China is the source of a huge proportion of manufactured goods bought by British consumers. The brand owners who have the goods made in China usually take great care to ensure that they have their trade marks protected in the countries where their goods are sold. Unfortunately, there have been instances where Chinese manufacturers have registered trade marks of brand owners without their knowledge.
In this article, our trade mark solicitors discuss the risks to trade mark owners that have their products manufactured in China and explain the steps brand owners can take to protect their intellectual property rights in China.
Contents:
- What are the risks to trade mark owners that have their products manufactured in China?
- What steps can you take to protect your trade mark in China?
- How can you find out if someone has registered your trade mark in China?
- What can you do if someone has already registered your trade mark in China?
- What are your legal options if someone has infringed your trade mark rights in China?
- What evidence do you need to provide to prove trade mark infringement in China?
- Enforcement of trade mark rights in China
- Summary
What are the risks to trade mark owners that have their products manufactured in China?
Wherever they do business, and even where they don’t, trade mark owners run the risk that a third party will use their trade mark or something similar to it to confuse customers and divert trade, or perhaps to take a free ride on, or tarnish, the reputation of the trade mark. China being a huge country, with a culture and legal system that is unfamiliar to most UK based businesses, the risks to trade marks involved in business dealings there are greater than they might be in other place.
China has a particularly bad reputation for trade mark squatting – local companies or individuals making bad faith trade mark applications to register foreign businesses’ trade marks, whether for ransom purposes or to take a free ride on their reputation. The best way to prevent this is to register your own trade marks first, before they come onto the squatters’ radar.
China has drawn extensively on the EU trade mark directive in creating its law. Registered trade marks are protected under Chinese law, and parallel unfair competition rules should give reasonable protection to unregistered ones too. Getting your trade mark on the register also enables you to stop anyone else from registering the same one, or a similar one. For the relatively modest cost of registering a trade mark there, protection in China is usually worth getting.
What steps can you take to protect your trade mark in China?
What you should do in practice to protect your trade mark in China is much the same as what you would do anywhere else: know who you are dealing with, put appropriate agreements in place, register your trade marks and keep an eye on them and on third parties’ registrations that might conflict, work with the authorities in China, and if you can supplement your trade marks with other types of intellectual property rights do so.
Due diligence on the manufacturer you are working with
Protecting your interests includes making sure that the people with whom you do business are suitable trading partners. Organisations like the China Chamber of Commerce in the UK and the China UK Business Association are useful for finding reliable trading partners and should feature in your due diligence investigations before entering into a trading relationship. Your problem won’t be finding willing companies in China, it will be working out which of the hundreds or thousands of candidates is the right fit for you. Ideally, pay them a visit and get to know them personally, and see their factory and workers.
Well drafted supplier and manufacturing agreements
The willingness of a Chinese partner to enter into appropriate agreements is one indication of whether they are suitable business partners. The days when western businesses would accept that their lengthy and exhaustingly-negotiated agreement would be put in a bottom drawer and forgotten about, in the fairly certain knowledge that it would never be enforced in the courts, have gone – for China and for most other countries.
If your prospective Chinese partner instructs lawyers to review your draft agreement, so much the better. There are plenty of very competent commercial lawyers in China’s main commercial areas, often educated or trained in the UK or the US. If your counterparty takes legal advice from one of them, it’s a good sign.
To make sure that the agreement is as enforceable as possible, you’ll probably want to stipulate that it is governed by English law and that the English courts have jurisdiction. Arbitration might be a good alternative, especially if the other side aren’t comfortable with giving foreign courts jurisdiction – just as you would be uncomfortable if disputes had to go to the courts in China.
Register a trade mark in China
To register a trade mark in China, you can use the Madrid Protocol to file an international trade mark application – in effect, extending the protection of your home country (UK) trade mark to the PRC and other places you may choose. It’s a much cheaper proposition than instructing lawyers in all those countries to file applications – or getting us to use our local associates to do so. Local lawyers might still be needed to overcome objections and oppositions in the China National Intellectual Property Administration, but you don’t need to be paying for their services from the start.
There are often good reasons for making an application direct in China. Your home-country trade mark’s list of goods and services might not fit well within the Chinese system, which has a second level of detail in its classification of goods and services. For example, you might have a UK registration in Class 12, which covers vehicles and apparatus for locomotion by land, air, or water. In the Chinese classification system, you will have to drill down further: 1201 is ‘trains and their parts’, and below that 120002 is railway couplings. A registration that mentions class 12 only won’t necessarily cover the railway couplings, because they are not expressly included in the class heading. To make sure that your registration has the appropriate scope, it may well be best to apply for a Chinese trade mark directly with the help of our experienced trade mark lawyers.
If your UK trade mark is a multi-class one, that can also pose a problem. China does accept multi-class applications, including through the Madrid Protocol, although it charges for them as if they were multiple single class ones.
Another peculiarity of registering trade marks in China is that, to a native speaker, a western name or trade mark might sound like a Chinese word or phrase. Often there will be a choice of transliterations, and the four tones of Chinese mean that there are multiple possibilities, so the business can choose the most auspicious Chinese sound-alike for its name or trade mark. 可口可乐 [pronounced ke kou ke le] sounds similar enough to Coca Cola and means ‘tasty and happiness’. Looking for such a trade mark, or trade marks, probably won’t be important unless you are going to be selling to Chinese consumers, but if the extra protection is worth having the possibilities are huge.
