Chinese” mentality often pervades.  I swear if I hear one more American speaker start or conclude a lecture by talking about China’s phenomenal growth and how it is a nation of both great risks and great rewards or one more Chinese speaker spew out statistics for twenty straight minutes, I will ….

But there was surprisingly little of that at this conference and there were a decent number of speakers worth writing home about — or at least blogging about — and that is exactly what I will be doing over the next week.  I am going to lead with my favorite speaker of the conference, Kevin R. Brown, Nike’s Director of Global Brand Protection. I knew I was going to like Mr. Brown’s speech from the get go when he started out by saying his bias is to always see the glass as half full, as I have that same predilection.  I ended up agreeing with nearly everything he said, and found many corollaries to an article I wrote a long time ago called “Four Essential Principles for Emerging Market Success.”

Mr. Brown candidly admitted that Nike’s first four years trying to protect Nike’s IP in China were hell, but he said that after he sought help from a Chinese national at Nike around six years ago, things got decidedly better.  He emphasized that if you do things the right way in China, you can achieve success in protecting your IP there.

Brown then put up a PowerPoint slide that asked the question, “How do I swim in this river?”  He answered it by saying:

  1. Learn the system
  2. Be the system
  3. Out-system the system

My admittedly personalized and overly interpretive view on what Mr. Brown is saying here (and please remember I am a lawyer, not a Zen master) is as follows:

  1. China is not the United States.
  2. Do not expect China to be the United States.
  3. Get used to China not being the United States.
  4. China not being the United States does not make it bad, just different.
  5. You can do things the U.S. way in China and fail, or you can work within the system for success.
  6. Learn all you can about the Chinese system.
  7. Work within the Chinese system.

Mr. Brown then talked about the need for humility. He put up a PowerPoint image saying “It is honorable in China to downplay your leverage and work within the system” and “This is not something that comes naturally to most companies.”  He talked about how Nike does not play up its role as a big company.

He then flashed the following sentence/image:

The Role of Green Tea

Mr. Brown talked about how he gets things done in China by drinking green tea and chatting with government officials.  He then said if you are not willing to drink green tea, send someone from your company who is.

He then gave concrete examples of instances where the Chinese government had worked with Nike to eradicate counterfeiting operations, including in one case going onto a Chinese naval base to shut down an operation led by the officers and their wives.  The lead officer involved in the counterfeiting soon thereafter took “early retirement.”

Mr. Brown put up an image showing the following fake Nike seizures by the Chinese government in 2006:

  • 1,049,000 pairs of shoes
  • 371,460 pieces of apparel
  • 98,672 sports bags/backpacks
  • 354,427 pairs of socks

Mr. Brown then extolled the virtues of working with Chinese customs and talked of Nike’s successes by doing so.  If you register your trademark in China, alert Chinese customs to that registration and provide customs with information on your product, Chinese customs will contact you if it sees possible counterfeits of your product going in or out of China.  Mr. Brown then mentioned that in Canada neither the importation nor the exportation of counterfeit product is illegal; only the sale of such products is.

Mr. Brown talked about how most of the Chinese governmental officials with whom he deals genuinely want to do a good job.  He said giving them recognition for a job well done — and not seeking to bribe them — is the best strategy.  “Face” is of greater importance to a Chinese government official than money.

In my next post, I will give my own views on Mr. Brown’s talk.

On a somewhat related note, Microsoft last week filed 26 piracy lawsuits in the United States.  I mention this because I did not see a single article on these lawsuits mentioning how the United States government is not doing enough to stop piracy.  The reason for this is that the prevailing view in the United States is that the company, not the government, is primarily charged with protecting its own IP.  More companies need to take that same view regarding China.  Waiting for the government to protect your company’s IP rights is not the way to go in either the United States or China.

Five western luxury goods makers, Prada, Chanel, Louis Vuitton, Gucci, and Burberry just won a landmark trademark case in the Beijing High People’s Court against the Beijing-based Silk Street Market, according to this China Daily article.  The ruling requires the Silk Street Market to pay each of the five companies 20,000 yuan (approximately US $2,500) for trademark infringement.  The Silk Street market was found liable for trademark infringement because it allowed its retail tenants to sell fake products in violation of the intellectual property rights of these five luxury goods makers.

This decision is a watershed event in the evolution of China’s enforcement of intellectual property rights because it extends liability for trademark infringement to the companies that lease space to the offending retailers and then turn a blind eye to counterfeits. The Silk Street Market’s liability for trademark violations was not for selling counterfeit goods, but for failing to act against the infringing retailers after the five luxury goods makers informed the Silk Street Market of its retail tenant’s infringing sales:

Each of the five brand owners found counterfeits of their products in the Silk Street Market and presented them as evidence of counterfeiting in a coordinated act in 2005 aimed at protecting their intellectual property rights (IPR).

They filed a collective complaint against the market in a call for the prohibition of counterfeits last May. But the fakes remained on sale at the market one month later, and the brand owners decided to bring both the market and the individual stores before the court.

A representative for the Silk Street market “expressed disappointment over the final ruling, saying it was near impossible for operators to eradicate all counterfeiting in such a large market.”  Huai Xiaofeng, vice-president of the Beijing High People’s Court, said the court would go to great lengths to crack down on counterfeiters of foreign products.

Additionally, Louis Vuitton won a separate, but similar, lawsuit in a Beijing court against a Beijing market called Chaowai Men’s Department Store.  The court ordered this market to pay Louis Vuitton 150,000 yuan (approximately $19,000) after finding that 22 stalls within this “indoor market” were selling handbags bearing the LV trademark without Louis Vuitton’s prior authorization.

Bottom Line:  These two cases are important because they show China is widening the net of trademark infringement liability to step up its intellectual property rights enforcement.  The lessons to be learned from these cases are simple.  One, register your trademark in China.  Two, if you find someone violating your trademark, send them AND their landlord a letter (in Chinese, of course) demanding the violations immediately cease.  Three, if the violations continue, sue.