Archives: register your trademark

A few months ago, I was email interviewed for a story on protecting intellectual property in China. I just learned today that the story is not going to run because it was “deemed too technical.”  Fine.

So instead I will list out below the points I made to my interviewer, who had sought me out to discuss what “foreign companies need to know about China trademarks …. the China trademark basics, if you will.”  I told her the following:

1.  Companies need to know that China is a “first to file” country.  This is by far the most important thing to know about China trademarks. What this means is that (with very few exceptions) whoever files for a particular trademark in a particular category gets it. So if your company’s name is ABC and you make shoes and you have been manufacturing your shoes in China for the last five years and someone registers the ABC trademark in China for shoes, that other company gets the trademark. And what this means is that other company can stop your shoes from leaving China because your shoes violate its trademark.

2.  Companies need to realize that a trademark in the PRC is not a trademark in Hong Kong or Taiwan or Macao.  Oh, and just for safe measure (yes I have been asked this), it also is not a trademark for Singapore or Korea or Japan or for anywhere else outside the Mainland.  The real key here is that if it makes sense for you to have your product trademarked in the PRC and in Hong Kong and in Taiwan (or anywhere else), it is usually a good idea to register your trademark in all countries at least somewhat simultaneously. This is because trademark hijackers review the trademark publications and may quickly file “your” trademark for themselves in some other jurisdiction before you are able to do so.

3.  Companies also need to consider exactly what it is that they want to trademark.  Do you register just your English-language name?  Or do you create a Chinese name and register that as well?  Should your Chinese name be a translation of your English name, a transliteration, or something unrelated?  Determining these things oftentimes requires both a China trademark lawyer and a China marketer.  In Hermès’ China Trademark Case. Do You Know What Trademarks You Really Need? I talked about how my firm’s clients typically handle these issues:

In situations where our clients are making product in China for export only and their product has the trademark on it only in English, securing just an English language trademark is usually enough. In situations where a company intends to manufacture its product in China and eventually sell in China, the company must weigh the costs and benefits of securing a Mandarin (or other language) trademark now, or just wait. In situations where the company knows it will be selling its product in China right away, it needs to analyze the options set forth … above. I would say that in almost all instances where our client’s trademark has actual meaning … they have chosen to trademark both the English and the Mandarin of the word. Rarely do our clients seek a China trademark in a language other than either English or Mandarin. Only around 25% of the time do our clients seek to secure the trademark for a transliterated or phonetic version of their English language trademark. Most of the time, they choose to wait and see how their product does in China and then, if it proves successful, they usually come back and register more on it. Waiting also allows them to see exactly what the Chinese will call their product. The downside to waiting is that someone else may register the name in the meantime.

4.  Companies need to take a long term approach to their China trademark filings.  Sure you are only making shoes now, but what about your plans to eventually expand to wallets.  Should you register your trademark in the trademark class/category that encompasses wallets?  Do you care if someone makes shoe polish with your name on it?
Who needs the MSM anyway?

A few weeks ago, one of the lawyers in my office, emailed me an article co-written by a law school friend. The article was on trademark infringement in the clothing industry and on what clothing companies/fashion companies should do to protect their China trademarks, written by Yujing Shu and Hai-Ching Yang of KLGates. The note with the email said that she thought I “would be interested in the article because we represent so many clothing companies with their China IP.” I was very interested in the article for those exact reasons, but then chose not to write about it because it did not say anything “new.”

Since then, one of our IP lawyers spoke at a “Legal Protection in Fashion” event and later told me of how interested the audience (and even the other panelists) were in how to protect fashion IP in China. Then the other day, I spoke with a large clothing company and was surprised at their lack of knowledge regarding how to protect their IP in China. They essentially did not even know it was important or even possible.

All of this is my incredibly round-about way of noting that I should have weeks ago written about the article that was emailed to me.  The article is entitled What Your Company Should Know About Protecting Against Trademark Infringements in China’s Fashion Apparel Industry and it does a nice job setting out the basics of what fashion apparel companies need to do to protect their IP in China.  And though the article does not contain anything particularly new, that is only because the way to use China’s legal system for trademark protection has not changed in quite some time and does not vary much by industry.

