By Diana Muller
China has always been the subject of extensive conversations among trademark lawyers, on the various challenges that are constantly encountered when attempting to protect and enforce trademark rights there. On paper, the process does not seem to be complicated, but the reality is that China’s laws and practices are quite challenging.
China is known as a manufacturing country and many foreign companies have manufacturing facilities in China or hire third parties to manufacture for them. However, these companies often underestimate the importance of registering their trademarks in China or conducting due diligence in order to find out if they can sell in China or manufacture their products for export purposes. It is very important for these entities to understand that protection of their marks in China is fundamental to the success of their business. China is a first-to-file country (no use of the mark is needed in China prior to obtaining a registration, as is required in the United States). Any party can obtain a trademark registration, in one or several classes, become the title owner of the mark and stop products bearing a legitimate foreign well-known trademark from being sold in China or exported from China to other countries. In many cases, a mark could be considered well-known in the country of origin but not necessarily in China. There is always the possibility of filing oppositions or cancellation actions against these applications and registrations based on bad faith but the results are often uncertain.
If a party is not familiar with the practice in China, it could encounter unpleasant surprises. For instance, China follows the International Classification of goods and services under the 1957 Nice Agreement (updated in 2019), but further divides these classes into subclasses. In view of the foregoing, the selection of classes and subclasses and the identification of products and services must be clearly discussed and analyzed with a Chinese IP lawyer.
As an example, if a foreign company has properly protected its famous trademark in Classes 25 for clothing and 18 for leather products, it could still be possible for a Chinese entity to file an application for the same mark in Class 26 covering: clothing trim (clothing accessories) , clothing buttons, zippers, buttons, artificial flowers for clothing, adhesive patches for jacket decoration, etc., and the legitimate owner may lose its rights in Class 26 because their company has not taken into consideration protection in Class 26. Losing this class may result in an action for trademark infringement by the owner of the registration in Class 26. Many Chinese companies take advantage of these additional filings in order to negotiate the sale of their applications or registrations to the legitimate trademark owner. It is quite unfair that the authorities ignore, in many instances, the concept of confusingly similarity or the fact (in this example) that the buttons bearing the legitimate owner’s trademark are not necessarily sold separately from the garment in China and yet the mark is affixed to the products that fall in Class 26.
China accepts multiclass applications but given the different experiences during the prosecution of the applications, it is strongly recommended to file single class applications enabling parties to register their mark in some classes faster than the others. The process normally takes 15 months unless the application encounters opposition. Words, names, devices, slogans, colors, sounds, 3D shapes, trade dress, collective marks, certification marks can be protected. Marks that are against moral standards, public order, generic words, or symbols, flags or names of a state, nation or region cannot be registered. The applications are filed with the Chinese Trademark Office examined, published for opposition and registered, if no obstacles are encountered. China is also a member of the international registration system known as Madrid Protocol. United States applicants can take advantage of the Madrid Protocol and file their trademark applications (based on their U.S. applications and registrations) in more than 100 countries including China. Conducting trademark searches before filing the applications, in order to determine the availability of the marks in Roman and Chinese characters, is also encouraged.
For stronger protection in China, it would be highly recommended to register a Roman character mark in the corresponding Chinese characters. The reality is that the Chinese consumers may not always pronounce the Roman letters mark but associate the products with its Chinese version whether it is the translation or translation of the mark. For instance, a McDonald’s store is referred to as Mai Dang Lao. Coca-Cola is known as Ke Kou Ke Le which means taste and be happy or pleasant. The Chinese version could also be used on social media to boost the sales of the products and create a better recognition and association with the Roman letters mark.
Many companies and famous athletes have not focused on registering the Chinese version of their names/marks. The famous company New Balance had to deal with a decision by a court in China that imposed damages of $750,000 as a result of New Balance’s unauthorized use of Xin Bal Lun and Bai Lun (registered by Lelun Zhou many years before). This entity instituted an action for trademark infringement against New Balance. On the other hand, New Balance had a victory in 2017. A Chinese court in the eastern city of Suzhou ordered three defendants to pay New Balance US$1.5 million in damages for the use of its famous N Logo.
