China trademark registrationLast week, the Foshan Intermediate People’s Court awarded RMB 10 million (nearly $1.5 million) in damages to the well-known British luxury goods brand Alfred Dunhill, finding Chinese copycat brand Danhuoli liable for trademark infringement and unfair competition.

The press coverage (which apparently took its cue from the PR release) trumpeted the size of the award and the groundbreaking nature of the victory. To an observer unfamiliar with China trademark practice, both of these claims might seem odd in that the infringement was obvious, outrageous, and longstanding. The infringing company selected a name (“Danhuoli”) similar to Dunhill and then mimicked the elongated vertical lines and lower-case lettering of the Dunhill logo to create a copycat brand identity. And they were apparently successful at it, with more than 200 low-budget clothing stores (franchises, according to the South China Morning Post) in more than 61 cities across China. And just in case there was any doubt about their intent, the infringing company also created a Hong Kong parent company called Dunhill Group.

In the U.S. this kind of nonsense would last about as long as it took to file a TRO, but in China the road to enforcing trademark rights is long and frustrating. Chinese judges are reluctant to find trademark infringement unless the marks are identical, and even then it’s not guaranteed. Chinese judges are also reluctant to award high monetary damages because of the speculative nature of anything that can’t be proven with written evidence. So Dunhill is absolutely justified in feeling vindicated by the verdict.

But a landmark? I beg to differ. A landmark verdict is one that signals a change in the way cases are being decided. But this decision is no landmark, or if it is, it is too early to tell. Nor does this decision show that China is really serious about enforcing IP rights, because this decision is still the exception, not the rule. Check back in a year and let me know if every other decision since this one followed the same logic and came out in favor of the trademark owner.

Still, one detail about the Dunhill decision bears repeating: both companies had registered trademarks, but Dunhill’s was registered first (by decades). That fact alone signifies that Dunhill has had an active and forward-thinking trademark strategy for years. And they would never have emerged victorious in the latest dispute without superior trademark rights. See 8 Reasons to Register Your Trademarks in China.

A quick search of the CTMO database reveals that Danhuoli, whose entire business model is based on ripping off Dunhill’s trademark, is itself the subject of trademark squatting. It seems karmically appropriate.

China IP lawyer

Time for another entry in what has become a running series of posts about wine in China. Thus far, the series includes:

  1. China, Wine and Tariffs
  2. China Trademarks: Wine Labels in China
  3. China Trademarks – The (Mis)Classification of Wine

I’ve written previously about the rampant counterfeiting of foreign wine in China, especially with well-known brands like Château Lafite, Château Latour, and Screaming Eagle. Because counterfeiting only comes to light when it is discovered by authorities (or brand owners), the data is sketchy on the actual amount of counterfeit wine on the market – it’s either anecdotal or extrapolated, which leads to widely divergent conclusions. Maureen Downey, often cited as the leading expert on wine fraud, said back in 2014 that the majority of counterfeits were limited to a few vintages of a few labels, and that the top 16 counterfeit wines were all European. Meanwhile, another wine fraud investigator stated last year that 20% of all wine in the world is counterfeit, which would mean approximately 6 billion bottles of counterfeit wine are sold each year – a lot more than a few vintages of a few labels.

For many wineries, the design of the label — that is, in addition to the name of the winery – is also an indication of the source of goods. A bottle of Château Lafite doesn’t just bear the name “Lafite”; it also has a picture of the château. The obvious way to protect the wine label from infringement is via a trademark registration for the label design (or at least the graphic elements common to each label). But almost every wine label would also be considered a creative work in fixed form, and therefore eligible for copyright protection.

As we wrote in China Copyright Law: We Need to Talk:

Copyright is an essential part of any substantive IP protection plan in China, but many companies fail to take an extremely important step: registering their copyrights in China. One of the most common misconceptions our China IP lawyers hear is that copyright registration in China is optional, because you do not have to file anything to have a valid copyright in China.

