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How to protection your trademark in China

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Growing global trade in pirated and counterfeit goods threatens America's innovation economy, the competitiveness of our leading companies and small manufacturers, and the livelihoods of their workers. Bogus products - from CDs, DVDs, software and watches to electronic equipment, clothing, processed foods, consumer products, and auto parts - are estimated to account for up to seven percent of global trade and cost legitimate rights holders around the world billions of dollars annually.

 

While Chinese Intellectual Property laws have seen considerable improvements over the years, they can do little to supplement the lack of initiative on behalf of businesses that fail to timely register their trademark rights. The most effective protection that trademark holders can achieve over their rights begins by exercising proper diligence and care. Being able to take full advantage of the possibilities offered by the legal framework governing this discipline in order to achieve the most adequate level of security is based upon this fundamental assumption. This is a rule valid worldwide and China is most certainly not the exception. However, a sad series of common misperceptions often distort this reality.

With this in mind, this article delves into some of the fundamentals of securing trademark protection in the country.

China’s Trademark Law was first adopted in 1982 and subsequently revised in 1993 and 2001. The current Trademark Law went into effect in October 2001, with implementing regulations taking effect on September 15, 2002. The new Trademark Law extended registration to collective marks, certification marks and three-dimensional symbols, as required by TRIPS. China joined the Madrid Protocol in 1989, which requires reciprocal trademark registration for member countries, which now include the United States. China has a ‘first-to-file’ system that requires no evidence of prior use or ownership, leaving registration of popular foreign marks open to third parties. However, the China trademark Office has cancelled Chinese trademarks that were unfairly registered by local Chinese agents or customers of foreign companies. Foreign companies seeking to distribute their products in China are advised to register their marks and/or logos with the China trademark Office. Further, foreign companies should register appropriate Internet domain names and Chinese language versions of their trademarks. As with patent registration, foreign parties must use the services of approved Chinese agents when submitting the trademark application. However, foreign attorneys or the Chinese agents may prepare the application. Recent amendments to the Implementing Regulations of the Trademark Law allow local branches or subsidiaries of foreign companies to register trademarks directly without use of a Chinese agent.

It is important to note from the outset that China essentially follows standard international practice in terms of the cost, the complexity, and the steps entailed in securing trademark protection and registration. It is in no small part thanks to China's participation and accession to the World Trade Organization. There are certainly a few particularities that are not present in other countries --particularly Western ones-, but most negative can be easily overcome with adequate preparation and, most importantly, having well-versed local counsel.

Registration is naturally the first and most basic step that needs to be undertaken. Nevertheless, it never ceases to amaze how foreign entities initially neglect this crucial aspect while misguided by fabled notions that wrongly override their common business sense. In fact, many -if not most- of the best practices that guide business decisions in the rest of the world apply equally to China. No emphasis can be spared in highlighting that this is the key to overcoming some of the obstacles in the field.

Wisdom accrued through past experiences dictates that the ideal time to proceed with registration is even before entering the Mainland's market. It is best to begin as early as possible; a philosophy underlined by the fact that the mere use or adoption of a trademark in connection with a particular commercial activity does not grant the holder exclusive rights or a priority for their acquisition.

Indeed, China uses a "first-to-file" system, meaning that under most circumstances a prior registrant's claim is more likely to succeed over that of a prior user. There are many tales of competitors or sadly even employees or local trade partners that have come to realize that this is a fact that can be used to leverage, take advantage of, or pressure foreign entities that have not proceeded to timely address the necessity of securing their trademark rights. This is not the case, however, for well-known marks thanks to the extended privileges granted to them under the Paris Convention.

REGISTRATION WITH CHINESE CHARACTERISTICS

While beginning the process of registration is a positive first step in the right track to commence a successful trademark enforcement strategy, it is important to consider that branding and localization not only play an important role, but also are a necessity to account for the cultural and practical considerations that arise due to the language barrier.

