China follows a ‘first-to-file’ rule for obtaining trade mark rights. This means that the first person to file a trade mark application will generally have priority over a prior user of the trade mark in the People’s Republic of China (PRC). There is no common law protection for unregistered trade marks in the PRC, except possibly for well-known marks although recent cases show that trade mark owners of well-known brands are fighting an uphill battle once trade mark squatters register the Chinese names or marks of their well-known brands in the PRC. For this reason, it is advisable to file trade mark applications in China as soon as possible.
In addition to filing for your Latin script trade mark, it is also worth considering whether you file a Chinese character trade mark for use and registration in China. Even though your initial marketing launch into the Chinese market is likely to be in Latin script, the majority of China’s 1.35 billion population does not read or speak English, or any other foreign language. For this reason, Chinese consumers of your products or services will devise their own Chinese name or mark for your products or services rather than using your Latin script mark, even if your Latin script mark is well known. At some point, a third party ( trade mark squatter) is likely to take up the Chinese version of your mark or name, and register it with the China Trade Marks Office (CTMO). As a result, you could potentially lose market share, be fined for trade mark infringement, and have to fight the trade mark squatter through the Chinese legal system to regain ownership of your mark in China.
There have recently been a number of cases where the owners of well-known brands such as Penfolds® and Tesla® have been locked in protracted legal battles with trade mark squatters in an effort to win back the Chinese names of their brands.
The owners of the Penfolds brand, Treasury Wine Estates failed to register the Chinese name, “Ben Fu” for Penfolds in China. As a result, Treasury Wines has been engaged in litigation in China for the past 3 years with notorious trade mark squatter Li Daozhi (also known as Daniel Li) who runs a rival wine company in China and sells wine under the Chinese name for Penfolds, “Ben Fu”. It is reported that Penfolds’ wine sales have suffered in China not only because Treasury Wines could potentially be found to be infringing Daozhi’s trade mark rights in China if it were to use the Chinese name to sell its goods but also because suppliers and sellers of Penfolds wine such as the InterContinental Hotels in China have removed the Penfolds brand amid fears that those selling the wine could potentially be liable for damages. Treasury Wines now face the prospect of either relaunching the brand in China or buying back the Chinese name from Li Daozhi for an exorbitant price.
In July 2013, trade mark squatter Zhan Baosheng demanded 23.9 million yuan in compensation from U.S. electric car maker Tesla, by alleging that Tesla was illegally using its own name in China as he too had registered the mark TESLA in China before the U.S car maker had even entered the China market. On 8 August 2014, it was reported that Tesla and Zhan Baosheng had settled the long-running trade mark dispute although the terms of settlement were not disclosed.
In July 2012, Apple Inc, reportedly paid USD 60 million to buy back the iPad trade mark in China, after a trade mark squatter registered the name and sought to prevent Apple for selling its tablets under the iPad name in China.
Such trademark disputes underscore a thorny issue faced by foreign companies doing business in China. Other companies too such as Koninklijke Philips NV and Unilever NV have also been embroiled in similar trademark disputes in China in the past due to China’s “first to file” rule.
It is one thing to be aware that you need to register the Chinese name for your brand in China but how do you devise your Chinese character trade mark? There are three different ways to do this:
- You could translate your trade mark into Chinese characters if it describes your goods or services. Although sometimes, the translation may not be appropriate as it could be too far removed from the original meaning of your mark.
- You could transliterate your mark into Chinese by choosing characters that sound close to your trade mark, or have a positive meaning. Although sometimes this could be problematic where the Chinese characters have different sounds when spoken in different Chinese dialects, or your transliteration has a positive meaning in one dialect but a negative meaning in a different dialect, for example Mandarin or Cantonese.
- If neither a translated or transliterated mark is appropriate, you could create your own Chinese trade mark and launch your goods or services under this mark in China. Should you decide to create your own Chinese mark, it is advisable to seek a reputable branding agency in China with a proven track record. Also don’t forget do have your trade mark attorney or lawyer register your own Chinese mark with the CTMO after having your attorney or lawyer check that the trade mark created by the agency is registrable under China’s trade mark laws. A good example of a created trade mark in China is Sai Bei We® (meaning “tastes better than others”) for Subway®
Thus, in order to avoid costly legal proceedings down the track it is critical that businesses take a proactive and comprehensive approach to protecting their brands and marks in China. You may want to consider filing in China years before you actually plan on selling in China in order to prevent a third party filing for your mark before you do. It is also strongly advisable that you register your mark/s in China, even if you are simply manufacturing in China for export given that it is not clear whether manufacturing in China solely for export would constitute trade mark infringement where you are applying a mark that has already been registered by a trade mark squatter.
Where infringement is already occurring and you have not sought to register your trade marks with the CTMO, trade mark cancellations may be available to recover and/or reinstate your trade mark rights (Trade Mark Cancellation Proceedings). There are also avenues of appeal against decisions of the CTMO through the Trademark Review and Adjudication Board (TRAB), with a right of final appeal to the Beijing People’s Court. Although, it is obviously better to avoid costly and protracted litigation by securing your rights in China as early as possible.