Keltie was pleased to host Tian-ying Zhao and Wang Yanping from IntellecPro. They gave the Keltie Trade Mark team a very interesting seminar on trade mark protection in China. I have summarised 5 important points to bear in mind when filing trade marks in China.
1) Chinese Culture
China adopts a “first-to-file” system, which grants exclusive trademark rights to the party that is first to apply to register the mark. Whereas in the UK, we use a “first-to-use” system, meaning a party filing for a trade mark has to show that it’s either used the mark in business or intends to use the mark in future business. This crucial difference can make life in China hard for foreign companies; especially in light of the fact that there is limited protection for unregistered trade marks.
Therefore, it is essential to register a trade mark in China before entering into the market so as to diminish the risk of trade marks being registered by someone else first, or in other words be ‘hijacked’ by a ‘trade mark squatter’. It is also important to register early, as the registration process can take up to 18 months and a trade mark can only be protected in China once it is registered.
Also, China has a unique sub-class classification system, which effectively further divides the broad Nice classes. Firstly, this contributes to delaying the registration process because Examiners often have to re-class trade mark applications. Secondly, it means that pirates can register an identical or similar mark for similar goods in a different sub-class, within that same main class; exacerbating the already prolific piracy problem.
Brand piracy is a big problem in China due to the “first-to-file” system, where third parties (known as ‘trade mark squatters’) register trade marks which are copies or imitations of well-known or up-and-coming brands before the rightful owner is able to. Businesses find it difficult to retrieve the mark and either have to buy it off the perpetrator (often for an inflated price) or prove non-use, which has been problematic.
Our Chinese Associates advise that a combination of trade mark squatters, defensive trade marks and inexperienced examiners (hastily but ineptly trained to keep up with volume of applications) have resulted in a very large Chinese Trade Mark Register. As a result, the vastness of the register only makes it harder to police the piracy problem.
There are 5 main ways to challenge a piracy mark if you have no registered rights in China:
- In specific circumstances, it is possible to apply for the ‘well-known’ status of a trade mark. However, there is no official registry of well-known marks and this status is only recognised on a case-by-case basis.
- If you already have use in China and your mark has attracted some fame then you can claim bad faith.
- You can try to rely on other prior rights (for example, copyright or merchandising rights).
- If the pirate was previously a company representative or if your business had prior contractual relations with the pirate, you can again claim bad faith.
- If you can prove that the pirate applied/registered the trade mark by “other illegitimate means”; this is a provision in Chinese Trade Mark Law which invalidates trade marks owned by those who inter alia disrupt the trade mark registration order. For example, a serial trade mark filer – it is highly unlikely that someone who owns hundreds or thousands of trade marks is actually using them all!
3) When to File
It is best to file a trade mark in China before any use in any market. Even if a company has no plans to enter the Chinese market or has not yet started manufacturing, it is still worthwhile applying as early as possible to register a defensive trade mark to ensure you get the registration before any fraudulent third parties.
Not only does this keep the door open for future business, it also safeguards exports of OEM products from China, blocks counterfeits from being exported from China and avoids legal hassle for any direct sales to China (e.g. Amazon).
4) What to File
There are many different options when deciding what to file because the registration of a trade mark in Latin characters does not automatically protect the trade mark against the use or registration of the same or similar trade mark written in Chinese. If preferred, you can register just the word/logo version of your English trade mark. However, it is advisable to register a Chinese version, either instead of or as well as an English version.
If there is no existing Chinese character name for a foreign brand, it is very likely that one will be adopted by local consumers either by way of translation or by transliteration; this will not necessarily have the right connotations or image that the foreign company would wish to convey. Therefore, a Chinese trade mark name should be chosen carefully.
You can create a literal translation but the disadvantage is that the Chinese characters will sound different from the original trade mark so marketing time and money will need to be spent on building the association between the Latin character trade mark and the Chinese character trade mark. For example, Apple Computers chose the brand name ‘Ping Guo’, which is Chinese for ‘apple’.
A phonetic translation involves creating a Chinese character name that sounds like the trade mark. A transliteration is preferable when the trade mark already has a reputation amongst Chinese speaking consumers. However, care must be taken because the Chinese characters may have an undesirable meaning in one or more of the six major Chinese dialects. For example, ‘McDonald’s’ is known as ‘Mai Dang Lao’ to local Chinese consumers.
The combination of a literal and phonetic translation can be the most effective. The best trade marks are often those that sound the same and also make reference to a defining characteristic of the brand or have a positive meaning in Chinese culture. For example, Coca-Cola uses ‘Ke Kou Ke Le’ which means ‘taste and be happy’.
In terms of strategy, trade marks can be file defensively to prevent trade mark infringement, even if the owner is not intending to use the mark. A defensive trade mark should be filed in relevant sub-classes or in all 45 classes (if budgets permit). As this can be expensive, it is important to prioritise goods or services you use, you might use, you might want to block and that you think are similar. This approach might lead to cancellation actions due to non-use for three consecutive years, but the cost of registering a mark is much less than the cost for initiating opposition or cancellation proceedings.
In conclusion, China is a challenging market with increasing significance. Foreign companies need to realise the importance of registering their trade mark rights as early as possible to prevent costly legal issues later down the line.
Amelia Skelding 6 June 2018