China: 3 Takeaways From Michael Jordan's Chinese Supreme Court Trademark Victory For Companies Doing Business In China

Michael Jordan, arguably the greatest and most well-known professional basketball player of all time, spent much of his time on the court defying the laws of gravity, but his defying of the odds in his trademark battles in China may be even more surprising. Despite his fame and global notoriety, Jordan has been unsuccessfully battling the Chinese court system for years (and had lost all fights until recently) for the right to use his name, JORDAN, in Chinese characters in China. In fact, a Chinese sports company has been using the name JORDAN, in Chinese characters, for years and has successfully built up a multi-million dollar footwear empire in China.

Jordan and his team launched legal battles in 2012 and their resiliency finally paid off. Just last week, the Chinese Supreme Court handed down its decision, overturning Jordan's defeats at the lower courts, and handing Jordan a (partial) victory. And while the victory may not have been as dramatic as sinking the Utah Jazz with a jumper over Bryon Russell, Jordan's seemingly improbable victory in this case carries with it a number of valuable take-aways that any company should consider when expanding into China.

So... What Exactly Happened?

In short, for the past 15 years, Jordan, the six-time NBA champion, five-time NBA MVP, and fourteen-time All-Star, has not owned the rights to the name Jordan (in Chinese characters) in China. Why not? Because Qiaodan Sports (a Chinese sportswear company headquartered in southeastern China) was first to obtain a registered trademark for the name Jordan in Chinese characters as early as 2001. Qiao-Dan may look and sound alien to non-Chinese speakers, but it is relevant to this legal saga, because it is the Chinese transliteration for the English word: "Jordan." If you say "Qiao-Dan" to a Chinese native speaker, he or she recognizes that as referring to JORDAN in English. And Qiaodan Sports' registration in 2001 of Qiaodan was just the beginning. Over the next decade Qiaodan Sports would register 80 trademarks relating to all aspects of the "Air Jordan" brand, including logos, which Jordan and Nike created and built during the late 1980s and 1990s.

Here are the relevant timelines:

  • 1990s: Nike expanded the Air Jordan brand to China; only the English name JORDAN was registered. It did not register the Chinese characters or phonetics for JORDAN.
  • 2001 – 2003: Qiaodan Sports obtained trademark registrations for (JORDAN in Chinese characters) and.
  • 2002 – 2007: Qiaodan filed 8 more trademarks—some selective ones are outlined below. Nike either failed to oppose these marks or decided not to pursue appeals with the Chinese courts.
  • Pictures of Qiaodan Sports' Stores 2012 – 2013: At this point, Qiaodan Sports owned close to 80 registrations, all of which related to the real Jordan. Although most of these registrations were clearly copies, Qiaodan Sports had been consistently using these marks for over 10 years. In fact, during the decade, Qiaodan Sports was successful in building a sports apparel empire in China—owning more than 5,700 stores across China in 2015; its annual sales in the same year reached RMB 3 trillion, roughly $500 million U.S. dollars. Qiaodan Sports' trademark registrations had also slipped by the five-year invalidation period, during which it would have been a lot easier (and cheaper) for Jordan to challenge the trademark registrations.
  • 2012 – 2015: The real Jordan from the United States started actions to cancel Qiaodan Sports' trademarks in China; he lost. Jordan went on to initiate 78 appeals and lawsuits with China's Trademark Appeal Board, Beijing First Intermediate Courts, and Beijing High People's Court. Jordan lost all of them.
  • 2016: The Chinese Supreme People's Court (similar to the Supreme Court in the US) accepted Jordan's appeal. On December 8, the Court supported 3 out of 10 appeals filed by Jordan, and denied 7 out of 10. The Supreme Court ruled that Jordan enjoys personal name rights over the Chinese characters for QIAO-DAN (the 3 wins); however, the Supreme Court denied Jordan's rights in the corresponding Chinese phonetics for JORDAN (the 7 losses).

Picture of Qiaodan sports store

Why Did Nike and Jordan Lose (prior to 2016)?

To the average person with no knowledge of the Chinese IP system, this case may seem outrageous. How could a Chinese company essentially hijack the persona of the most famous basketball player on the planet and get away with it for over a decade? The answer lies, in part, with the trademark system in China. Unlike in the U.S., the Chinese trademark system is a first-to-file system. This means rights are based almost exclusively on registrations, except in some cases in which a senior party (i.e., the first to "use" the mark) can convince the courts that their marks should be recognized as "famous" (a very high threshold to establish in China). It does not matter if the senior party has been using the mark for a while; if a third party—including a disgruntled employee or a Chinese distributor—is successful in registering the mark in China first, then this third party has the right to use the mark and the senior party does not (or the senior party would have a very difficult time fighting expensive battles to get the rights back). And that is when the trouble often begins for the senior party. This third party can then (and most likely will) allege that the senior party is now an infringer (yes, an infringer of its own brand). The third party can even ask the local officials and policemen in China to shut down the senior party's production lines and seize the allegedly infringing products.

This begs a second question—how in the world was Jordan not recognized as "famous" in China by the Chinese courts? The answer—that a brand may be commercially well-known in China, does not mean it will be legally recognized by the courts as a well-known trademark in China. In fact, the question of whether a trademark has achieved "well-known" or "famous" status in China has been a sensitive topic for years, because it has been tremendously difficult for western brands to achieve such status. Making matters worse is the fact that unknown Chinese brands often receive such a coveted status in China. In addition, notoriety of a trademark around the world carries little to no weight before Chinese courts. Only fame inside China, among the relevant Chinese public, matters. And as discussed above, even that standard is nearly impossible for western companies to meet. For these reasons, it is a much safer (and cheaper) approach for international companies to file early and rely on prior trademark rights, rather than hoping to rely on a trademark achieving "well-known" or "famous" status.

