Five Things You Need to Know About Trademark Disputes in China

10/22/2014 / John Kvinge and Molly Eichten

1) Even if you aren’t selling in China, you may need to register your trademark

Some companies have chosen not to register their trademarks in China, on the assumption that it is unnecessary if they don’t plan to sell their products in the Chinese marketplace, even though their products are manufactured in China. These same companies have been caught flat-footed when their products are manufactured in China for export and resale elsewhere. There are reports of Chinese custom officials blocking shipments at the border after the Chinese registrant of a trademark lodged a complaint of infringement. Pre-emptive registration would reduce the risk of an untimely and expensive holdup. In addition to registering a trademark in China, companies should consider registering a copyright for any logo designs. Some companies have had success relying on their U.S. copyright in the logo to block registration of their trademark by trademark squatters in China.

2) A database of promotional and sales materials can come in handy

Companies should keep a record (and a copy, if possible) of every advertisement, packaging design, or similar document created to promote their product. This information can be critically important in a trademark opposition proceeding or subsequent lawsuit for trademark infringement, in either an offensive or defensive capacity. Proof of when, where and how you used your trademark is one of the key elements of a case, and it is much easier to establish proof of use where there are clear records of how the mark has been used over the years.

3) Waiting until there is a dispute may prove costly

The aphorism, “a stitch in time saves nine,” is particularly applicable to registration of a trademark abroad. If you are the first party to file for a trademark in China, your application is more likely to be approved, and the cost is minimal. On the other hand, the process of contesting or cancelling a trademark registered by a trademark squatter is extremely expensive, and has no guarantee of success.  Pfizer, Hèrmes, and Chivas Regal were all unsuccessful in lawsuits to limit the use of their trademarks by trademark squatters. The litigation spanned several years, and likely cost hundreds of thousands of dollars, and could have been prevented if the companies had registered their marks in China earlier.

4) Changes to the Chinese trademark law may bring some relief, but also up the stakes

Amendments to the Chinese trademark registration system went into effect in early 2014, and included new requirements intended to reduce trademark squatting by requiring “good faith” of registrants, and creating special protections for “well known marks.”  It remains to be seen how these new rules will be enforced.  However, the law also increased penalties for trademark infringement, putting companies who run afoul of competing registrations at greater risk. The statutory damage cap has been raised to approximately USD $500,000, and the new law allows trademark authorities to confiscate and destroy equipment used to manufacture infringing goods. 

5) Trademark registration is a small cost with big benefits

Hiring an experienced attorney to prepare a foreign trademark application doesn’t have to break the bank. The cost is similar to a United States trademark registration. If you have already registered a trademark in the United States, the process of registering abroad is even easier. Pre-emptively registering your trademark in China protects the brand you’ve worked hard to establish in the United States from being copied or registered without your permission in the world’s most populous country.