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Foreign companies entering the Chinese market need to familiarize themselves with its complex trademark regime, which both facilitates protections while also imposing certain unique limitations that brands must work around. China’s trademark regime follows a first-to-file system and so does not recognize international trademarks if they are not registered in the mainland. While China accepts the International Classification of Goods and Services under the 1957 Nice Agreement (updated 2019), it further divides these classes into subclasses.
[Image Source: Istock]
Foreign brands should register their trademark in Chinese characters as well to avoid infringement by rogue businesses. This process is complicated and requires a combination of choosing characters with appropriate meaning and relevance, which also conjure an image suitable to the brand.
Since China only acknowledges trademarks registered within its own jurisdiction, this is a key legal step for foreign companies. If the brand is well-established, it will most likely encounter trademark squatters, counterfeiters, or grey market suppliers. New Balance, the American sports footwear brand, fought against rogue manufacturers and sellers for over two decades before finally winning its trademark rights in China in 2017. It received the highest pay out in damages for a foreign company in China.
Companies that take the risk of operating in China without a registered trademark in the region can easily lose their infringement claims, irrespective of whether they legitimately sell goods in other countries under that brand or even if they manufacture in China to sell elsewhere.
Trademark registration in China is the responsibility of the China National Intellectual Property Administration (CNIPA). Companies without a legal presence in China must appoint a CNIPA-designated trademark agency to act as their intermediary. Foreign companies with a legal presence in China may file directly, but it is still recommended to use the services of a trademark agent.
China follows the Nice Classification system of goods and services for trademark protection but also applies a unique system of subclasses. The protection scope of the trademark in China is then based on the classes and specific subclasses under which it is registered. This generally means that different owners can register the same trademark in different classes, even in different subclasses under the same class, without infringing on each other’s trademark’s rights.
It is important for companies to carefully consider the most appropriate scope of protection for your trademark. This could be limited to the products and services that you currently offer, but it could also include product classes where you plan to expand your product offerings in the future, or even neighbouring product classes to avoid a third party registering your trademark and competing with your own product by confusing consumers. For example, it may be obvious to apply for your trademark under “food product” but you may also want to consider registering your trademark under “health food product” and “processed foods”. Of course, trademark application fees increase with the number of classes included. It is cost prohibitive for the average company to seek comprehensive trademark protection covering all product classes.
No matter how known the applicant’s English- or French-language brand may be in other markets, Chinese consumers will use a Chinese name to identify your product. If the applicant does not create his/her own Chinese-language brand name, Chinese consumers will organically create one for the organization and applicant, which may or may not reflect the brand image the applicant have worked hard to develop.
Foreign companies looking to open flagship stores on Chinese cross-border e-commerce platforms like JD Worldwide and Tmall Global typically only require proof of trademark registration in their country of incorporation. It is nonetheless strongly recommended to register the applicant’s trademark in China to ensure the applicant can operate in China without infringing on a third-party’s trademark and that the applicant has the legal means to enforce his/her right if infringement occurs.
The new Guidelines for Trademark Examination and Trial in China went into effect on 1 January 2022, with the goal of standardising trademark examination and trial procedures and ensuring the uniform execution of related laws. The new document, like the fourth amendment to the Chinese Trademark Law, focuses on bad faith trademark applications while also expanding information on the extension of protection in the communist country utilizing the Madrid system.
Article 4 of the new Trademark Law provides that “malicious trademark applications not intended for use shall be rejected”. This has led to further crackdowns on malicious trademark filings.
In order to implement the revision of the Trademark Law and standardise trademark application and registration, the State Administration for Market Regulation (SAMR) issued Several Provisions on Regulating the Behaviour of Trademark Application and Registration (Order No. 17) in October 2019. These provide specific factors to determine whether a trademark application should be defined as a “bad faith application not intended for use”.
At the beginning of 2021, CNIPA issued the Special Action Plans for Combating Malicious Trademark Squatting, and cracked down on 10 typical types of bad faith trademark applications. These included copies of the names of public figures, well-known works and celebrity names with a high reputation.
Foreign firms entering China should be aware that their trademark in Roman characters will not completely protect them against infringement. The same or similar trademark can be registered in Chinese characters by another business. This is also key to a business’ profitability and image in China. If other firms or the public informally uses your trademark in the locally-spoken language, there are chances of losing customers and diminishing your brand value due to the meaning, the pronunciation, or even the appearance of the Chinese characters.
Author: Tanya Saraswat, a Student of Narsee Monjee Institute of Management Studies (NMIMS), in case of any queries please contact/write back to us via email to email@example.com or at Khurana & Khurana, Advocates and IP Attorney.