Trade mark monitoring
Once registered, you’ll want to ensure that a close watch is kept on anything that might affect your trade mark rights. A watch service to pick up conflicting applications for Chinese trade marks is an essential starting point – if someone else is applying to register an identical or similar mark you will need to oppose it if it is to be kept off the register. A watch service for China can be run from the UK, as it will draw on the same international databases that a Chinese lawyer would use: but our foreign associates usually alert us to applications that our clients ought to know about, and you’ll certainly be needing them if opposition proceedings are required.
Work alongside customs and other authorities
While we are accustomed to having to sue for trade mark infringement if someone uses a confusingly similar sign for their goods or services, in China the public authorities are much more involved in enforcement. It might mean that you don’t have to sue for infringement to protect your trade mark, though that possibility remains available.
UK customs also have an important role to play in keeping infringing goods out of the country. Many such goods are likely to originate in China. Trade mark owners may report suspicions to customs, who will then stop the consignment at the port of entry – a very useful and cheap alternative to suing for infringement, if you can provide the information that customs need. But this sort of action protects the UK trade mark, not the Chinese one, so it’s a slightly different matter.
Other forms of protection
Trade marks are not the only type of intellectual property, and it is possible that other forms of protection might be relevant. The appearance of products or articles can be protected by designs law, and you might want to register designs in China to give you further protection there. It is not unknown for Chinese manufacturers to make goods which would infringe design right in the UK, and ship them to the UK where they are infringing articles. The importer would be liable for infringement – the manufacturing would have been done outside the scope of UK design right protection, although Chinese laws might also prohibit it – and traders could be liable for secondary infringements.
How can you find out if someone has registered your trade mark in China?
A formal watch service will pick up anyone trying to register an identical or similar trade mark in China. If it turns out that your agent or distributor in China is trying to register, that will automatically be stoppable, and if it’s your contracted manufacturer or someone else in the same line of business it might be considered to be a bad faith application.
Trade mark searches
It’s to search for foreign trade marks on the internet, where publicly available databases cover most of the world – including China. The CNIPA also has a facility on its website for searching registered trade marks.
While you will do best to leave searching to professionals, especially as you could spend a lot of time looking for trade marks, there are good reasons for supplementing automated searches with manual ones.
Notifications from the office
The UK trade marks registry does not refuse applications because of what is already on the register – a trade mark that is the same or similar, registered for identical or similar goods or services. Nor does the EUIPO, or many other national offices. China (like the US Patent and Trademark Office) does, which relieves trade mark owners of some of the burden of policing applications that conflict with their own trade marks.
UK trade mark owners will be accustomed to being notified by the registry when a conflicting application is received, alerting the owner of the earlier trade mark to the possible need to oppose the application. China is not an opposition-based system, and while the fact that the office will refuse applications gives protection to the owners of earlier rights, they still need to maintain a watch to pick up applications as they are advertised prior to registration.
UK businesses will also find that the approach to classification of goods and services in the Chinese trade mark system is unfamiliar. Although China, like the UK and most of the world, uses the Nice Classification, it overlays it with a detailed sub-classification system which is applied quite rigidly when questions of similarity of goods or services come up. This could lead to conflicting applications being accepted by the Chinese office, so opposition may still be necessary to protect an existing registered trade mark.
What can you do if someone has already registered your trade mark in China?
Chinese trade mark law gives strong protection to well-known trade marks, whether registered there or not, and you might be able to assert your rights against a local business that has registered your trade mark if it qualifies as well-known. If your agent or representative applies to register your trade mark, you will be able to take action to prevent it from being registered, and there is also special protection where the applicant has or had a business relationship with the ‘proper’ owner of the trade mark.
If Chinese law gives you a remedy in this situation, it will be a matter of going through the procedures to cancel the registration. Foreign businesses are often tempted to reach a financial settlement with the registrant – but this can just encourage squatting, and the CNIPA may (and does) refuse to record an assignment if the trade mark was obtained in bad faith to start with.
What are your legal options if someone has infringed your trade mark rights in China?
There are four options for trade mark owners seeking to enforce their rights in the PRC. In addition to civil litigation – suing for infringement in the civil courts, a trade mark owner may make a criminal complaint to the local Public Security Bureau or the People’s Procuratorate, though (as in the UK) criminal offences are largely confined to counterfeiting and this form of enforcement is generally for big cases. They may also register their trade mark with the Chinese customs authorities, which will not only block imports of infringing goods but also intercept exports, which can be very useful to trade mark owners. Although trade mark owners will have to work hard to keep the customs authorities informed of the activities of infringers to make this effective.
What evidence do you need to provide to prove trade mark infringement in China?
China has a civil law system, so the courts go about infringement actions very differently from the way the English courts do. It is very important to ensure that as much evidence as possible is collected and presented to the court, and there is no equivalent of the English disclosure process. In many cases, an evidence preservation order will be important so the court can raid the defendant’s premises to secure evidence, and strong evidence that the infringement is taking place will be needed before the court will take this step.
The trade mark owner will probably have to produce a registration certificate to show that they own the trade mark or marks concerned.
Enforcement of trade mark rights in China
The Chinese courts have a similar range of powers to those in England, and can grant injunctions, award damages and order delivery up and destruction of infringing items. Interim injunctions are available, but rarely granted. Cases generally come to trial six to twelve months after proceedings are started, but the trial is likely to take only half a day, perhaps twice that.
Summary
China has a reputation for trade mark infringement and counterfeiting, so western businesses will be cautious about entering into agreements with Chinese partners. There are many sources of advice and assistance, and a large volume of helpful material on Chinese trade mark law and enforcement and other aspects of doing business there. Through our network of professional contacts, we can help you minimise the risks of doing business in China where so many processes are different from what’s familiar to you. The starting point, though, will always be a trade mark registered in China.