Here is their spot-on advice:

  • Register your trademark as quickly as possible.  Since China follows the “first to file” policy, registering your trademark as quickly as possible is the key to protecting your IP.  
  • Properly register your trademarks by registering multiple categories and subcategories of goods.  As a preventative measure, companies should register their trademarks in as many closely related categories and sub-categories of goods.
  • Vigilantly monitor infringement actions and use China’s administrative process.  Companies should use the administrative process to cease infringing products and tools, impose fines, and seek court imposed raids if necessary. 
  • Use court proceedings to seek damages and to obtain well-known trademark status.  As courts have become the main channel to protect IP, companies can use litigation to serve as warnings for other violators.  Companies can also seek the court’s recognition of “well-known trademark” status in current or future cases for increased trademark protection.

Just what every China lawyer has been saying for years now to companies in all industries.  We have been saying it because it is true and necessary.  Here are some more tips on protecting against trademark infringement in China, all of which apply to the fashion industry:

  • Register your trademark or copyright in your home country.  Typically it makes sense to do this before you start doing business with China.
  • Before doing business in China, consider which provinces do the best job of protecting intellectual property.
  • Review and revise your own Web site with an eye towards removing anything that makes for a good target for intellectual property thieves.
  • Stay ahead of the copiers by rapidly introducing new products, improving on your existing ones and building your brand image.
  • Have a contract with your Chinese factories that clearly forbids copying and specifies liquidated damages for violations.
  • Use tracking technology to monitor the product you are having made in your Chinese factories.
  • Have anti-counterfeiting elements put into your products and/or packaging.  I am always amazed at what can be done in this arena.
  • Monitor your manufacturers.

What else?

According to recently released statistics, in 2012 Chinese Customs (General Administration of Customs or GAC for short) seized approximately 15,000 shipments of counterfeit goods, the vast majority of which were exports. This was the first year since the Beijing Olympics in which the numbers weren’t goosed by a “special campaign” or similar program, and on a gross basis they weren’t embarrassingly far from those of US Customs, which seized approximately 23,000 incoming shipments in 2012. The comparison pales a bit given that nearly half of the shipments seized in the US originated from China, but let’s be fair here: Chinese Customs didn’t even have a plan to enforce IP rights until 1994, and it wasn’t until the run-up to the Beijing Olympics that they got serious about confiscating goods. Serious as a Jackie Chan PSA.

The implication for foreign companies doing business in China is clear: Chinese Customs can help protect your IP from infringement, even when there isn’t some artificial quota in effect. What the numbers don’t tell you, however, is that nearly all of the seizures were of goods that infringed registered Chinese trademarks, and that those trademarks had been registered not only with China’s Trademark Office but also with Chinese Customs.

As we have written a number of times — see File Your Trademark In China. Now., China: Do Just One Thing. Trademarks., and China’s Changing Trademark Environment. Why You Need To Register Your Trademark Now. — the essential first step in any China IP strategy is to register your trademarks with China’s Trademark Office. Because China is a first-to-file country, until you register a trademark you have no rights in that trademark. But a trademark registration alone will not limit the spread of counterfeit goods. A trademark registration merely gives you the legal capacity to enforce your rights to that mark, and should properly be seen as one of the pieces in an overall strategy.

For any company concerned about counterfeit goods coming from China, the next step should be registering your trademark with Chinese Customs. This is not a legal requirement but a practical one: though China Customs officials have discretion to check every outgoing shipment for trademark infringement against the Trademark Office database, in reality they only check against the Customs database. No separate registration with Customs means no enforcement by Customs.

If you register your mark with Customs, they will contact you any time they discover a shipment of possibly infringing goods. At that point you have three working days to request seizure of the goods. Assuming you request seizure (and post a bond), Customs will inspect the goods. If Customs subsequently concludes the goods are infringing, they will invariably either donate the goods to charity (if the infringing mark can be removed) or destroy them entirely. The cost of destruction, and of storing the goods during the inspection process, will be deducted from your bond.