The moral of that post is just as true for wineries as for any other company – the best way to enforce your copyright in China is to register it. Counterfeiters are creative in their own way, and I’ve seen some fakes that combine one winery’s label design with a new (often fake) winery name. A trademark registration for your label may be sufficient to stop such a fake, but why not give yourself more ammunition?

As with any business decision, wineries should conduct a cost-benefit analysis before registering a copyright in China. If you are a small winery and/or don’t sell wine in China and never expect to, I wouldn’t bother registering any IP in China, let alone a copyright. But if you’re big enough to export wine to China, you’re big enough to protect your IP. And that means trademarks for your name and your label, and also a copyright for the label.

China lawyers

Because of this blog, our China lawyers get a fairly steady stream of China law questions from readers, mostly via emails but occasionally via blog comments or phone calls as well. If we were to conduct research on all the questions we get asked and then comprehensively answer them, we would become overwhelmed. So what we usually do is provide a quick general answer and, when it is easy to do so, a link or two to a blog post that provides some additional guidance. We figure we might as well post some of these on here as well. On Fridays, like today.

We are often asked if China uses the same trademark classification system as the rest of the world. The answer is yes and no. Although there is no such thing as a universal trademark classification system, the World Intellectual Property Organization’s Nice Classification system – which divides all goods and services into 45 trademark classes (34 classes for goods and 11 classes for services) – comes fairly close. Currently 149 nations (including the US and China) use the Nice system.

But China has its own spin on the Nice system; as we wrote in China Trademarks: Subclasses and Basic Numbers:

One of the more distinctive aspects of China’s trademark system is its unique interpretation of the Nice Classification system. China divides each Nice class into subclasses, and treats each subclass as a discrete unit. A trademark registration gives the owner rights in the covered subclasses, but virtually no rights in any other subclasses. (For further discussion of this feature, see China Trademarks. Register Them in China not Madrid.)

So there you have it. China’s trademark system: the same, but different.

China trademark registration

The month of wine-related posts continues!

We started with China, Wine and Tariffs, continued with China Trademarks: Wine Labels in China, and I will now examine the Nice classes to use on wine-related trademarks in China.

This may seem like an obvious question – if you’re selling wine, then you should register in Class 33, which covers alcoholic beverages (except beer). Class 33 only has one subclass, so you don’t even need to worry about filing in multiple subclasses. A single registration for “wine” will also cover aperitifs, bitters, ciders, sake, vodka and whiskey (and everything in between). And if all you want to do is ensure that you can sell your product in China, then you can stop here.

But for most brand owners, it’s not enough just to ensure that you can continue your operations. You also want to prevent trademark squatters from coopting your mark in other ways. In China, the trademark examination system is quite mechanical: all items in a subclass are deemed similar to every other item in the subclass – and only to those items. There are a few exceptions with certain goods and certain subclasses (i.e., goods in a certain subclass that are considered similar to those in another subclass), but those are predefined and laid out in Chinese Trademark Office (CTMO) publications. Everything else is fair game, because it’s not considered “similar” under CTMO practice.

Also, as we have explained previously in China Trademarks: Register in More Classes, Take Down More Counterfeit Goods, CTMO practice allows (if not encourages) trademark applicants to file in classes far beyond the scope of what they actually manufacture or sell. This is a double-edged sword: it allows trademark owners to extend brand protection as broadly as they like (if cost is no object), but on the other hand it also allows trademark squatters the latitude to engage in mischief, like applying for Star Wars brand instant noodles.

So when you’re filing a trademark application, you should think about two sets of classes: (1) which classes you need to protect your own goods/services, and (2) which classes you want to keep out of the hands of third parties.

If you’re a winemaker, you probably don’t care if someone takes the brand name of your wine and uses it on telescopes. But you probably would care if someone used it (for example) on corks (Class 20) or beer (Class 32). I just did a quick search on the CTMO website and yes, Penfolds has registrations in both classes.

What are you doing to protect your wine brand in China?

