China and Trademark Hijacking

As the Morningside team travels around the world for conferences and meetings, we will be sharing observations and advice regarding these markets. Our New Market Watch series kicks off with China.

This week Morningside is exhibiting at the INTA (International Trademark Association) Conference in Hong Kong. The INTA Conference deals with intellectual property and international trademark education, with a special focus this year on doing business in Asia and China in particular. China is an incredibly important market with a growing class of knowledgeable consumers. It has a large amount of natural resources, talented human capital and over the last 20 years has grown into an increasingly important destination for global businesses. China is one of the most important economic players in the world and a growing number of companies are looking to enter this exciting market. However, every country presents its own unique challenges. Trademark translation and intellectual property translation are critical issues for this market, but today we’re going to focus on Trademark Hijacking.

Over the past few years, many companies have dealt with the issue of Trademark Hijacking in China. Trademark Hijacking refers to a “situation where a third party registers an established company’s trademark in China, often before the company enters the Chinese marketplace.”[1] A well known case of Trademark Hijacking occurred two years ago when Apple paid a large settlement fee of $60 million dollars to Proview Technology for use of the term iPad. The Chinese trademark law follows the “first filing principle,” meaning the first party to register a trademark, even if it is connected to a well-known brand or idea, will be sole owner of that trademark. Basically, a trademark in China has practically no protection if it is not registered unless you can prove bad faith or a connection with the third party who registered your trademark. While Apple may have the money to settle the case, your entry into the Chinese market may not be taking into account this added expense.

This month, new alterations were implemented to Chinese trademark law to help resolve some outstanding issues. Key changes include increased protection against piracy, shortening the trademark process to limit the ability of trademark pirates to get involved, harsher penalties for those guilty of piracy, and increased protection for ‘well-known’ trademarks.

Even though the new law may not remove all trademark infringement in China, it does provide more ways to prevent others from registering an established mark. However, though the new changes in the law are a welcome step forward, it is still important to protect yourself by registering your trademark in China as soon as you can. Once the trademark is approved by the Chinese Trademark Office, it as advisable to also record the right with the Chinese Customs Office and be proactive in defending any possible infringement.

Another important factor to consider is trademark translation and registering the trademarks in Chinese. Registering in Roman letters of the trademark doesn’t provide the same protection as also registering the trademark in Chinese. It can be beneficial to delineate the exact trademark phrase to the local consumers as well in order to avoid any confusion and get your message across clearly. Due diligence in obtaining intellectual property protection is a critical part of doing business in China.

The large and increasingly affluent Chinese market offers any business tremendous opportunities, but make sure you clearly understand the risks and issues involved, including the trademark and intellectual property issues.