Registration with China Customs generally takes three to five months and can only be done after China’s Trademark Office has issued a trademark certificate. The latter currently takes approximately fourteen months, which means that within nineteen months of the date you file your trademark application, Chinese Customs could be helping to stop counterfeit goods from being exported from China.

Nineteen months can be an eternity in the retail world. Whether you’re a toy company producing dolls in Shanghai, a home video company making DVDs in Guangzhou, or a luxury goods company manufacturing high-end purses in Qingdao, there’s only one approach that makes sense. Register your China trademark now. Then register it again.

As we have written many times over the years, if you are selling goods into China, sourcing goods from China, or even just doing business in China or with China, you probably should be registering a trademark in China for your logos and brand names. China is a first-to-file country and it requires no evidence of prior use, which means that whomever files for “your” trademark first, almost certainly gets it. For more on the need to register your trademarks in China, check out the following:

But for what exactly should you register your trademark n China?

China breaks out its trademark registrations into 45 different classes, not to mention sub-classes.  And unlike many other countries, China is a “single class application” country, which means that you must file (and pay for) a separate trademark application for each class for which you are seeking trademark protection.  Very roughly speaking, what this means is that if you register your “ABC Trademark” in the class for clothing, you will be protected from trademark infringement just from those who use your ABC Trademark on clothing items.  If someone wants to use your ABC trademark on clocks, cars, kitchen appliances, or any other product or service within any of the other 44 classes, they will be free to do so.

So then what can you do?  Well obviously you can register your “ABC Trademark” in all 45 classes, but that is really no solution at all. It is no solution both because doing that would be prohibitively expensive for all but the largest and wealthiest companies.  It is also no solution because if you fail to use your registered trademark for three years, you risk losing it.

So then what should you do when filing for China trademarks?  We suggest that you register your mark in classes of products you may make or sell in the future, or where there is room for consumer confusion.  Let’s take your ABC Trademark on clothing.  It probably does not make sense for you to register that for kitchen appliances but it might make sense for you to register it for beauty products because so many clothing companies also make beauty products.

Unfortunately, there are no general rules here, beyond that you fully familiarize yourself with China’s various trademark classes and that you figure out as early as possible what classes your products/services best fit into now or may fit into in the future and also what registrations by others are most likely to be confused for yours.

UPDATE:  I just received an email from a Hong Kong lawyer friend that raises a very good point.  This lawyer, who has a very substantial China IP practice, thinks every company should think long and hard about registering their trademark in the clothing class:

It was interesting to read the last portion about registering CN TMs.  I’ve been advising people for years that irregardless of what their product category is, they should also register their TM for clothing on the basis that almost any TM in China will eventually appear on someone’s (unauthorized) T-shirt, socks, or something in one way or another.

Furthermore, most companies will at some point or another want to put their trademark on a piece of clothing, whether it be a T-shirt for a promotional item, or for a marketing blitz somewhere, or whatever.  Or, the company will eventually want to expand their brand by moving into clothing…Look at what happened to Ferrari when they started selling clothing in China – or Harley Davidson.
Very good point.

 

A reporter called me the other day on the Apple-Proview trademark kerfuffle. She kept wanting me to give her a quote on what foreign companies should take away from this dispute and I kept parrying with her, unable to give her just one. I kept finding myself saying “it’s probably more complicated than that.”

Let me back up a bit. As many of you no doubt know, Apple is in a massive trademark fight with a Shenzhen-based company called Proview. Near as I can tell, the facts are as follows:

  • Proview-Shenzhen registered the iPad trade-name before Apple had ever manufactured an iPad.
  • Proview-Taiwan (a Taiwanese company that is not the same company as Proview-Shenzhen) entered into an agreement with Apple (or, more accurately, a company acting on Apple’s behalf) to sell its Asian iPad trademarks to Apple.
  • Apple claims that agreement with Proview-Taiwan included the PRC iPad trademark, but Proview is claiming otherwise.
  • Apple sued Proview (I think Proview-Taiwan, but I am not sure) in Hong Kong and the Hong Kong court ruled that Apple is entitled to use the iPad trademark on the Mainland.