Michael Jordan legally fought the Fujian-based Qiaodan Sports company that illegally used the Chinese version of Jordan’s name.
Patrick Ewing protected his name and signature in China very early in his career which, enables him to stop the infringement of his athletic footwear with the assistance of the AIC (Administration of Industry and Commerce). 48,000 pairs of unauthorized shoes were confiscated from several factories.
One of the most important advantages in obtaining trademark registrations is the ability for the IP holder to record its registrations with Chinese Customs. Trademark rights (except for service marks), patent rights and copyrights can be recorded. Chinese Customs could take an Ex- officio Custom Action or the IP holder could apply for the detainment of the infringing products that have been imported or are to be exported.
The issue as to whether the use of a trademark for export purpose could lead to a case of infringement of a prior Chinese registered trademark is controversial and would very much depend on the facts of each case. A few interesting cases are discussed as follows:
On November 26, 2015, the Supreme People‘s Court issued a decision on the PRETUL case. A company Truper owned the Mexican trademark PRETUL and elliptical figure which had an earlier registration date than an identical Chinese trademark. Company Yahuan entrusted by company Truper to manufacture padlocks according to its request by affixing the PRETUL trademarks on the padlocks and exported all the products to Mexico. The padlocks were not sold in China, all products were exported into Mexico with descriptions in Spanish. The owner of the mark in Mexico and its Chinese manufacturer signed a manufacturing agreement including the specifications as to products and their right the export to Mexico. The Supreme People’s Court held that the use of the mark in China was not an infringement of a Chinese registered mark since there was no association in the public’s mind with the source of the products manufactured in China under the PRETUL trademarks and sold exclusively in Mexico.
On April 21, 2017, the Shanghai Intellectual Property Court issued a decision regarding the use of the trademark PEAK SEASON against Isaacs Maurice Co. Ltd. who entrusted Wuxi Zhenyu International Trade Co, Ltd. to apply the PEAK SEASON mark on clothing sold through Internet platforms such as Amazon. The Court considered that the Chinese public might get confused with this brand and the Chinese registered brand PEAK of Fujian Quanzhou Peak Sport Products Co, Ltd. This is not a typical case involving manufacturing for export purposes only since the products bearing PEAK SEASON were sold online on a worldwide basis and Chinese customers had access to these products.
In June 2016, Ruili Customs under Kunming Customs seized 220 motorcycles with the logo HONDAKIT from the company Chongqing. After several Court actions, Chongqing was found to have infringed Honda’s exclusive right to use its registered mark HONDA by producing and exporting the motorcycles in question. The Supreme People’s Court stated that “trademark use”, in order to determine if there is an infringement, should be considered based on the interpretation of the law and many other factors.
No party should assume that manufacturing products in China for export will not result in the infringement of an existing Chinese registration, even where the party has registered its mark outside of China. That may not be a defense for non-infringement of trademark rights. The exporting of the products with the foreign trademark affixed to them should neither cause confusion to the Chinese consumers nor damage the interest of the Chinese trademark proprietor. The Chinese courts are always interested in knowing the degree of care and diligence done by the Chinese manufacturer and the foreign trademark owner in determining if a possible infringement in China could be encountered. Obviously, in many instances, the trademark owner of the mark in China is not in fact the “ legitimate “ owner of the mark. However, following the principle of the “first-to-file”, Chinese companies constantly attempt to protect trademarks that may be well-known in other jurisdictions. These actions may result in trademark piracy which is pretty common in China. Acting quickly to remedy this situation by filing oppositions, cancellation actions, purchasing the registrations and protecting the trademarks very early is crucial in China.
For further information please contact Diana Muller regarding foreign filings and protection of trademarks on a worldwide basis.
If you enjoyed this article then check out Gloria Tsui-Yips key takeaways from her webinar “Overview of IP Protection Outside the US [with a focus on China]”