Recently, I ran across an article Dan Harris wrote on China’s trademark laws way back in 2007, entitled China Trademark Law: Simple and Effective. As I read the article, it struck me that it could have just as well have been written, almost word for word, in 2020.
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.
This remains true to this day. There is certainly more awareness within the international business community of the need to register IP in China, but we still see companies that don’t bother to do so. Even in the face of considerable evidence that Chinese law enforcement and courts take IP infringements seriously, some foreign businesspeople insist on holding onto an outdated view that legal precautions in China are worthless, and you might as well not bother. This blog has been warning that this is How NOT to Handle Your China Legal Matters since 2006.
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.
Again, this remains the case. A few years ago I represented an English Premier League team that became very proactive when it came to its China trademark protection. Unfortunately, some of their trademarks had already been registered by squatters, taking advantage of China’s first-to-file system. One of the arguments we made as the matter wound its way through the system was that the trademarks were “well-known,” and hence subject to protection even if unregistered (See Art. 13 of China’s Trademark Law).
Surely, our client thought, one of the top teams in one of the most popular sports leagues in the world would meet the standard for being well-known. Well, it didn’t, and the point here is that relying on “well-known” status for protection is a fraught proposition for all but a small tier of extremely well-known brands (who are probably smart enough to register their IP anyway).
Along the same lines, according the China’s Copyright Law, registration in China is not a prerequisite for copyright enforcement (Art. 2). This is technically true, but I can tell you from my own experiences that you won’t get far if you show up at an enforcement agency with a foreign copyright registration, even if its translated, notarized, certified by the local authorities, and authenticated at a Chinese embassy or consulate. And that’s assuming the copyright is held in a country with a registration system, which the United Kingdom is not. Whatever the law says, the unwritten rule is that enforcement authorities will want to see a Chinese registration.
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.
In part because of the registration issues I described above, it is much better to rely on trademark and copyright protections in China.
Savvy counterfeiters take advantage of this enforcement gap and look for ways to block trademark infringement avenues. Walk around the markets near the main Guangzhou train station and you will see handbags for sale that look just like the famous ones, except for the zipper pulls and metal tabs with the designer’s logo (those are kept in nearby apartments and storage areas). Electronics factories will say their products are exactly like Luxury Brand A’s, down to a pirated copy of Brand A’s proprietary software, but without the Brand A logo:
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.
This is one area where there has been some progress. The most recent amendment to the China’s Trademark Law provides that applications for trademarks not intended for use shall be rejected (Art. 4). Even prior to the entry into force of the amended Trademark Law, China’s Supreme Court and the China Trademark Office (CTMO) had taken aim at bad-faith registrations. However, you should not by any means assume CTMO will catch all bad-faith registration attempts.
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.
A key point that can’t be repeated enough. I’ve had clients tell me they don’t care if someone knocks off their product and sells it in China. But if that counterfeiter develops international expansion ambitions, and you have not registered your trademark in China, they could set up legal barriers to the exportation of your genuine product. You need to discuss this in full with your international IP lawyer.
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.
Indeed, a comprehensive trademark protection strategy might call for registering the Chinese name. In this regard, it’s important to pay attention to informal names that might be used in China, different from your company’s official Chinese name. Depending on the circumstances, it might make sense to register Chinese names in both simplified and traditional characters. If the company name includes an ampersand (&), it might be prudent to register a version of the name using the equivalent in letters (“and”) — and vice versa.
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.
Lawsuits against trademark and copyright infringers remain a key part of enforcement strategies. Damage awards are usually modest by American standards, but can still be a useful deterrent, especially against resellers (including online ones) whose margins were never going to be great.
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.
Recording your trademarks with China Customs is seldom done but often essential. Moreover, it’s an extremely cost-efficient way to amplify the benefits of registering your trademarks in China. To this I would add that companies should constantly be on the lookout for opportunities to liaise with different Customs offices. I participated in a number of training workshops with China Customs for where brands would introduce their products and offer counterfeit identification tips. In addition to offering practical tools to China Customs for doing their job, such interaction can help sharpen officers’ attention in a way that helps the brand, and adds a personal touch that can’t hurt.
In the end, the fact that much of our advice remains unchanged since 2007 says less about China than about common sense decisions. When entering any first-to-file market, especially one where trademark registrars might be less familiar with international brands, and where legal protections for unregistered trademarks might be less vigorous than in countries like the United States, companies should be extra proactive. In addition, language issues must always be considered and IP protection strategies must realistically account for country conditions, including the relative strength of certain enforcement mechanisms in comparison to others.