Here is where it gets so complicated and here is how I see it:

  • Proview-Shenzhen still shows up as the owner of the iPad trademark in China.
  • It is not clear if Proview-Shenzhen ever contracted with Apple to give Apple the China iPad trademark or any sort of license to use that trademark.
  • It appears that Proview-Taiwan did enter into some sort of trademark sale or licensing agreement with Apple (again, actually the company acting on Apple’s behalf), but since Proview-Taiwan did not own the PRC trademark for iPad, there are some real issues as to the validity of such a sale or license.
  • Did Proview-Taiwan have any interest in the PRC iPad trademark such that it could transfer or sell that interest to Apple?
  • Did Proview-Shenzhen ever agree to sell or license its iPad trademark to Apple?

What I find really difficult to believe is that Apple and/or Apple’s attorneys would have done a deal to acquire rights to the iPad trademark in China without having done real due diligence on that trademark. Basic due diligence would have revealed that the PRC iPad trademark was registered to Proview-Shenzhen and at that point, Apple would have required Proview-Shenzhen (not Proview-Taiwan) sign on to the contract to assign or license the PRC mark. So the first thing to be learned from this (maybe) is to do your due diligence and make sure that when you are buying something or securing a license to something that you are in fact doing so with the company that is actually authorized to sell or license that item.

This all came to the fore when Proview-Shenzhen started asking trademark officials in various Chinese cities to start pulling iPads from store shelves because those iPads infringe on Proview-Shenzhen’s trademark.  Some cities are pulling iPads from store shelves and this is obviously not good for Apple. [Full Disclosure: I have a disproportionate percentage of my retirement savings wrapped up in Apple stock]. Some cities seem to be refusing to do so, in what appear to be political, not legal, reasons.

Now Proview-Shenzhen is saying that is going to ask China customs to block exports of Apple’s iPads from China because they infringe on Proview-Shenzhen’s trademark. The media (and even Proview-Shenzhen itself) seem to believe this will not happen because it would look so bad for China politically. This is where the real lesson lies. If you are not Apple, I can pretty much assure you that all of your iPads would be off the shelves in China by now and they would also not still be leaving China via export. The real lesson then is on how to prevent this from happening to “your” trademark and that lesson is really quite simple. If you want to avoid your product getting pulled off shelves in China and/or prevented from leaving China, make sure that the trade-names and trademarks you put on your product (or on its packaging) are actually registered (or licensed) to you in China. And just to be clear, “in China,” for purposes of China’s trademark law, does not mean in Hong Kong or in Taiwan or in Macau or in the United States or in Australia or in any other country. If you want China trademark protection, you must register the trademark in China.

For more on China trademark law, check out the following:

Here are some articles for those who want to read more about the Apple-Proview fight:

Just don’t say we didn’t warn you.

UPDATE: Stan Abrams over at China Hearsay has two great (recent) posts on this dispute. The first post, “Apple vs. Proview: The Assignment Agreement!” contains Stan’s analysis of the Trademark Assignment Agreement between Apple (actually it’s stand-in entity) and Proview. Stan does a great job of analysing the Assignment Agreement, which really is by far the key issue involved in the case. I completely agree with all that Stan says about the Agreement and I add one thing to it. If you think you can properly assign a Chinese trademark without using an experienced attorney to draft the contracts and oversee the agreements you are wrong. And if you think that after reading Stan’s post, you are flat out crazy.

The second post, “What Have We Learned About China’s IP System? Answer: nothing,” posits that the issues in this matter involve a commercial dispute, not IP. I generally agree with this. The heart of the issue is how you secure ownership or rights to someone else’s trademark.

We are always preaching that if you 1) choose a good manufacturer, 2) use a good OEM contract, 3) engage in good quality control monitoring, and register your trademark, the odds are overwhelming that you will do just fine in outsourcing your product from China.

The odds just went down.

