Intellectual property rights are notoriously difficult to
navigate in China. Understanding how trademark protection works in
the country is vital to safeguard your corporate reputation and
Understanding how trademark protection works in China is vital
to prevent damage to your corporate reputation and brand. The
country's intellectual property (IP) rights are notoriously
difficult to navigate, and the incredible scope of China's IP
violations are well known around the world.
The International AntiCounterfeiting Coalition (IACC) identified
China as the "global hub of counterfeiting" in its 2016 Special 301 Review. Customs seizure
statistics in the United States and the European Union have
consistently identified China as the primary source of counterfeit
and pirated goods intercepted at their respective borders. From the
rampant ripping off of luxury goods to DVDs and computer software;
Chinese counterfeiting reportedly costs foreign firms an estimated
billion a year in lost profits.
Despite this proliferation of knock-offs originating from the
country, China itself ranks as the fifth most difficult
jurisdiction for multinationals to stay compliant with corporate
regulation and legislation. This is according to
TMF Group's Global Benchmark Complexity Index 2015.
Alongside issues of trademark protection is the country's
complex structure with numerous provinces; each with separate
regulatory regimes. A range of dialects also make it difficult for
foreign companies to do business in China.
"A common oversight by multinationals entering the Chinese
market is to assume the rights of their trademarks registered in
some common law countries could also be protected in China.
However, their trademarks can only be protected only if they have
been registered in China itself." says Thun Lee, Head of TMF
"We had one such company in the electronics industry, that
experienced various challenges when they decided to establish their
partner and distribution network in China. Having never
manufactured or sold their products in Asia before, our client
found out that an array of their electronic components with
proprietary design were already available and distributed widely in
the local market through non-authorised distributors, who in turn
bought these components from errant Chinese manufacturers. Not only
were there serious infringement considerations, our client also
faced reputation and brand risk in case such counterfeits had
Lee adds that "Companies entering the Chinese market also
frequently underestimate the complexities and costs that arise to
which IP infringements are contested and enforced. Therefore,
protecting all forms of intellectual property is critical when
establishing operations in China, regardless of business models and
While China is a challenging jurisdiction for a multinational
company looking to establish, steps are being taken to address
this. Wandy Chan, Head of East China at TMF Group says "Last
year, China simplified the procedure for company registrations,
expatriate work visas and annual compliance to encourage investment
and commercial businesses. As these rule changes take effect, we
expect to see an improvement in the number of foreign investors
looking to set up operations in the country."
And companies outside China are cracking down – where they
can – to protect their brands' reputations and claw back
sales, with many pursuing legal action.
Whether you want to set up in China or just streamline your
Chinese operations, understanding local regulations and trademark
protection can help mitigate the risk of noncompliance, and protect
your corporate reputation and brand.
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.
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