China trademark registration costs $
                                                                  What’s in your bottle?

In my last post, I wrote that I could do a whole month of posts about wine. Here’s another.

The Grape Wall of China blog recently assembled a page full of “[f]ake, funny, old or odd” wine labels. The labels are all entertaining, but as someone who regularly deals with counterfeit merchandise, the fake ones are what really caught my eye. Typically, the bottles of fake wine really do contain wine and not some other liquid. However, the wine inside the bottle does not match the label and it is usually low-end plonk that (literally) would not pass the sniff test.

The webpage focuses on two particular faked brands: the legendary French brand Château Lafite Rothschild and the Australian brand Penfolds. Both of these brands have enjoyed worldwide success and are well-recognized in China, which is undoubtedly why they have been counterfeited so often and in so many ways.

Some of the counterfeits are straight copies and are hard to tell apart from the real thing – like the 10,000 bottles of Chateau Lafite that police found last year in a single house in Wenzhou. Lafite only exports 50,000 bottles to China each year and nobody believed that 20% of the bottles were languishing in a house in Wenzhou. But the wine resale market is mysterious enough, and the fake labels good enough, that at the time the wine was seized, no one could definitively say the seized wine was fake.

Other fakes are more “inspired by,” which makes you wonder how hard these counterfeiters are trying – or how hard they need to try. No one who speaks English would think that a wine called “CHATEAU OFFICIALLAFITE” is legitimate. But if your market is people who don’t speak English and don’t know much about wine but have heard of Château Lafite Rothschild, then the bar is pretty low.

Unlike most consumer products, the world contains thousands of wineries and even more brand names. And for those who don’t particularly follow wine, maybe only a dozen are recognizable as wine brands. For Chinese people, the number is even less. Frankly, I doubt the average person in China could name a single winery, with the possible exception of Chateau Lafite. If they know anything about foreign wine, it’s related to geographic areas or appellations (Napa, Bordeaux, etc.). So one response from a foreign winemaker might be: why bother registering a trademark in China? Unless I’m selling thousands of cases, no one knows the name of my winery anyway so there’s nothing to protect. That may be true, but think about it from the perspective of a counterfeiter. They want the biggest return for the least effort. You’ve already built up some brand equity with your brand and your wine label, and even if only a few people in China might recognize your label, it’s a lot easier for a counterfeit wine seller to register your mark and sell “your” wine in China than it would be for them to create a new brand. And all of a sudden you’ve lost the ability to sell wine in China under your own name, which means you’ll need to rebrand to sell in China.

As usual, it comes down to the same issue in China: if you don’t register your name first, someone else will do it for you. The only reason not to register your wine brand as a trademark in China is if you never intend to sell wine there.

China tariffs wine

Jim Boyce’s ebullient, edifying Grape Wall of China blog (yes, about wine in China) has an interesting take on China’s imposition of an additional 15% tariff on American table wine. In two recent posts (see here and here), the latter a direct response to a pot-stirring story on Al Jazeera, he basically tells everyone to chill out.

It’s not that the tariffs won’t hurt the U.S. wine industry – they will. But they need to be viewed in context. As Boyce explains, only a small percentage (about 12.5%) of U.S wine is exported, and of that only 3.7% went to China. In short, only 0.4% of U.S. wine goes to China and will be subject to the additional tariff.

Moreover, U.S. wine has been facing headwinds in China for several years. From 2011-17, China doubled the amount of wine it imported, but the U.S. market share of those imports fell by more than 50%, decreasing in actual numbers from 16.1M liters to 14.2M liters. The problems U.S. wine faces in China are complex and multi-factored, and often intertwined with historical, political, or cultural backstories. Other countries (particularly France) were early entrants to the Chinese wine market and have retained a huge first mover advantage. Other countries spend more money on marketing and brand presence in China. And let’s not forget that even before China imposed the additional 15% tariff, U.S. wine already faced a 14% tariff, unlike wine from countries with China free-trade agreements (such as Chile, New Zealand, and Australia). Like I said, selling wine in China is complex. I could write a whole month of blog posts about it.