Most western companies now understand the Chinese trademark system and are typically shrewd enough to register their English brands when entering the Chinese market. However, what's often forgotten, or deemed less important, are their Chinese brands. And that can lead to disaster. The Chinese market will create a name for the western brand over time, even though the name has not been authorized by the company. If a third party then obtains a trademark registration on this name, then, as discussed above, the western brand will be at risk of being perceived as an infringer of its own Chinese brand—in fact, New Balance learned this lesson the hard way.

Creating a Chinese name, however, is not as simple as putting the English name in Google Translation and picking out the characters. A Chinese brand can be created in any of the following ways: (1) Translation (such as "Apple"); (2) Transliteration (such as "Google"); (3) Concept (BMW's Chinese name literally means "treasure horse"); (4) Nickname (created by media/consumers: famous example, "Viagra" is known as "Great Brother" in Chinese); (5) Others (e.g., based on trademark record filed with the Chinese government; usually not great brand names).

In the Jordan vs. Qiaodan case, the Chinese name was created based on transliteration. While this Qiao-Dan name enjoys high popularity in China and is (almost exclusively) associated with the real Jordan, Nike/Jordan did not have senior trademark registrations over "QIAODAN" (the phonetics in English) and the "Qiao-Dan" Chinese characters. Because in China the first registration wins, Jordan lost simply because Qiaodan Sports registered his name first at the Chinese Trademark Office. Quite simply, while Jordan was one of the fastest on the basketball court, Qiaodan Sports was faster before the Chinese trademark office. Qiaodan Sports beat Nike and Jordan to it.

The Supreme Court Win on December 8, 2016

China's Supreme Court accepted Jordan's appeal, held a public hearing in April 2016, and publicly announced its decision on December 8, 2016. And as discussed above, Jordan scored a partial victory, seemingly against the odds based on the last decade of loss after loss, This is the final word from China's top court: Michael Jordan enjoys rights over JORDAN in Chinese characters; however, Michael Jordan does not enjoy senior rights over the phonetics for JORDAN.

It might be seen as a bizarre decision because JORDAN in Chinese characters is the same thing as its phonetics: Qiao Dan. Nevertheless, it is still a great win for Jordan and his team for the following reasons:

  • Characters are the more popular form of use than phonetics; among the two, Jordan won the more important one.
  • Qiaodan Sports' bad faith was recognized by the Chinese Supreme Court (it also owns trademark registration for the silhouette logo, famous jersey number "23," and the names of Jordan's two sons- both in English and Chinese characters!). This bad faith recognition should be helpful for Jordan to push for good decisions in his future challenges against Qiaodan Sports' trademark registrations among the lower courts.
  • Publicity—This is certainly a great (and must needed) boost of confidence for western brand owners; we have seen great brands lose significant trademark disputes in China in recent years including Apple's iPhone and New Balance.

However, this is by no means a slam-dunk win for Jordan. Qiaodan Sports still owns the majority of the registrations (including the jumpman silhouette) and it would still be difficult to cancel these registrations, in part, because the registrations are more than five years old. More importantly, Qiaodan Sports, a known infringer, has successfully built a footwear empire in China by trading on the goodwill associated (partially or entirely) with Jordan's brand power. Nevertheless, after a decade of unsuccessful legal battles, gaining the support of China's top court on some important trademarks could lead to more positive decisions for Jordan and his team relating to other trademark disputes in China. At the very least, through this win, Jordan and Nike have formally announced to Chinese consumers that the company "Jordan Sports" has no connection to either the real Jordan or Nike. The message will be heard loud and clear.

Three Takeaways from the Case

Infringers/trademark squatters like Qiaodan Sports are inevitable; but the lawsuit(s) are avoidable. Here are three important lessons to bear in mind before entering in the Chinese market or expanding a business already operating in China:

  1. First registration wins. The Chinese trademark system very rarely recognizes common law rights (i.e., prior use without registration). If you're using a mark in China but have not registered it, you should register immediately. As discussed above, the system is entirely different from that of the United States, and prior use is not a reasonable protection against infringement.
  2. Register your Chinese name(s). If you do not have a Chinese name, you should create one or monitor the market to see if one has begun to gain notoriety in the marketplace. Pay attention to multiple names, not just one; it is not uncommon for a western brand to have multiple Chinese names/brands in Asia. For example, a company could have three different names in Mainland China, and two additional and entirely separate names in Hong Kong and Taiwan. Register popular names for defensive purposes, but at the same time, educate the market and direct consumers to your company's primary (chosen) Chinese name.
  3. Remember the Five Year Rule. Even though the likelihood of success in trademark oppositions is still low in China, brand owners should still pursue oppositions where appropriate and / or even invalidation actions within the first five years of the registration of the infringing mark. China's Trademark Law has undergone three major revisions in 1993, 2001 and 2013; the new law is, relatively speaking, more helpful for brand owners to cancel infringing registrations.

Originally printed in SportTechie on December 15, 2016. This article is for informational purposes, is not intended to constitute legal advice, and may be considered advertising under applicable state laws. This article is only the opinion of the authors and is not attributable to Finnegan, Henderson, Farabow, Garrett & Dunner, LLP, or the firm's clients.

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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