Some of the most successful cases of entities conducting business in China are tied to masterful local branding. Take for instance the case of the "Coca-Cola" or "Pepsi" trademarks. Despite the language differences, they have cleverly managed to phonetically tie their valuable local and global brands, while also giving Chinese consumers a meaning that they can relate to in their own language. Respectively, both trademarks arguably sound somewhat similar in Chinese and Western pronunciations, thus being able to take advantage of their associated worldwide goodwill, but also through a clever play of words- adopt a completely new meaning when written in Chinese characters, which makes them far more appealing locally.

While these may be extreme examples in the sense that considerable branding effort was undertaken by the owners to come up with an optimal marketing strategy, they serve to exemplify a basic fact when it comes to Chinese trademarks. That is, most consumers have difficulty reading or understanding the Latin alphabet. This can be overcome by employing the services of a branding agency or the assistance of local counsel fluent in the language to help adapt the mark and the name of the owner to the market.

However, it should be noted that the Chinese Trademarks Office can register marks written both in the Latin alphabet and in Chinese characters. In fact, a single application can cover both instances. However, to ensure that the rights holder gets the broadest possible scope of protection, it is advisable to secure each registration in as many forms and variations as deemed convenient. Of course, this entails additional work when applying for registration and during the process of conducting searches to clear the mark for availability, but not doing this may entail the risk of crippling the registration's effectiveness.

While obtaining the corresponding registration is as simple as in most jurisdictions, a not-so-desirable characteristic of the Chinese process is its duration. Obtaining approval can take several years under normal conditions. However, this is no cause to despair, as senior applicants are granted protection against junior applicants for conflicting trademarks as of the date of filing, provided that all substantive requirements for registration are complied with.

THE BORDERS OF PROTECTION

One final fact that should be noted, while not strictly related to the registration of trademarks rights in China, but it does have significant importance over their enforcement, is that customs authorities have been empowered with their own monitoring system to help prevent the export of counterfeited goods. Trademark owners, provided they are registered in China, can now apply for protection of their trademark rights directly at the borders, by having customs agents actively check for potentially infringing exports. Product samples, packaging and even suspected instances of piracy can be submitted before their consideration, which causes them to, ex officio, take measures to curb and stop these kinds of practices when detected.

Simple cares such as the ones mentioned in this article can help prevent some common pitfalls when entering the Chinese market. In the trademarks field, many problems can be avoided by taking simple precautionary measures that go a long way in avoiding the need to engage in costly and uncertain litigation.

Trademark Protection in China

Like the United States, China recognizes trademark protection for marks that are distinctive. A distinctive mark is one that is not generic and that does not refer to the quality, functionality, or features of the good. If a mark is "distinct" and does not conflict with any other prior registration, it can be provided protection in China. Unlike the United States, China does not recognize trademark protection for trade dress or the shape of a product.

Governmental Administration

The Chinese Trademark Office ("CTO") is responsible for registration and enforcement of trademarks in China. Decisions of the CTO are reviewable by the Trademark Review and Adjudication Board ("TRAB"). The CTO and the TRAB are under the jurisdiction of the State Administration on Industry and Commerce ("SAIC").


 

The Application Process

A Chinese trademark application can be filed by an individual or an entity. However, as with patents in China, if the application is being made by a foreign individual or entity, that applicant must use the services of a registered Chinese agent to file the application. The trademark application must be made in Chinese, and any supporting documents must be translated into Chinese. In addition to information related to the exact mark for which the applicant seeks protection, a trademark application must provide an explanation of the type of goods to which that trademark will apply.

Upon submission of a trademark application, the CTO will assign it a filing date. The filing date is important because, unlike the United States, China is a first-to-file country. This means that the first applicant for trademark protection is provided priority over all other parties, including parties that have used the trademark in the marketplace prior to the filing date. The only situation in which a party using the trademark first is given priority is when two applications are received on the same day for similar trademarks. In that instance, the CTO will grant priority to the trademark that was used first in the marketplace.

Once the CTO concludes that an application includes all required information, that the application fees have been paid, and that the mark meets the distinctiveness requirement, the CTO will issue a trademark registration number for the mark together with a Notice of Acceptance of Application, which is a preliminary approval of the trademark. The trademark then will be published in the Trademark Gazette. Any party wishing to object to issuance of a trademark on the published mark must submit written objection to the preliminary approval within three months after the date of first publication of the preliminary approval in the Gazette. Upon receipt of an objection, the CTO will provide the applicant with a copy of the objection. The applicant then has 30 days to provide a written response. The CTO reviews the objection and response, and then provides both parties with its decision. Either party then may appeal the CTO's decision to the TRAB.

