Starbucks this week won a trademark litigation case the press is heralding as a great step forward for those seeking trademark protection in China. The press is wrong. This decision will have virtually no impact on foreign businesses in China.
Make no mistake about it, this is a great victory for Starbucks. But, as our own Steve Dickinson noted in a Seattle Times story published before the Shanghai court’s ruling, the costs of these lawsuits can be enormous and Starbucks’ situation is different from that of most other companies doing business in China.
The Shanghai court did not rule that Chinese companies cannot use foreign trademarks. Instead, the court merely held that a direct Chinese translation of “Starbucks” infringed on Starbucks’ “well known” trademark. The term “well known” trademark is key to this decision and it is what limits it.
In the United States and most other British law systems, trademark rights arise out of use. However, in most countries, including China, 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? Sadly, the answer is no.
The first thing businesses in or involved with China must understand about the Starbucks’ decision is that it did not change Chinese trademark law. It was merely a ruling that because Starbucks is a well known trademark the Chinese translation of its name could not be used in China even by someone who registered it first. The Shanghai court could hardly have ruled otherwise since Starbucks is one of the best known brands in the world and is very well known in China as well. The fact that Russia’s patent office had issued a similar ruling only a few months earlier no doubt put additional pressure on the Shanghai court to rule as it did.
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 trademarks in China before anyone else can register them first. Indeed, the high cost of litigation makes registering your trademark in China the wise course for even those companies confident of their “well known” name.
In other words, if you are doing business with China you should be thinking about China trademark registration. Or as my firm’s lead China trademark lawyer is always saying: registering your company name and your brand name and your logo is usually the first thing any company even looking to do business with or in China should do first.