China Trademarks: 12 Resolutions for 2018 (Part Two of Two)

China Trademark RegistrationIn part one of this two-part post, I presented six China trademark resolutions for 2018:

  1. Register the trademarks you are using in China for the products/services you are using.
  2. Register your trademarks in additional classes/subclasses.
  3. Register more trademarks than you are currently using.
  4. Monitor your trademarks.
  5. File non-use cancellations against squatters.
  6. Come up with a Chinese name for your mark and register it.

Now, in part two, I present six more resolutions.

  1. Register similar Chinese names.

As we have written, a foreign company’s Chinese brand name usually falls into one of the following categories:

  1. A direct translation of each word in the name. This is what Microsoft has done: 微软, Chinese characters for “micro” and “soft.”
  2. A transliteration, in which the Chinese characters approximate the sound of the English-language name. This is what Google has done: 谷歌, Chinese characters that make the sounds “gu” and “ge.”
  3. A new name with a positive connotation with no obvious connection to the English-language antecedent. This is what Pfizer has done: 辉瑞, Chinese characters that make the sounds “hui” and “rui” and mean “brilliant and auspicious” (more or less).
  4. A combination of the above. This is what Starbucks has done: 星巴克, the Chinese character for “star” and Chinese characters that make the sounds “ba” and “ke” (“bucks,” more or less).

No matter what method is used, because Chinese has so many homonyms (i.e., characters with the same sound) it is all too easy to come up with alternative Chinese brand names that sound exactly the same but use different characters. The possibilities are even greater when you include characters with similar (but not identical) sounds. And a soundalike mark is good enough for a counterfeiter.

The Chinese Trademark Office (CTMO) is likely to block Chinese brand names that are only one character away from your registered mark and cover the same goods/services. But it’s far from guaranteed they’ll do so. A better approach is to identify the Chinese brand names that are similar enough to yours that you wouldn’t want them to be registered by a third party, and register them yourself before someone else does.

  1. Have your Chinese business partners execute a formal agreement.

Having your Chinese business partners execute (i.e., sign and chop with the company seal) a formal agreement is a good idea for all kinds of reasons, whether that agreement is an OEM agreement, an NNN agreement, a licensing agreement, or otherwise. Such an agreement establishes the basic terms of the business relationship, clarifies the expectations on both sides, and provides a basis for a lawsuit should things go awry. And in the trademark context, a signed, chopped agreement can be the difference between winning and losing when you discover that your former Chinese business partner has filed an application for “your” trademark.

Our agreements always have a separate IP section forbidding the Chinese party from taking any actions to interfere with your IP rights (e.g., filing applications for “your” trademarks or opposing/attempting to invalidate your existing trademarks). Such language, when formally agreed to by a Chinese entity, is relatively easy to enforce, and often will prevent spurious trademark applications in the first place. And if you do need to take action against your former supplier either in court or before the CTMO, having an original signed, chopped agreement in which your Chinese business partner agrees to respect your IP is powerful evidence in your favor.

Needless to say, the time to execute these agreements is at the beginning of the relationship when everyone’s happy – not when your Chinese supplier has proven incompetent or worse and you are no longer on speaking terms.

  1. Keep copies of all documents to/from your Chinese business partner

Many companies still do business in China solely on the basis of purchase orders written in English and English-language emails sent to their Chinese business partners’ personal email account. This arrangement is ideal for the Chinese side and horrible for the foreign side because it creates great ambiguity about both the terms and the Chinese side’s identity, and thereby minimizes their liability. It’s difficult to hold a Chinese company liable when you don’t even know their real name.

In the trademark context, this issue comes up most often when a foreign company learns that their former Chinese business partner has filed an application for “their” trademark. (Typical generic scenario: Chinese manufacturer experiences quality fade; foreign buyer refuses to pay for defective merchandise; quality fade gets worse; foreign buyer stops purchasing altogether; Chinese manufacturer engages Sinosure to collect unpaid money and files trademark applications for the foreign buyer’s marks.)

