Do you manufacture or sell goods in China? Have you got a strategy in place to ensure your brand name is protected in China? No doubt for the majority of Australian fashion businesses, the answer to the first question is yes and to the second question is no. But a recent example demonstrates the importance of implementing a brand protection strategy in China sooner rather than later. The old adage ‘prevention is better than cure’ definitely holds true for this jurisdiction which is seen as difficult to say the least, when it comes to intellectual property protection.
Recent media coverage concerning Apple’s difficulties with the iPad brand in China highlights this issue. As has been widely reported, a Chinese company, Proview Technology (Shenzen) (Proview) claimed it owned the rights to the iPad name in China. Apple claimed it had purchased the global rights to the iPad name from Proview’s Taiwanese affiliate in 2009, but Proview claimed that the rights to the name in China were never transferred and a court agreed. Apple appealed the decision, but recently settled the dispute by paying Proview a reported US$60 million in exchange for the assignment of the iPad trade mark.
This is a lot of money by any measure. For a company like Apple, it is no doubt offset by the money that Apple will make back through product sales, which were hampered in China due to this dispute, but of course, Apple is not your average company. Although a global company like Apple appears to have weathered the storm, the loss of the Chinese market for any period of time could be crippling for other businesses.
So, what can you do to protect your brand in China? China has long had a reputation as being a jurisdiction where it is difficult to secure and enforce intellectual property rights. However, there are practical steps that companies can take to help reduce the risk of headaches down the track.
One very important difference between China’s trade mark system and those of many other countries, including Australia, is that China awards trade mark rights on a first to file basis. In other words – the first person or company to file an application for a trade mark has the strongest claim to the mark – even if someone else has already used the trade mark in China. In Australia (and many other countries) it is possible to develop legally recognised rights in a name or logo without registering it as a trade mark (although registration is always recommended). We are all familiar with saying “position, position, position” in real estate – for trade marks in China, it is all about “registration, registration, registration”!
The conduct of profiteers seeking to exploit China’s first to file trade mark laws means applying for registration of your trade mark in China has never been more important. These practices have developed beyond the fairly well known practice of trade mark squatting – that is, registering a well known trade mark in China and then selling the registration to the rightful brand owner when it enters the Chinese market.
Local Chinese businesses are now savvy enough to not only apply for a well known trade mark which is not already registered in China, but also to start using the mark. Then, when the international brand owner attempts to enter the Chinese market and use its own brand name, the trade mark owner commences legal proceedings for trade mark infringement. By registering and using the mark in China before the international owner of the mark enters the Chinese market, these individuals and companies are often successful in such actions, making it that much more difficult (and therefore expensive) for the the international owner of the mark to acquire rights in China in its own brand.
It is also worth remembering that the more successful your brand is, the more likely it is to cost you to buy it back from a profiteering third party. In Apple’s case, it is unlikely the settlement amount would have been so large if the iPad brand had not been so successful.
When applying to register your trade mark in China, it is also very important to ensure your mark will be registered for the goods or services that you will use the mark for. For example, while trade marks can be registered in Australia for a broad range of goods (such as clothing), in China you will typically need to specify the types of clothing you want your mark to cover.
Brand owners should also consider applying to register the Chinese equivalent of their brand name at the same time as applying to register their trade mark in English. Obtaining local advice on the appropriate Chinese equivalent is highly recommended so that you reduce the risk of selecting the incorrect translation or a translation that has an alternative (and potentially undesirable!) meaning.
So, the key points to remember: - protect your brand against trade mark hijacking by seeking registration of your trade mark in China as early as possible - if you find another party is using your brand name, take immediate action (this may include opposing a trade mark application); the longer you leave it the more difficult (and therefore expensive) it becomes - a valuable trade mark registration is one that covers the right goods and services so consider these carefully. If the scope of your goods and services has holes, those holes can be exploited by third parties - consider registering the Chinese equivalent of your brand and make sure you choose the correct translation - above all, have a brand protection strategy in place which includes China - seek advice from a local Chinese trade mark attorney or lawyer to help you formulate a strategy to consider the appropriate goods and services, different dialects and translations and transliterations.
Lisa Egan is a partner and Alex Dunlop is a lawyer in Middletons’ Melbourne office. www.middletons.com.au