None of this is to minimize the very real pain some American winemakers (as Boyce notes) are feeling. Different winemakers have different selling strategies, and some have invested substantial amounts in developing or maintaining their market presence in China. At a conference I attended years ago, a high-end Napa winemaker told a cautionary tale about how he had been approached by several Chinese buyers who wanted to purchase the winery’s entire production run for the year (presumably to serve as the in-house wine for a large state-owned enterprise). It was a cautionary tale because such sales would be one-offs, providing a large cash infusion but with no long-term benefit, because there wouldn’t be any repeat purchases and little to no increase in brand awareness. The only way such a deal would make sense is if the winemaker was about to retire. Instead, the way to succeed in China was to cultivate distributors, retailers, and consumers who would become long-term brand adherents. And that takes time, money, and patience.

If you take a step back and look at these tariffs from China’s perspective, it’s pretty clear they are a win-win. They get to strike back at Trump in a highly visible, prestigious area of commerce. Chinese consumers are (for the most part) unaffected, because they have numerous credible alternatives available from countries with which China is not in a trade war. Meanwhile, the effect in the US is in states that overwhelmingly oppose Trump in any event: the top 5 wine-producing states – which control more than 96% of all production, are California (at 80%), Washington, Georgia, New York, and Oregon. And Georgia’s production in 2017 seems anomalous, rising more than 140% from 2016 according to the Alcohol and Tobacco Tax and Trade Bureau. (But even if the 2017 numbers are accurate, Georgia only accounts for 4.4% of US wine production.)

For more on China and wine, check out the following:

 

 

 

 

 

China lawyers

Because of this blog, our China lawyers get a fairly steady stream of China law questions from readers, mostly via emails but occasionally via blog comments or phone calls as well. If we were to conduct research on all the questions we get asked and then comprehensively answer them, we would become overwhelmed. So what we usually do is provide a quick general answer and, when it is easy to do so, a link or two to a blog post that provides some additional guidance. We figure we might as well post some of these on here as well. On Fridays, like today.

Companies involved in the cannabis industry will sometimes hear about China being a first-to-file jurisdiction and ask if they should file a trademark application in China for their cannabis products. The short answer is no. Cannabis is illegal in China and those who violate the relevant laws are subject to harsh criminal penalties, including the death penalty.

However, it is possible to use the same workaround as in the U.S., where cannabis is also illegal under federal law: register the mark on products that also have legal uses.

China copyright lawsCurrently, the number one film in China is the smash hit Hello Mr. Billionaire (US$306M and counting). It’s a comedy about a hapless soccer player who stands to inherit 30 billion RMB, but only if he can spend 1 billion RMB in a month (albeit with a number of complicated conditions, like no gambling, donating the money, or purchasing illegal substances).

If the story sounds like déjà vu all over again, that’s because it’s the same plot as a 1985 Universal movie starring Richard Pryor called Brewster’s Millions. The idea for Hello Mr. Billionaire originated with Universal, which was seeking to exploit their back catalog by remaking movies for a Chinese audience. It’s a brilliant strategy when it works, except that it didn’t actually work for Universal: they decided not to finance the remake and merely allowed the filmmakers to use some of the plot points from the 1985 film.

The track record of Chinese remakes is decidedly mixed. In 2017, Disney remained highly involved in The Dreaming Man (a remake of the 1995 Sandra Bullock film While You Were Sleeping) but it barely registered at the box office. Before that, the 2004 film Cellular was remade in 2008 and bombed; the Coen Brothers’ 1984 film Blood Simple was remade in 2009 by Zhang Yimou and enjoyed modest success; and the 2000 film What Women Want was remade in 2011 and basically broke even. It only takes one success to start a trend, though, and the outsize profits of Hello Mr. Billionaire will surely lead to similar remakes being fast-tracked.

