Mistakes Brand Owners Make in China

Filing a trademark in China is a tedious and long drawn out process, Imagine your anxiety when you find that you didn’t get it right the first time around. Apple discovered that the other day, to the tune of $3.65 million. A trademark for $3.65 million seems extreme; but it seems a necessary measure to ensure that Apple keeps its iPhone trade mark for mobile phones in China intact.
The question is could Apple have avoided it? The answer is yes. The funny thing is that most corporates have fallen into the same Chinese swamp as Apple. What is not so funny is that they are still fighting it out without having any real solution in sight.

We can understand this, as most of these multinational companies entered the Chinese market nearly a decade ago and it was the time when the complex Chinese legal system and the methods of working with it, was still being honed.
However, have the owners of marks become wise to these nuances? How did Apple end up paying so much? Can we avoid making the same mistake if not others? The questions fly thick and fast. The answers lie below.

1.    First- to – File Jurisdiction:
China follows a first to file system as most companies have discovered to their cost. Most companies think that filing in China is not needed when they manufacture products in China for export and do not cater to the local clientele. This leaves a gap open to counterfeiters or corrupt officials who mostly go ahead and file the same mark first. The China customs department would then block the company’s exports leading mostly, to a costly affair on the part of the company to win back its own brand. As China customs check outgoing goods for IP infringements as well as those entering the country, this happens more often than people think.

Ferrari waged a decade long suit against a company that registered a trade mark with a picture of a horse for clothing in 1995. When Ferrari opposed, saying that consumers would be confused as the trademarks of Ferrari with the horse and the horse graphic alone should enjoy protection as well-known marks; The China Trade Mark Office (CTMO) disagreed, as did the Trademark Review and Appeal Board (TRAB). Consequently it lost having failed to both prove that Ferrari was a well known brand in China and having failed to protect its mark the first time around,

Thinking of setting up your shop in China? Keep in mind that you would also need to file a Chinese trademark and cover all possible, marketable variations of it, apart from your domestic trademark.

2.    Choice of the Right Trademark:
Don’t rush the process. China is the home of many dialects, some of which are Mandarin, Cantonese, Hokkien and Shanghainese.  Most characters in the language share the same sounds making transliteration tricky. Also, as a company you would need to decide whether you wish to cater to a single market comprising of only mainland China or treat mainland China, Hong Kong, Taiwan and Chinese-speaking populations in Southeast Asia as one market. Transliteration would make sure that the brand sounds right when spoken. This is done by closely following the western pronunciation, as most have found out, if you’re not careful it would either carry no meaning or connote a negative meaning to Chinese consumers.

For example; Google decided against the name Gou Gou – Dog Dog which most Chinese were familiar with and opted for the more sophisticated (Gu Ge – Songs of Crops). However it did not meet with much applause from all of its users.
Pfizer filed for the Chinese mark (Wan Ai Ke – a transliteration with no meaning) for its anti-impotence blockbuster drug Viagra. Its consumers called it Wei Ge which also sounds like Viagra but means great man or mighty brother. Guangzhou Welman – a domestic pharmaceutical company moved fast and filed for the trade mark first for its own brand of similar drug. The case is now pending before the TRAB should the TRAB decide in Pfizer’s favor of a cancellation action against Guangzhou Welman, till then a majority of the Chinese market is denied to the drug major.
Tip: Always involve your marketing team, language specialists to keep their finger on the pulse to make sure that the brand name you select is the one that appeals to customers.
Be smart like the Finnish giant – Nokia. If you play your cards right and file without a translation of the mark , you just may come up trumps first. Nokia’s Le Sui Xiang – enjoy happiness any time was a phonetic match to its Comes With Music programme.

3.    Be Aware of the Sub-Classes:
China has its own unique system of subclasses with each of the main classes. It makes things easy for Chinese trademark examiners but makes things complicated for business owners. The risk of finding similar or identical marks filed within the same class is enormous. Hence it is suggested that filing is done on a broad basis in China. Take heed from Apple’s mistake.

Apple failed to file within subclass 0907 (includes phones and mobile phones), this having filed the mark within the class 9 and subclass 0901 (computers and computer software) in 2002. Hanwang Technology seized the chance in 2004 and registered the mark iPhone plus device in subclass 0907. Now Apple has to pay its rivals. Don’t let this happen to be you especially if you are a small to medium business owner, you cannot afford to do so.When you can, adopt the strategy of filing broadly for your brand. It helps that you only need to show Intent –to- Use in China to file a mark. If you can afford it then we suggest you file for products you use, products you might use and (as far as budget allows) for products you might want to block.

Also make sure that the employee or team responsible for such filing knows the right approach to protecting your brand.
As in the case of aircraft manufacturer, Airbus had to oppose a registration of Airbus and (a translation of Airbus) for cocoa products and chocolate cakes. The case was appealed but was unable to cancel the registered mark.

4.    Timely Monitoring of Infringing Marks:
Check up every 3 – 6 months on Chinese marks that look and sound similar to your mark. Do not wait for the mark to be published to check. It would be too late by then , instead check in the registry every 3- 6 months for new applications.
Through regular monitoring of your mark, you can discover if the owner of the potentially infringing trade mark has any intention to cause harm to your brand. When unlikely, call the bluff. When the mark is in use by an established company take steps instantly to avoid dilution of your mark.

5.   Evidence of Market Presence of Brand:
It’s 2 simple points really. Is the mark well known in China? Can you prove it?
Any evidence that points strongly to market renown “when the other company (read Chinese co.) registered its trademark” is a definite weapon in your arsenal. Always have sales receipts, inventories, records of dealings with Customs, marketing materials, advertising used in China, proof of market share and consumer surveys from the time you first started operating in China.

6.    CTMO and TRAB:
Below is a flow chart that elaborates the process of filing a mark in China.

china-trademark-system

It has now cut waiting times for registrations to 18 months. A trademark can be opposed by an individual which can extend the time up to three years before registration in some cases.
Hence the importance of filing first in China cannot be stressed more.
Also, remember that trademark assignments need to be applied for and approved by the CTMO as well as licensing agreements that need to be recorded by them.
And lastly but not the least of all our pointers;

7.    Use of the mark as registered:
Chinese officials are very strict about ensuring that marks should be used as registered. A trademark examiner may view the mark written in capitals versus the mark in cursive as two different marks. If you file the mark as filed in US presuming it to be taken as a standard character mark which is a mark in capital letters on a black and white background, you may find this extremely difficult to enforce. File for your mark exactly as the way you would use it, else you may have a mark on your hands, that you have no use for once registered.
Usage of marks that haven’t been registered or have been registered in a different form than what is in use, have resulted in heavy fines.  Also bear in mind that, however slight a difference there is in your company name, domain name and business cards from each other or from the registered mark, it would dilute the registered mark. Also make sure you have a registered cn domain for your trade mark.
Bottom line: The law is different in every country; Keep in mind language and cultural differences between your nation and others; internal communication is essential to success of a mark and using a strategy that costs more in the beginning than in the end makes money in the long haul.

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