French luxury group Hermès lost its longstanding trade mark dispute in China this February. Back in 1977 Hermès registered the name "Hermès" and its pattern in China, but failed to register the Chinese translation of Hermès. In 1995, a Guangdong based menswear company registered the name "爱玛 仕" (Ai Ma Shi). The problem was that Hermès has been using "爱马" (Ai Ma Shi) as its Chinese name (the same pronunciation with very similar Chinese characters to "爱玛"(Ai Ma Shi), where "玛" and "马" are very similar) and which is also the way the Chinese public pronounces Hermès in Chinese. Hermès has since 1997 been trying to take back ownership of "Ai Ma Shi". However, the Chinese trade mark authorities and Chinese courts ruled against Hermès' claim on the basis that Hermès failed to present evidence proving Hermès was a well-known brand among consumers in mainland China prior to "Ai Ma Shi" being registered by the Guangdong company.

Chivas Regal, the Scotch whiskey brand is also facing a similar situation. In March 2012 a Chinese court ruled against Chivas Regal by permitting a Zhejiang garment maker to use Chivas Regal as a brand for its clothing, on the basis that Chivas Regal had failed to register its trade mark under the relevant clothing class and was also unable to prove its well-known status prior to the Zhejiang maker's registration.

Similar trade mark disputes include pop star Britney Spears and a Chinese clock manufacturer which registered "BRITNEY 布兰 妮" (BRITNEY in Chinese) and NBA legend Michael Jordan and a Chinese sports appliance manufacturer which registered "乔" (Jordan in Chinese, and which is how the Chinese public refers to Michael Jordan), and many others. Companies like Hermès and Chivas Regal are losing the battle against local companies who file trade mark applications for similar sounding names.

The problem of trade mark squatter in China is the direct result of the implementation of a "first to file" trade mark registration system, where the party who files for registration first obtains the trade mark. This is comparatively different from the "first to use" system, where a party filing for a trade mark has to prove that it either has used the mark in business or intends to use the mark for future businesses. Although there are remedies in China for recovering the trade mark from the squatters, it is a long, difficult and uncertain process.

The Hermès case also demonstrates that registration of the English name alone is far from sufficient to protect the brand owner because it is possible that another company may register a Chinese phonetic translation of the English name before the legitimate owner does so.

The following illustrates considerations that a brand owner should be mindful of when filing a trade mark registration in China. For example, if a foreign company intends to sell a gadget in China under the brand name "Hero", it has the following options:

  1. to register the English name "Hero" under a relevant category; and/or
  2. to register Chinese translations of the meaning of the brand name (conceptual translation), such as "英 罗" (Ying Xiong) which translates to "Hero" in the Chinese language; and/or
  3. to register the Chinese phonetic translations, such as "希" (Xi Luo which transliterates to Hero).

It is advisable to adopt a combination of all three options as listed above. In addition, the brand owner may also consider whether to register simplified Chinese characters (which are used as the standard writing script for mainland China and Singapore) and/or traditional Chinese characters (which are used widely in Hong Kong, Macau, Malaysia and Taiwan). The only setback for such a combination of registration is that the costs involved are definitely higher than that of a simple registration of only one or two of the options. However, the risk of damage and the corresponding costs to recover the trade mark may outweigh such registration charges.

Further, it is vital for brand owners to keep proper documentation to support a claim of well-known status prior to squatters' registration. Such evidence should include other trade mark registrations, examples of usage of trade mark, marketing, promotional and advertising materials, consumer surveys and records of money spent on promoting brand awareness. Brand owners that keep good records, and enjoy management continuity may prevail, but if a brand owner is unable to come up with sufficient documentary evidence of prior use, the squatters' rights may prevail.

In summary, brand owners are advised to:

  1. apply for registration as soon as practicable;
  2. register the trade mark in more classes which could potentially be of interest to the company;
  3. keep proper and complete records;
  4. monitor trade mark registers for similar marks; and
  5. be prepared for a lengthy and difficult battle when faced with a squatter.

This update is provided to you for general information and should not be relied upon as legal advice.