In 2009 and 2010 and the first half of 2011, I estimate that I would receive maybe two emails a month from someone who had sent money to a Chinese manufacturer and received no product. And of those emails, I estimate that pretty much all of them involved a relatively unsophisticated buyer who had done none of the three things listed out above.

In the last three months or so, I have received probably 4-5 emails from buyers who have been burned by Chinese manufacturers but have a very different story to tell. These buyers have been burned by Chinese manufacturers with whom they have been dealing successfully for many years. The following is a fairly typical example:

I did not receive my most recent order from ____________ Chinese manufacturer. I have been dealing with ______________ for six years and we have never had a problem like this. We have had issues with them in the past but we were always able to resolve them. Now they are not even answering their phone. They owe us around $30,000.  Can you help?

I also just received the following email:

On July 21st, you wrote an article entitled “Factory Closings in South China.  All Part of the Plan,” in which rising costs for low value added factories was cited as part of the reason for factory closings.  Lately there has been another string of articles floating around several websites about Guangdong wages increasing another 20% this coming January.  While I do realize the government often puts out feelers to see how people will react, it does seem realistic and inevitable that wages will continue to rise.
 
Two things I would love to get your opinion on:
 
1)  As a director of a company that sources “promotional items” solely in China (assuming the quantity of goods is large enough), where else can we possibly be looking?  If we only did textiles I could set up in Vietnam or in Bangladesh; but we source plastic trinkets, low-end electronics, pens, lanyards, bags, and a variety of other LOW VALUE ADDED goods.  Is our only option to keep taking the price increase until someone finally starts making plastic toys and trinkets in another country?  From my experience these China manufacturers are NOT moving inland to cheaper places in China, but are either taking the increase or shutting down.  Keep in mind 95% of the factories I’m working with are not huge Foxconn-like factories but private owned 100 employee factories.  What have you seen?
 
2)  We work with over 100 factories a year in China. I’m trying to develop a plan on “How Not to Get Caught With Our Pants Down” where a manufacturer closes and takes our deposit.  If a factory goes bankrupt I think the chances of us getting any kind of money back on a deposit no matter how well our written contracts are is low (maybe this is wrong?).  Our current plan is ‘hoping and praying’ on deposits less than $10k that wouldn’t really hurt our company, and making sure we send our QC team to visit the factory even if previously audited, for any deposits over $10k to ensure they have workers there, raw materials in storage, and are producing something. I don’t know that this plan is the most technical.
 
I would imagine many of your readers are facing similar situations.  It’s a scary time to be exporting from China.  I’m shifting my studies and free time to learning more about China consumerism these days because I believe that’s where the money is for the next decade and beyond.  I enjoyed your recommendation of Billions: Selling to the New Chinese.

I responded to this email by professing that I had no great solutions and that I would blog about it.

As for where to go, the answer is “that depends.”

As for how to prevent yourself from getting caught holding a bag when your Chinese manufacturer disappears or what to do about it when that happens, I have the following advice, none of it great:

  1. Redouble your due diligence in choosing a Chinese manufacturer. Check out the factory. Check out its company registration. Check out the rumors about it. Do whatever you can to try to gain a sense as to whether it is a company that is acting like it has a future.
  2. Reduce the size of your orders to the extent that you can. This way whatever bag you end up holding will at least be a smaller one.
  3. To the extent you can, try not to order anything in September, October or November. I have heard from a couple of clients that Chinese companies typically come up for renewal of various licenses in December and January and that they often try to hold on up until the point they are supposed to pay these. That being the case, they stop shipping a few months beforehand and then they are gone. It does seem to me that in prior years (2008 being a prime example), the number of disappearing Chinese companies increased during the end of one year and the beginning of another.
  4. Increase your monitoring of the factory to make sure your product ships.
  5. Do whatever you can to try to reduce the amount you pay upfront for your product. If you have been doing business with the same factory for five years and paying it 70% upfront, go to them and point out that you have always paid and then ask to be able to switch to a 30-70 or 50-50 payment plan.

Any other ideas out there?

