One of the most difficult issues faced by any company selling its products or services in China is how to protect them against counterfeiting. Some recent cases have highlighted the progress China has been making in the field of enforcement of trademarks as well as some of the problems still being encountered. In particular, they throw light on the possibility of enforcing trademarks through administrative action as opposed to through the court system as well as some of the shortcomings of this alternative method of enforcement.
Recent Infringement Cases
2004 saw the prosecution of 24,000 trademark infringement cases in China. Last year there were three major campaigns against trademark infringement, focusing on food, medicine and foreign related trademarks, well-known trademarks and the forgery of trademarks. We will first review some significant cases of enforcing trademarks through administrative action published by the State Administration for Industry and Commerce ("SAIC") in China. The SAIC’s Trademark Office plays the leading role among government organizations in registering and administering trademarks nationwide, and also guides local administrations of industry and commerce in their pursuit of trademark and counterfeiting cases.
Nike and Adidas
In or around March 2003 a dress manufacturer in Shanghai produced and sold 15,000 garments marked with the labels "Nike" and "Adidas" for a total of Rmb177, 368. The US and German companies who own the Nike and Adidas trademarks, respectively, filed for administrative action with the Shanghai Administration of Industry and Commerce. The action was successful and the infringer faced orders to cease the violation, pay a fine of Rmb180, 000 and have the infringing goods confiscated.
This case involved a company based in Wuxi that used the trademark "Hongda" to market its motorcycle parts. Honda filed for administrative action in January 2003 with the aim of forcing the Wuxi company to cease this activity. The action was ultimately successful and the "Hongda" company was ordered to cease infringement and pay a fine of Rmb300, 000 out of sales of Rmb430, 000 that it had made from the "Hongda" parts.
Mickey Unlimited and Mickey & Co.
Since April 2000, the Shenzhen "Mickey" Industrial Co. had been purchasing or commissioning others to manufacture 7,500 dresses bearing "Mickey Unlimited" or "Mickey & Co." labels. In April 2003, the Shenzhen Administration of Industry and Commerce ordered cessation of these activities, and in addition fined the company Rmb250, 000 out of the total value of the dresses sold of Rmb440, 000 and confiscated the remaining products.
Advantages and Disadvantages of Enforcement by Administrative Action
The advantages of enforcing trademarks through administrative action are that it will be cheaper and quicker to stop trademark infringements than going through the court system.
However, administrative enforcement is not without its disadvantages. Administrative bodies cannot award damages and the penalties are relatively small. Greater reliance must be placed on local officials to conduct themselves properly. The integrity of the officials may give rise to some concern, particularly outside the major cities of Beijing, Shanghai and Guangzhou. Unscrupulous counterfeiters may simply start manufacturing in a different area within China. Enforcement actions taken in China have to jump a number of evidentiary hurdles to succeed. Given the problems, it is of considerable importance to appoint independent reputable lawyers to handle and monitor infringement cases.
Registration of Trademarks in China
Before a foreigner can enforce his/her trademark through the courts or administrative action, the trademark must be registered in China first. With the exception of very well-known trademarks, China does not recognise trademark rights acquired through use. The first person to register a trademark in China is regarded as the owner of that mark. Thus, it is essential for companies contemplating business or actually doing business in China to register their trademarks as soon as possible in order to secure protection of their marks.
Procedures for Trademark Registration
Applications for trademark registration are made in accordance with Articles 19 to 26 of the China’s Trademark Law and the relevant articles in the Implementing Regulations of the Trademark Law. In summary, the relevant procedures are as follows:-
- The class and description of the goods must be entered in the application form according to the prescribed classification system. Currently, China adopts the International Classification System, which classifies goods and services into 34 categories and 8 categories respectively.
- The official trademark registration application form must be completed in Chinese and submitted to the Trademark Office together with other supporting documents, such as power of attorney, other relevant certificates (any document in a foreign language should be accompanied by a Chinese translation) and five copies of the reproductions of the trademark (if colour is claimed, five copies of the colour reproductions of the trademark) and one copy of the black and white design thereof.
- Applications will undergo examination as to form and substance by the Trademark Office in accordance with the Trademark Law.
- Where an application has passed the examination both in form and substance, preliminary approval will be granted and the trademark will be published.
- Any person may, within three months from the date of publication of the trademark, file an opposition against the trademark that has been granted preliminary approval.
- If the Trademark Office approves the application, a certificate of registration will be issued and the trademark will be published. The period of validity of a registered trademark is 10 years, counted from the date of approval.
Unfortunately, the procedure is characterised by short deadlines and the lack of opportunities for formal negotiations with the Trademark Office as to the terms on which a mark may be accepted for registration. Therefore, it is important to seek proper advice before filing the registration application. Moreover, post registration management issues such as maintaining use of a trademark, transfers and renewals must additionally be addressed.
With the PRC government encouraging public dissemination of IP infringement cases, it is clear that China wants to be seen as being tough on infringers of intellectual property rights, particularly since joining the WTO. Thus, registration of trademarks is a simple and essential step towards securing protection.
Experienced Hong Kong and PRC lawyers in our China Business Department can provide advice on PRC trademark registration and enforcement issues. We can also assist clients in selecting a uniform Chinese character trademark which may be used both in the Mandarin-speaking jurisdiction of China and the Cantonese-speaking jurisdiction of Hong Kong. Please contact us if you have any queries.
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.