But Hello Mr. Billionaire is not just any remake. It’s based on the 1902 novel Brewster’s Millions by George Barr McCutcheon, which has been adapted into a film at least 12 times and in multiple countries. Sure, the story is fun, but I suspect the real reason it’s been remade so often is that the IP is free – the book’s copyright has expired and the story has been in the public domain for years. Thus, when Universal decided not to fund Hello Mr. Billionaire, the only chain of title issues the filmmakers faced were with respect to plot points or characters that solely appeared in the 1985 film. (The filmmakers may have had other contractual obligations to Universal, but that’s a separate matter.)

Let’s thicken the plot even further. China and the US are both signatories to the Berne Convention, but they don’t have the same rule when it comes to the expiration of copyright. The basic rule in China is that a published work enters the public domain after the life of the author plus 50 years (i.e., the minimum protection under the Convention); the basic rule in the U.S. is the life of the author plus 70 years. Both countries have numerous exceptions to the rule, which in the U.S. are even more advantageous to copyright holders.

It remains unclear whether China would apply its own rule or the U.S. rule for a work created in America — say, a book or play or other source material for a movie. It may seem like a moot point because most movies are created for an international audience, but the Chinese film audience is so big now that a Chinese movie only needs to succeed in China. As of December 31, 2018, the works of any author who died in 1968 will arguably be in the public domain in China. That’s a lot of potential material coming on the market, including the oeuvres of John Steinbeck, Edna Ferber, and Upton Sinclair. And that doesn’t even consider anyone who died before 1968! The larger question is whether Hollywood will view this as a threat, an opportunity, or both.

China trademarkAs a result of reshuffling announced during the 2018 National People’s Congress back in March, the Chinese Trademark Office will now become part of the State Intellectual Property Office (SIPO), which had previously only handled patents. SIPO is also taking over responsibility for geographical indications (e.g., Basmati rice, Parmagiano Reggiano cheese, Cognac brandy), but copyrights will remain under the purview of the Copyright Protection Centre of China. Which may seem odd at first – why consolidate IP registrations in one agency but leave out one form of IP? – but that’s how the US does it with the USPTO and the U.S. Copyright Office.

Although early reports are that SIPO is having some growing pains, the integration has progressed enough so that when SIPO released the mid-year statistics on July 10, 2018, it included statistics for patents, trademarks, and geographical indications.

Faithful readers of the blog will remember that we have expressed a combination of incredulity and bemusement at the massive numbers of trademark applications being filed in China over the past few years. See, for instance, Does China Have Too Many Trademarks? and China Still Has Too Many Trademarks. Well, the hits just keep on coming.

During the first six months of 2018, 3,586,000 applications for trademark registration were filed in China. As of June 30, 2018, 31.5 million total trademark applications had been filed, 19.4 million trademarks had been registered, and 16.8 million trademarks remained as valid registrations. To provide some context, slightly more than 5.7 million trademark applications were filed in all of 2017; if the numbers for the second half of 2018 stay at the same level (which seems overly conservative) then the number of applications in 2018 will have increased by nearly 25% from the previous year.

Meanwhile, the CTMO is making a decent showing on its pledge to reduce the time spent examining trademarks. According to its statistics, the average examination time is now about 7 months. I don’t have access to all of the data, but anecdotally that number seems generous (although I will concede that the tempo has picked up). But the quality of the decisions isn’t any better, which raises a bit of a conundrum. If you’re going to get a ridiculous decision, do you want it made quickly or slowly?

One of these days we’ll hit peak trademark – we have to – but we sure aren’t there yet. In the meantime, what with all the trademarks that are being filed  in China, it’s more important than ever that you secure the trademarks that matter to you before anyone else does. See China Trademarks: Register Yours BEFORE You Do ANYTHING Else.

In the meantime, stay tuned for updates on China’s trademark statistics.

