With the rise in economic prosperity in China, many brand owners are keen to expand into this market. Rights in a trade mark in China are acquired solely through registration so it is essential for brand owners to be the "first to file" their mark in China. Prior use by the legitimate brand owner, by itself, will not provide a basis for taking action against third party use or registration of a mark.
Chivas Brothers, the makers of Chivas Regal whisky came up against this problem when they were unable to prove that the CHIVAS REGAL mark was sufficiently well-known in China to stop the use and registration of the mark by a third party for goods in a different class from that registered by the brand owner.
Sub-classification in China
Filing for its usual list of goods and services in China may not provide a trade mark owner with adequate protection due to the sub-classification system in operation in China. Whilst China broadly follows the Nice Classification system, brand owners should be aware that under local practice goods and services are further broken down into sub categories within each class. Unwary trade mark owners may be caught out by the Chinese sub-classification system as examination of the similarity between goods and services does not necessarily reflect practice elsewhere in the world.
An item that falls into one sub-class will not be deemed similar to an item which is listed in a different sub-class. This is so even where both items fall within the same Nice class and where similarities may be routinely recognised in other jurisdictions. The China Trade Mark Office ("CTMO") will automatically deem items within the same sub-class similar rather than considering whether this is so commercially and practically.
If brand owners are not quick off the mark "brand pirates" may take advantage of the "first to file" system in China by registering the brand owner's mark and blocking a later legitimate application for registration of the mark. Brand owners then may be faced with long, expensive and uncertain legal proceedings to have the earlier registration cancelled or alternatively the unpalatable option of paying off the "brand pirate" in return for an assignment of its registration.
A further situation may arise where a trade mark owner is unable to oppose registration of its brand by a third party within a sub-class that the legitimate owner may have overlooked registering.
Supply chain issues for exports
Brand owners who manufacture in China but who export overseas rather than marketing locally may also be caught out if a third party registers the brand with Chinese customs. Then the brand owner's legitimate goods bearing a mark which has been pirated may be intercepted by the authorities. Getting the goods released can be a long and difficult process, giving the "brand pirate" trade mark owner the opportunity to effectively hold the mark to ransom, knowing a brand owner will meet its financial demands in order to avoid severe commercial implications if it cannot secure early release of its goods.
Translations or Transliterations
A trade mark owner should also consider registering a local language version of its mark. A brand owner may choose to adopt the direct Chinese translation of the words that comprise the mark or it could opt for an interpretation of the mark in Chinese which sounds similar to the way the mark is pronounced in English. It may be possible to choose characters which promote the brand or otherwise have positive connotations. There can be many different Chinese characters which have the same pronunciation which means an English word may have many different Chinese transliterations so seeking local advice is recommended when selecting the appropriate version.
Hermès, another seemingly well-known brand, was unable to stop the registration of a Chinese version of its name which was pronounced in the same way as the Chinese version of the mark that it has been using and which shared very similar characters. This was because it was not the first to file a Chinese version and it could not show that the brand had become well-known in China prior to the rogue registration and despite having a pre-existing English-language registration in China.
Prevention is better than cure
The key to successful brand protection in China is securing early registration and filling any potential gaps before they are exploited by unscrupulous third parties. It is also important to consider that Taiwan, Hong Kong and Macau are not covered by a Chinese trade mark registration. They are separate registries and will require separate registration.
Any businesses thinking of expanding into China, either in terms of sales in this market or by locating manufacturing operations there, should take immediate steps to apply for registration of the trade mark in all relevant sub-classes to pre-empt any bad faith registrations.
Owners of existing registrations should consider whether there are any gaps in their protection and all brand owners should undertake regular audits to take into account potential new product lines or services.
One strategy is to obtain registration of at least one item listed in each sub-class under a particular class of interest. If budgetary constraints make this difficult, a trade mark applicant should carefully consider the type of goods and services it offers, is likely to offer in the future or which it would wish to block and tailor its specification accordingly. Trade mark owners should bear in mind that registrations become vulnerable to challenge for non-use after three years but the risk of challenge may be outweighed by the benefit of a broad registration deterring would-be trade mark hi-jackers.
Also if a brand owner is trying to avoid rejection on the basis of an earlier mark that has been identified through searches, for example, it may avoid filing in certain sub-classes so that an automatic objection is not raised by the CTMO.
With the implementation of new trade mark legislation in May 2014, China has taken steps to bring its trade mark protection in line with practice elsewhere. However, much will depend on interpretation by the courts so this alone will not prevent illegitimate exploitation of brands. Therefore, proactive steps should be taken by trade mark owners to protect their brands in China.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.