Earlier this year, I wrote an article for the Alaska Bar Magazine [link no longer exists] on China’s trademark laws, mostly extolling how necessary it is to secure such a trademark and how relatively simple it is. Nothing much in the article that we have not been saying here since our inception, but since it provides a nice summary in one place, I am running the whole thing below.

Members of the media love to write about China’s failure to protect foreign company intellectual property (IP), but those articles can be misleading. These articles often fail to state whether the foreign company actually registered its IP in China at all and they nearly always fail to distinguish between the various types of IP eligible for protection. Both of these shortcomings are meaningful.

China generally does not protect any IP unless it is registered in China. Though there are a few exceptions to this rule, the bottom line is that it will always be cheaper for a company to register its IP than to litigate, whether it comes within any exception or not.

The failure to distinguish among the various types of intellectual property leads companies to believe that enforcement of intellectual property in China is poor across the board, and that simply is not true. China’s patent law system is difficult and spotty, at best. Copyright protection in China–particularly of DVDs, CDs, and software–is downright terrible. But, its protection of trademarks is actually quite good and getting better all the time. China’s better courts (usually found in China’s more commercialized cities) are actually quite good in enforcing trademark rights. There is a widely believed theory that countries start enforcing IP rights when their more powerful domestic companies demand enforcement because they themselves have IP worthy of protection.

With respect to trademarks in China, that time has already arrived. As proof of this, I often talk about an incident in China involving watermelon and rumors of their having been tainted by AIDS. A group of watermelon farmers in Linquan county, (a county in Shandong Province known for the high quality of its watermelons) had registered a trademark for their watermelons and established an association to promote them. The Linquan watermelons had, according to the Shanghai Daily, became “the top sellers, even though their price was much higher than watermelons from other regions.”

Sales of Linquan watermelons then plunged amid rumors they had been injected with HIV tainted blood. The rumors had a devastating impact on sales. The newspaper interviewed one of the farmers who said he planted more than 6.7 hectares of watermelon this year. Before the rumors, he had sold out all of the watermelons harvested. After the rumors, much of the inventory rotted.

It should be clear from this incident that securing a trademark in China can be an effective tool for distinguishing your product from the competition and for allowing you to charge a premium price for it. That is exactly what happened here. The efficacy of trademarks in China allowed the Linquan farmers to charge significantly more than others and yet sell out of their watermelon crop, and it also caused its rivals to feel they needed to spread the vicious AIDS rumor.

So now that I have (I hope) convinced you that it makes sense to protect a trademark in China, the next step is to explain how to do so. Easy. Register it. Plain and simple.

China is a first-to-register country, which means that unless your trademark is a well known mark (and let me assure you it almost certainly is not and you definitely do not want to be litigating this issue in any event), whoever registers it in China first gets it. Put another way, to expect trademark protection in China, foreign companies must register their trademarks in China and the prudent company does this before going in.

There are actually a number of people in China who make a living by usurping foreign trademarks and then selling a license to that trademark to the original license holder. Once one comes to grip with the fact that China, like most of the rest of the world, is a “first to file” country, one can understand how easy this usurpation is, and also, how easy it is to prevent it.

The fact that you are manufacturing your product in China just for export does not in any way minimize the need for you to protect your trademark. Under China trademark law, once someone registers “your” trademark in China, they have the power to stop your goods at the border and prevent them from leaving China.

China’s trademark requirements are actually quite similar to those in most other countries. The trademark must not conflict with an existing Chinese trademark and it must be distinctive. China allows for registration of all marks for goods, services, collective marks and certification marks.

In deciding what to trademark, foreign companies must consider all sorts of things. Take Starbucks, for instance. Starbucks registered more than 200 trademarks in China. It has registered Starbucks in English and the translation of “star” and “bucks” together in Chinese. Any foreign company strategizing about what to trademark in China must have a fluent Mandarin speaker to assist. Indeed, some of the very largest foreign companies register trademarks in other dialects used in China as well.