China actually does a decent job policing bad faith trademark applications from foreign companies’ Chinese business partners. But in order for the CTMO to rule against the Chinese manufacturer who coopted “your” mark, you first need to prove the existence of a business relationship. As described in the previous resolution, the easiest way to do this is with a signed, chopped agreement. Failing that, you need to prove the relationship by circumstantial evidence, and the more original documents you have the better. The best evidence is documents issued by your business partner and bearing their company chop (like an invitation from them for purposes of a business visa), or documents issued by a third party clearly identifying both the foreign buyer and the Chinese party (like shipping or customs documents). Most of the time, foreign buyers don’t pay much attention to the documents from the Chinese side (perhaps because the Chinese side is so cavalier), and so the more documents that you keep on hand, the more likely you’ll have a document that could actually help.

  1. Keep evidence of trademark use in China.

Unlike the US, China does not require affirmative proof of use in commerce to register or maintain a trademark. But you still need to collect and maintain evidence that you are using your trademark in China. Every trademark in China is vulnerable to a non-use cancellation starting three years after the registration date. And with the vast number of trademark applications being filed, more and more existing registrations are being cited as obstacles to new applications, which only increases the chance of a cancellation being filed against your mark.

The CTMO does not pursue non-use cancellations sua sponte; only a third party would file a non-use cancellation against your registration. But it happens all the time, and when it does you need to provide evidence that your trademark has been used in China during the past three years on the covered goods/services, or else your trademark registration will be cancelled.

Evidence can take many forms. If you are actively selling products in China, then proof should be easy: advertisements, packaging, website screenshots, and other publicly available marketing and sales ephemera. If all you do is manufacture in China, then you’ll need to reply on third-party documents that clearly demonstrate your use of the mark in China on the covered products: invoices, shipping documents, quality inspections, customs export declarations, and the like. Photographs (say, from your factory) are helpful to provide context but, standing alone, are usually insufficient to demonstrate use. This is another area where a business relationship evidenced solely by English-language purchase orders and emails to a personal email account are going to come back to haunt you, because neither one is likely to be sufficient evidence of trademark use.

  1. Secure copyright registration for your trademark logo.

Copyright law protects creative works, and many trademarks that are mere standard character marks (aka word marks) do not qualify as creative works because they are too short. However, almost all trademarks expressed as a logo could also be protected by copyright in China. Some practitioners refer to a China trademark registration and a copyright registration together as a “super trademark.” The theory is that because copyright is not governed by the Nice Classification system, a copyright registration applies to all goods and services, and therefore means that no one besides you can ever use your logo for anything.

It doesn’t always work out that easily – and the remedies for copyright infringement aren’t nearly as robust as those for trademark infringement – but a copyright registration can definitely be useful when trying to take down Alibaba listings for fake branded products.

  1. Record your trademarks with customs.

Every year, Chinese customs gets a little better about sussing out counterfeit goods. It’s a massive job, considering how much of the world’s goods (authentic or not) originate in China. Most countries, the US included, only check imported goods for counterfeits. China checks both, and they deserve credit for that.

But they don’t check everything; actually, they hardly check anything at all on their own. And unless your brand is as well known as Nike, your average Chinese customs inspector isn’t going to have any idea whether goods are authentic or not.

Really, the only way to get Chinese customs to pay attention at all is to have a valid trademark registration in China and then record that trademark registration with customs.

This article was written by Matthew Dresden and published on China Law Blog. Original Post: https://www.chinalawblog.com/2018/01/china-trademarks-12-resolutions-for-2018-part-two-of-two.html      

View the original article here.

Matthew Dresden

Matthew focuses on international and China law, with a focus on technology and entertainment law and Chinese transactional and IP work. He represents a wide range of companies, from start-ups to NYSE-traded companies. His work has included matters for film studios, cable channels, film and television production companies, video game developers, magazines, restaurants, wineries, international design firms, product manufacturers, outsourcing companies, and computer hardware and software companies.