register trademarks in China

A few months ago, a couple of our China lawyers did a project for a company looking for various ways to bring its internet game to China.  Now that the project is over, I cleaned up my files and came across an initial email interaction between the client and me, that went something like the following (the point of which is that China’s internet is different from the West, and legally complicated):

Q. How can we register trademarks in China? We’ve already registered them in the United States and in Vietnam (that’s a long story), but now we are ready to register them in China. What do we do?

A.  You register trademarks in China pretty much like anywhere else, which means that you firs figure out the appropriate category/class and then you register your trademark in that category/class. The thing about China though is that if you register your trademark in video games, you have zero protection from someone using your trademark on their t-shirt or even in their book. Add in the fact that all of this has to be done in Chinese and you can see how difficult it is. Then there is the separate issue of copyrights, which may or may not protect some of what you are doing.

Q.  Is there anything special about internet games in China?  
The legal issues relating to the internet in China are just so numerous as to be impossible to discuss without my knowing more about your intentions. The really short answer is that foreign online content is illegal in China and some people make a fortune from it and others go to jail.
Dealing with the internet in China is usually quite expensive; most who go in on the cheap end up getting everything stolen.
We represent two large companies involved in businesses similar to that to which you aspire and we are constantly having to deal with China IP issues for them.

Stan Abrams has a thought pondering post up on his China Hearsay blog, entitled, “DMAX: This is What Happens to Foreign Technology Companies in China.” The post is on a Chinese rival to IMAX, called DMAX and Stan concludes his post by saying he expects “to see this written up as a case study for some business or law school out there. Looks textbook.”

I agree and I disagree. I agree that it looks textbook and that’s because what is going on here happens pretty much every day in China. But because this sort of thing happens pretty much every day in China, I’m less certain that this particular example will make the textbooks. That being the case, I will do the case analysis right here and now.

Factual Background (as taken from this China Daily article): 

DMAX, a large film screen made with Chinese independent technology, on Monday was put into commercial use in a cinema in the eastern province of Anhui, as developers hope to break the IMAX monopoly in China’s booming film market.

According to Yang Xuepei, head of the institute, while embodying the country’s independent core technology of big screen motion pictures production and image optimization, DMAX is also compatible with the most advanced technology overseas. Its 2D and 3D screening quality are as good as large screens of foreign brands.

Factual Issues:  Does IMAX have any patents in China? They have a whole slew of them in the United States.  Is DMAX violating any IMAX patents? Did IMAX register its name as a trademark in China? I am guessing that it did. If IMAX registered its name in China, does the name “DMAX” violate IMAX’s China trademark?  I am thinking that it does. Did DMAX improperly receive any IMAX trade secrets? What are DMAX’s plans?  Just China or the rest of the world too?  What is the pricing difference between the two technologies?  What about quality and service?

Legal Issues: If DMAX is using any IMAX patents or trade secrets, we should expect IMAX to sue DMAX in China. I would expect IMAX will be suing DMAX in China for trademark infringement.

I wish I could claim the above as original scholarship, but my analysis pretty much tracks Stan’s:

A lot of questions here, but we’ve got a booming domestic market and a foreign company that is pretty much in a monopoly position because of its superior technology. Sound familiar?

Yes, this sort of situation has occurred over and over in China. What usually happens is that a domestic competitor emerges that (at first) competes on price. I’m wondering whether IMAX has patent protection over its tech and whether DMAX will be looking at any infringement suits in the future. If not, were there trade secrets involved? I’m speculating, of course. It’s possible that there are no IP issues here at all and that DMAX is a solid citizen. And if there are IP problems, I wouldn’t want to be IMAX — the owners of DMAX seem to be heavy hitters (e.g. “China Film Co.” — part of China Film Group?).

At the very least, though, there’s got to be a trademark issue here, yeah? After all, “IMAX” and “DMAX” are 75% identical. I might do a quick trademark search tomorrow and see what I can find on these guys.

If IMAX did not protect its IP by registering it in China, the lesson is that it should have, if it could have. The problem with patents in China is that one must register one’s patent in China within one year of having registered it elsewhere. So if some IMAX’s US patents are, let’s say, ten years old, and it never even really considered China until a few years ago, it would not have been able to register at least some of its patents in China at all. That is not the case with trademarks and if IMAX did register its name in China, it probably does have some recourse against DMAX.  I say “probably” though because DMAX will probably argue that the max portion of the name is fairly generic and so it is not infringing at all.  IMAX will argue that it is no coincidence that DMAX’s name is only one letter of its own and they are selling the same product. At minimum, a company should — if it can — register its patents in China and its trademarks as well. Chinese law is actually pretty good at protecting trade secrets and so if IMAX can show that DMAX secured its technology from IMAX improperly, it may make sense for IMAX to sue for trade secret theft.

But maybe DMAX did not violate any laws or infringe on any registrations. If that is the case, IMAX’s only recourse would be to outshine DMAX on quality and/or service because it is not likely going to be able to beat DMAX on price.

Is there a lesson to be learned here?  There has to be, but it is not quite clear yet exactly what it is. In the meantime, about all we can tell you is that if you have patents or trademarks that you want protected in China, register them right away. And if you have trade secrets you want to keep secret, make sure you have systems in place to maximize the likelihood of that happening. Chinese companies are constantly on the lookout for the next big thing and they are a lot more likely to find it at your company than by their own innovation. You should assume copying of your product is going to occur in China and you should prepare accordingly.

China trademarksIt should go without saying that the applications to register trademarks in China are 100% in Chinese. The applications themselves are entirely in Chinese, as are everything one puts on the application to complete them for filing. I always find it strange when clients and potential clients express surprise at this and I usually respond by noting how the trademark applications in the United States are entirely in English.

The fact that the applications are entirely in Chinese means that your company name goes into Chinese as well. This is not usually a big deal, but it can be when things get confusing down the road. When we do a trademark application for a company that already has its own entity in China or at least enough of a presence to have already translated its English name into Chinese, there is usually no issue. If the client wants its Chinese entity to hold the trademark, we put the trademark in the name of the Chinese entity and no translation is necessary. Similarly, if the client wants the trademark to go into its United States entity, and that entity already has a Chinese translation, we use that.

But oftentimes, we register trademarks in China for companies that have no real direct interest in China and because of that, they have no Chinese name. For instance, we recently did a number of trademarks for a large company that wanted its names trademarked in China because it “probably will go there eventually.”

In those situations, it can be important to choose the right translation (and to stick with it) so as to avoid confusion down the road on who owns your mark.

China is trying to deal with the potential for confusion by allowing for a Roman script version of the applicant name and address to be included in the application. Though the Chinese language version of the company name is treated as controlling, the Roman script version is used for assistance in searching and for prevention of confusion. As one would expect, no attempt is being made to accommodate other languages and scripts. For languages that use a non-Roman script, translation into English or some other European language (French usually) is required. But again, in the end, it really just makes sense to do it right in Chinese.