China movie lawAs everyone who follows the Chinese film industry already knows, the would-be blockbuster Asura had one of the strangest and most ignominious openings in film history last weekend. With an estimated budget of US $113 million, it ranked as the most expensive domestic production of all time, and featured a high-profile international cast and crew including Chinese teen heartthrob Lei Wu, Hong Kong legends Tony Leung Ka-Fai and Carina Lau, the costume designer from the Lord of the Rings movies and the visual effects supervisor from Deadpool. But after an anemic opening weekend of $7.1 million and a huge decline in box office even from Friday to Sunday, the film was yanked from theaters on Sunday evening like a vaudeville act getting the cane.

The producers announced their decision to pull the movie via the film’s official Weibo account (in Chinese). Some stories have emphasized that the producers (and not the theaters) pulled the movie. This is true, but elides the fact that Chinese theaters adjust the number of theaters every day for every film, especially on a film’s opening weekend. By Sunday evening Asura was already circling the drain, caught in a vicious cycle of low admissions, terrible reviews, and dwindling screens, and the producers faced a Hobson’s choice of pulling the movie themselves or having it effectively pulled for them.

No one quite believes the producers’ announced plan for Asura, which is that they will modify the film and re-release it. Numerous films have been successfully retooled after preview screenings, but after a wide release with a huge marketing push? It reminds me of the long and troubled history of the Broadway show Spider-Man: Turn Off the Dark, which at the time was the most expensive Broadway show in history, had the most number of “previews” in history, and was revamped several times but still ended up losing more than $60 million.

But if the producers really are going to re-release Asura, their plan to pull the movie early may have been a stroke of genius: by pulling the movie early, they may have given up a million or so in revenue, but they’re getting that back and more with the free publicity surrounding the mystery of what’s next. And the producers are just adding fuel to the fire by alleging they were sabotaged by a deluge of (ostensibly fake) negative reviews. I can’t decide which P.T. Barnum quote is more apt: “There’s a sucker born every minute” or “I don’t care what the newspapers say about me as long as they spell my name right.”

The coverage has bordered on the gleeful, with pundits from across the spectrum weighing in on what went wrong. Everyone agrees that the movie was a disaster, with particular attention to the effects (uninspiring), the story (a strange fusion of Tibetan mythology and action-adventure tropes), the actors (poorly cast), and the marketing (off-putting with its emphasis on the movie’s cost). Indeed, in retrospect it’s hard to identify anything that went right with this movie.

Asura wasn’t some strange labor of love backed by a mysterious billionaire. It was a studio film, produced by powerful and experienced Chinese companies like Zhenjian Film Studio, Ningxia Film Group and Alibaba Pictures. Numerous executives must have weighed in on every aspect of development and production, yet nobody with the power to stop it ever did. I can honestly say that this movie looked horrible and I would have predicted that it would fail, but I would have said the same thing about Warcraft and Resident Evil: The Final Chapter and those movies went gangbusters in China despite being largely ignored in the rest of the world.

As a general rule, I root for Chinese films to succeed. But if this film was as bad as it seems, it’s good that it failed, because Chinese audiences deserve better. Maybe the failure of Asura will even prove a corrective to Chinese studios trotting out 17 Monkey King movies every year. But I doubt it.

The real lesson from Asura, and the reason I think its implosion will ultimately prove to be a good thing, is that it shows the Chinese film industry is maturing. It can fail, and fail spectacularly, in the same way that Hollywood has done for years (see, for instance, Cleopatra, Heaven’s Gate, Ishtar, Cutthroat Island, The Adventures of Pluto Nash, and John Carter). And just like Hollywood, the Chinese film industry will shrug off this failure, because the Chinese film industry is doing just fine – the two movies that dominated the box office last week, Dying to Survive and Hidden Man, are home-grown successes attracting audiences and critical acclaim in equal measure.

It bears noting that Renny Harlin, director of Cutthroat Island, has moved to China and restarted his once-faltering career, with numerous big-budget films lined up including one for Alibaba Pictures. What could possibly go wrong?