South Africa: Lessons From China

Last Updated: 17 June 2014
Article by Manisha Bugwandeen-Doorasamy

Most Read Contributor in South Africa, September 2016

Many South African businesses are finding it necessary to become acquainted with Chinese trade mark law and practice. One reason for this is that China is a market that many SA companies want to access. This requires them to make sure that they can use their trade marks in China without infringing the rights of other companies. In other words, they need to do trade mark searching. Having established that their trade marks are available for use, the SA companies also want protection in the form of a certain exclusivity – which means trade mark registration.

There's a further reason why SA companies are coming into contact with Chinese trade mark law. This relates to China's huge manufacturing capacity, and the fact that many SA companies source their products in China. In many cases these products will never be sold in China. Yet if the SA company's trade mark is applied to the goods in China, Chinese trade mark law becomes relevant. That's because Chinese trade mark law - like trade mark law in many countries - provides that the application of a trade mark to goods that are due to be exported is regarded as use of that trade mark in China. So, once again, the SA company needs to make sure that the trade mark that it might only be using in South Africa is available in China. (This can, of course, be avoided by making sure that trade mark is only applied when the goods arrive in SA, but this isn't always practical).

China has never been regarded as an easy trade mark territory. One reason for this is that when it comes to searching and registration, transliterations need to be considered. Another is the fact that, at one stage, China had an unfortunate reputation for allowing its companies to 'hijack' the trade marks of foreign companies. Chinese trade mark law has, however, undergone some important changes, making it a lot more user-friendly. We've reported on these changes before, and the most important of these deals with the hijacking situation. The authorities have sought to mitigate the effect of the 'first to file' policy – in other words the policy that says that the first company to apply for registration of a trade mark gets it – by providing that trade mark applications must be filed in good faith. Another improvement is the introduction of multi-class filing, which means that a trade mark owner can cover a number of different classes of goods or services in a single application. A third change is the introduction of time limits, the most important of which is the requirement that the trade mark authorities must deal with applications within a period of nine months.

This time limit has had an unexpected consequence – the trademark authorities are struggling to cope with their workload. But it's not only the time limit that's to blame, China has, to a certain extent, become the victim of its own success. The demand for trade mark registrations in China has become quite extraordinary – it was recently reported in the magazine, World Trade Mark Review, that in 2013 trade mark filings in China jumped 14.15%, reaching a record figure of 1.8 million in a year. It's mind-boggling!

This creates a strange dilemma for the SA company. On the one hand, the new good faith requirement in Chinese trade mark law might suggest that it's no longer so important for it to rush off and register its trade mark in China, because there might be recourse if the trade mark is taken by someone else in bad faith. On the other hand, the huge number of trade marks being filed in China means that it can't afford to hang about, because there's every chance that its trade mark will be taken by someone else who has, in perfectly good faith, chosen the same name or logo.

Another interesting thing to note about Chinese trade marks is that Chinese companies are filing trade mark applications in foreign countries in staggering numbers. This may well be related to the fact that the Chinese government actively encourages its companies to export their products, and to ensure that they use intellectual property (IP) protection as a way of achieving success. By way of example, every year China hosts something called the China Intellectual Property Rights Week, a program that involves no fewer than 24 government departments. In fact, the Chinese IP Office works closely with a number of government departments as part of the country's export drive, the so-called 'Going Out' policy. China is clearly a country that realises that economic prosperity and IP protection are closely linked.

The question for us is this: will we follow the path of our BRICS counterpart? It's hard to say right now. It has been said that the Department of Science and Technology is pro-IP, that the Department of Health is anti-IP, and that the DTI is neutral. Following the recent general election, there's a further ministry in the mix, the new Small Business ministry. This creation of this ministry was welcomed by the CEO of Proudly SA, Leslie Sedibe, who spoke of the 'unrelenting' unemployment rate in South Africa, of how he hopes that the new ministry will 'impact positively on current unemployment, poverty and inequality levels in the country', and how he feels that 'there needs to be improved communication between business and government if we are to move our country forward in terms of economic transformation.'

It's probably safe to say that it's small business that's missing out most in terms of IP, and that it's small business that stands to gain the most from it. So it will be interesting to see whether the new ministry pushes the cause of IP. One way to do this would be to ensure that SA joins the 90-plus countries that belong to the international trade mark registration system (the so-called Madrid system) – the list includes 18 African countries, as well as China. That small step will certainly make it easier for SA companies to get the trade mark protection they need 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.

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