China’s Trademark Office maintains a centralized database of all registered and applied-for trademarks. Trademark applications that pass a preliminary screening are published by the Trademark Office and subject to a three-month period for objection. If there are no objections within this three-month period, or if the Chinese Trademark Office rejects the objections as frivolous, the trademark is registered. If the Chinese Trademark Office supports an objection, it will deny the application. Denied applications may be appealed to the State Administration of Industry and Commerce Trademark Review & Approval Board and then to the People’s Court. Based on our experience, objections to trademarks are rare.

A Chinese trademark gives foreign companies a surprising amount of protection in China. If a foreign company learns that its trademark is being infringed in China, it has a number of actions available to it.

We usually advise our clients to pursue a multi-pronged approach to protect an infringed-upon trademark and to pursue the infringer. The foreign trademark owner should usually file a lawsuit against the infringer, seeking damages and an injunction stopping the infringer from continuing to sell the infringing goods. The Chinese courts in the more commercialized regions are actually quite willing to enforce China’s trademark laws, even for foreign companies.

Trademark infringement is a crime in China. For serious cases of infringement, a complaint to the office of the public prosecutor can often result in a criminal prosecution against the infringer. The Chinese police will close the offending operation and seize the counterfeit goods. The courts are authorized to impose both fines and imprisonment. Finally, if the counterfeit goods are destined for export, a notice to the Chinese customs authorities will prevent export of the counterfeit goods.

Interesting article by Eugene Kim in yesterday’s Yomiuri Shimbun (the world’s largest circulation newspaper) on American sports teams seeking to make inroads in China.  The English version of this article is entitled, U.S. sports organizations looking to score in China [link no longer exists] and darned if yours truly isn’t quoted in the article on how to protect IP in China.

The article starts out by chronicling the huge opportunities in China for American sports teams:

“All the information and research we have suggest that there are huge opportunities for almost all sports because sports is relatively underdeveloped there,” said Mark Waller, senior vice president of the National Football League International.

The National Football League (NFL) will be putting on a preseason U.S. football game in China this summer as a platform to increase China’s awareness of the game.Waller describes China as an “incredibly exciting” market, for the NFL and for other sports leagues.

The National Basketball Association (NBA) is the most popular sports league in China and more than 300 million people in China play basketball. NBA games have been broadcast in China for twenty years they now average 558,100 viewers per broadcast. NBA.com/China averages 12 million page views per day. Heidi Ueberroth, president of NBA International Business Operations, describes China as “by far the largest market for the NBA outside of the United States.”

Major League Baseball (MLB) is also seeking to get in on the Chinese sports act. Earlier this year, the New York Yankees (boo, hiss) and the MLB announced an alliance with the Chinese Baseball Association under which the CBA sends staff to the Yankees to learn more about baseball and the Yankees send send players, coaches, and training personnel to teach baseball in China:

“Everybody thinks that it is a great place to grow the sport of baseball,” Yankees President Randy Levine said at a press conference held before leaving for China. “There’s a real appetite for it. The Chinese want to move forward and expand their talents in the game and really make it a well-known, very active sport.”

MLB plans to open an office in China within a year and bring a regular season game to China “in the very near future,” according to MLB President and Chief Operating Officer Bob DuPuy.

But where there is China business, there will be China legal issues and China lawyers, and where there are China legal issues and China lawyers, there will be the China Law Blog:

“The biggest [legal] issue for the sports industry is trademark and intellectual property protection,” said Dan Harris, a business attorney specializing in China, who also writes for chinalawblog.com. “You can find fake NBA shirts anywhere in China. What you’ve got to do is register your trademark and go after the people who violate it.”

Enjoy the game.

Update:  Interesting post at the Informed Reader as to why baseball may well thrive in China.