Approval and Use of a Trademark in China

If no objection is received to the preliminary approval, or if the objection is denied, the trademark will be approved and will be recorded on the Trademark Register. As in the United States, the applicant then is provided with a Certificate of Trademark Registration. The date of registration, which is important for priority issues, is the date that the application was filed with the CTO.

A trademark in China is valid for ten years from the date of registration. Within the six-month period prior to the date the trademark is set to expire, the trademark holder may apply for an additional ten-year extension.

As in the United States, a trademark may be assigned or licensed. An assignment of a trademark must be filed with the CTO. Unlike in the United States, a license agreement must be submitted to the CTO within three months after the license agreement is made. Failure to submit a license agreement to the CTO may subject the trademark holder to monetary penalties and cancellation of the trademark.

Well-Known Trademarks

One unique concept recognized in China is the concept of a "well known trademark." The CTO can deny an application for a trademark and/or can cancel a registered trademark if it is shown that the mark is a copy of a well-known trademark owned by another entity. In addition, the owner of a trademark can apply for certification from the CTO that its mark is a well known trademark. When determining whether a mark is a well-known trademark, the CTO considers: (1) how well the mark is known by the public; (2) the duration of the use of the mark; (3) how long and how much the mark has been used in advertising and other forms of marketing; and (4) whether the mark has been determined to be a well-known mark in other jurisdictions. If the CTO determines that a mark is well-known, that certification is good for three years, and the holder can bar others from registering identical or confusingly similar trademarks.

The recognition of well-known trademarks in China is another example of China's effort to stop piracy and counterfeiting. Despite China's efforts, however, it does not seem that the CTO, the TRAB, or the Chinese courts have fully accepted the concept. Recently, in connection with a challenge by Ferrari of an application by a Chinese company for registration of a trademark that was similar to Ferrari's running horse graphic and the use of the name Ferrari, the Intermediate People's Court in Beijing ruled that Ferrari's internationally recognized graphic of a running horse and the name Ferrari were not well-known trademarks. In determining that Ferrari and the running horse graphic were not well-known trademarks, the Court held that there was not sufficient evidence that the public in China widely recognized the trademark. The Court made this conclusion despite the fact that evidence was provided to show that the running horse and Ferrari trademarks were widely recognized throughout the world.

Enforcement

The holder of a trademark may seek enforcement of its trademark rights either administratively through the SAIC or judicially through the courts.

If it is shown that a party is using a registered trademark or is using a confusingly similar trademark, the SAIC can provide the following administrative remedies: order the infringing party to cease and desist; confiscate and destroy the goods and/or advertising materials using the infringing trademark; impose monetary fines on the infringing party; or confiscate and destroy the tools and molds used to make the infringing goods.

A party also may seek cancellation of an infringing trademark within five years after the date of registration of the infringing trademark. Cancellation of a trademark can be granted on any of the following grounds: the trademark is a copy of, or is confusingly similar to, a well-known trademark; the trademark holder has abandoned use of the trademark; the trademark is being used with inferior goods; the trademark holder has modified the trademark without proper notice to the CTO; or the trademark has been assigned to another party without approval of the CTO. If the trademark is cancelled, the trademark holder can appeal the decision to the TRAB.

Similar remedies can be sought from the Chinese courts. Recently, Chinese courts have been given the power to award injunctive relief to trademark holders. Accordingly, as in the United States, a trademark holder may seek equitable relief to stop infringing conduct. The trademark holder also may seek monetary relief consisting of disgorgement of the profits or benefits from the infringing party or damages related to the economic harm caused to the trademark holder. If damages are difficult to prove, a court also can award statutory damages.

Summary

While some aspects of trademark protection in China are the same as those in the United States, some aspects nevertheless are different. These differences need to be considered when seeking trademark protection in China.

 
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