Unlike the United States, which is a “first to use” trademark system, many countries, including China, follow a “first to file” trademark system. Meaning whoever files a Chinese trademark application first for a particular trademark and goods/services, which ultimately matures into a trademark registration, is generally considered the legal owner of the registered mark – even if that party had never used the mark in China (or elsewhere). An exception to that rule is if the subject mark is well-known or famous in China; a standard most trademarks cannot satisfy. For that reason, securing trademark registration in China is highly recommended.
Many cases of third parties registering a company’s trademark in China are the result of trademark pirates, those parties seeking to hold the trademarks of others for ransom and, in some cases, third parties planning to actually sell product under the company’s mark.
Even if a company secures Chinese trademark registrations for its relevant marks and goods, the company may still be vulnerable to piracy if it has not adequately protected all categories of goods in a certain international class or category.
Unlike the U.S., for example, the Chinese registration system not only categorizes goods and services in certain international classes (e.g., Class 3 covers cosmetics, Class 12 covers various automotive products and Class 25 covers clothing), China further categorizes goods and services into subclasses (think of it as “buckets” of different but potentially related products). For example, International Class 12 covers 12 different subclasses of goods. Should brand owners register their marks for automotive products A, B, C and D and should those goods fall within only 2 of the 12 subclasses, these brand owners are vulnerable to pirates (and competitors) who may register their marks in the “open” subclasses potentially causing consumer confusion in the marketplace and certainly causing senior management trepidation.
Failure to properly protect your trademarks in China can result in loss of rights, loss of market opportunity and/or many years of costly litigation (4-6+ years) over trademark rights.
Best practices for securing and enforcing trademark rights in China, and seeking to reduce overall future enforcement actions and costs, include the following:
- Audit your trademark portfolio for gaps in protection
- Conduct trademark searches in all classes and subclasses relevant to your business for any barriers to registration based upon third party filings
- Register marks in all available sub-classes, even if the marks are not used for many of the covered goods, to prevent future piracy. Such strategy also preserves rights for future product expansion and licensing (revenue) opportunities.
- Register marks even if 100% of Chinese manufactured products are produced for export, as the registrations permit authorized “use” of marks for manufacture and should avoid pirates from seizing products at customs based upon registering the company’s marks
- File oppositions and cancellations, as necessary, and/or seek purchase of third party filings, to clear out pirates
- Register your brand names early in English, Chinese phonetics and Chinese characters
- Identify products you sell now and which products you plan to sell in 2-5+ years
- Identify economic zones within which company has focused on growth and where majority of sales are derived, which will assist with prioritizing spend concerning trademark infringements and counterfeits
- Set up a trademark watch service and surveillance program
- Secure and gather evidence of use of trademarks for use in enforcement actions
Trademark theft and piracy is an industry in China. Even with the new laws enacted in 2014 to assist Western companies against trademark theft, trademark piracy is, simply put, “running rampant.”
Companies that ignore China and their Chinese trademark rights for whatever reason, perhaps they don’t have plans to move there any time soon, should still be thinking about the future prospect of Chinese business and seek to secure their rights today… before pirates do it for them…