Why it’s important to protect your IP in China
Before you enter into a contract or business relationship with a Chinese entity, make sure you have first filed a trademark application with the China Trademark Office (Industrial Property Office SAIC) to protect your brand.
Trademark Hijacking
There is a widespread practice of trademark hijacking in China. Because trademark rights are acquired by the first person to file a trademark application, Australian brand owners often find that their trademark has been “hijacked” in China by an earlier trademark application in the name of a local Chinese entity (and this may even be your Chinese distributor or manufacturer!)
The trademarks FACEBOOK, TOPSHOP, J.CREW, KARDASHIAN, JUSTIN BIEBER, ANGRY BIRDS, CHIVAS and OPRAH WINFREY are all owned by Chinese entities for a variety of different products.
Less than 3 months after VIAGRA was approved by the FDA, a Chinese pharmaceutical company registered the trademark VIAGRA in Chinese. Pfizer tried (unsuccessfully) for over 10 years to prevent the Chinese pharmaceutical company from selling the drug under the brand name VIAGRA in Chinese.
Apple paid a settlement of $60 million to Proview Technology so that it could use the trademark “iPad” in China.
The practice of trademark hijacking seems to cut across all industries and it is not just well-known trademarks that are hijacked. Many Australian businesses in wine and FMCGs have also fallen victim to this practice, especially when they engage a Chinese entity as part of the packaging or manufacturing process.
The solution?
In China, the first to file a trademark gets the trademark registration. Accordingly, it is important for you to file a trademark application for your brand in China before you meet with any potential business partners, sign any contracts with Chinese entities or commence any manufacturing in China.
China is a member of the Madrid Protocol, which means that if you own an Australian trademark application or registration for your brand, you can use your Australian trademark as a basis to file an International Trademark extending protection to China.
If you also intend to sell your product in China, remember to register your trademark in both Latin and Chinese characters.
New Laws
If you do find that your trademark has been hijacked, China has introduced new laws which come into effect on May 1, 2014 which give foreign trademark owners some recourse.
An identical trade mark registered for identical goods and services will be considered trademark infringement if there is a contractual or business relationship between the parties (and irrespective of whether or not there is confusion).
The opposition procedure is simplified and shortened.
Trade mark use and registration is subject to a requirement of “good faith”.
Prior use of a trade mark can be used as a defence.
There are higher damages for trademark infringement.
Unfair competition laws will allow action against the use or registration of a registered trademark as a trade name.
The above changes are positive developments for the protection of trademarks in China. However, it is important to still remember that:
Trade mark rights in China are based on the first to file a trademark application. If you plan to do business in China, it is important to first file a trademark application before entering any discussions with local entities.
If you license a third party to use your trademark in China, such as a distributor, it is important that the license is recorded with the China Trademark Office. This ensures that any goodwill generated through the use of the trademark in China reverts back to you the owner and will allow you to rely on your licensee’s use of the trade mark in legal actions.
This article is intended to outline some of the trademark issues that you may need to address with your legal counsel when entering the China market. It does not go into great depth with the subject matter, but offers useful insights into the basics. It is not legal advice and it is not exhaustive of all laws and issues that may apply to your particular business. Qualified legal counsel should review the details of your business in China.