China Daily ran an article today, entitled, “IPR Special.” The article talks about a number of pending and recently resolved lawsuits involving foreign companies:

  • The Walt Disney Company filed a lawsuit in Shenzhen, alleging “Mickeyle,” a Shenzhen-based children’s clothing manufacturer, illegally uses Disney’s registered trademark “MICKEY & CO” and “MICKEY UNLIMITED.”  Disney is seeking around $75,000 in damages and appears also to be seeking injunctive relief requiring Mickeyle stop using Disney trademarks.
  • A Chengdu court just awarded 300,00 yuan (~$37,000) to Adobe Systems Incorporated in a software piracy case against a local information technology (IT) company that had installed 55 “pirated” copies of Adobe software.  This is the fourth intellectual property rights (IPR) lawsuit Adobe has won in China.  It is also the first such victory for an international software company in western China.  In “Chinese Counterfeiting — A Different Perspective,”I blogged about how impressed I am with Adobe’s handling of its Chinese business. This case increases my admiration.
  • A Wenzhou court recently sentenced a counterfeiter of ZIPPO lighters to prison for one and a half years and fined him 100,000 yuan (US$12,400). The counterfeiter possessed 32,980 counterfeit ZIPPO lighters and 6,000 fake lighter shells labeled “ZIPPO” and “MADE IN USA,” worth an estimated $770,000.

The article also discusses how a Shenzhen-based company has applied to register 128 “famous mainland trademarks” in Hong Kong.  According to the article, if the companies that own these trademarks do not oppose their registration in Hong Kong, they “will have to pay astronomical ransoms for their trademarks, or be forever banned from the Hong Kong market:”

The trademarks cover more than 20 industries including pharmaceuticals, IT, clothing, food and chemicals. More than 30 of them are well-known Chinese trademarks.  The 128 trademarks will be granted legal protection within three months if no opposition is raised.  Experts called on the mainland companies involved to legally protect their rights as quickly as possible.

In the United States and most other British law systems, trademark rights arise from use. However, in most countries, including China (and Hong Kong), trademark rights typically go to the first to file for the trademark. The well known trademark is an exception to the first to file rule.  The Paris Convention for the Protection of Industrial Property, to which China and 168 other parties are signatories, calls for protecting well known trademarks even in countries where they are not registered.  Disputes often arise as to what is meant by “well known’ and to what population well known is referring.  Is a trademark well known only in the United States to be considered well known in China as well? China generally says no.

Unless a company is absolutely certain its trademark is so universally recognized that Chinese courts will invariably consider it a well known trademark, the wise course is to register your trademark in China before anyone else can register it there first. Indeed, the high cost of litigation makes this the wise course  even for companies confident of their “well known” name.

Enhanced by Zemanta

A reader in Arkansas sent us this article from CSO Magazine [article link no longer exists], entitled, “13 Ways to Protect Your Company in China.”  This article does a very thorough job of both setting out the problems and putting forth a strong list of solutions.

The article notes that “security experts don’t buy into the belief that copying is somehow inherent in Chinese culture. The simple fact is that counterfeit goods are cheaper than the genuine ones, and in developing nations like China, wages are low.”  I completely agree.  Like everywhere else, those in China who can afford the real thing, prefer to buy the real thing.  As China’s wealth increases, and as more and more Chinese companies seek to protect their own brands, counterfeiting in China will decrease.  This is what happened in both Japan and Korea, both of which were at one time, notorious for counterfeiting.

The article also correctly points out that China’s government in Beijing actively seeks to end counterfeiting, but local officials oftentimes are reluctant to go hard after local companies.  In the legal sphere, this means foreign companies pursuing counterfeiting claims in the courts must be prepared to have to appeal local court decisions to a higher, more distant court.

I also like how the article emphasizes the need to secure a Chinese trademark early: “If you do business in China, register your trademarks with the Trademark Office there. But even if you don’t sell there today, it’s a good idea to register trademarks there now if you might do business there in the future….”  I have said it before and I will say it again: it is absolutely essential that you register your trademarks in China before exposing them in any way in China. If you are doing business in China, this is an absolute essential.

The only thing we would add to this article’s list is the need for a good written contract (usually in Chinese) with whomever one does business.  This contract should explicitly set forth your requirements regarding trade secrets, products, trademarks, and whatever else you wish protected.  Contracts in China do not provide 100% protection (nor do they anywhere else) but they are nearly always the critical component to a successful litigation.