China trademark theft is on the rise
Everything China comes in waves and China trademark “theft” is no different. When we first started this blog way back in 2006, we would get about a call a week from someone — usually a U.S. company — wanting us to sue a Chinese company blocking the American company’s product from leaving China. We hated those calls because most of the time about all we could do was suggest the U.S. company try to buy “their” trademark “back” from the Chinese company that now rightfully owned it.
In an article I wrote more than a decade ago, [link no longer exists], I talked of how common these calls were back then.
Though troublesome, the damage from domain name usurpation is typically small, particularly as compared to what can happen if someone hijacks your trade name or trademark in China. We have seen this happen countless times, mostly to American companies unfamiliar with“first to file” trademark law, as opposed to the U.S., British, and Canadian, “first to use” systems.
Though the media love to publish stories deriding China’s intellectual property protection, those articles frequently fail to mention that in most instances involving trademarks, the fault lies with the foreign company, not with Chinese IP enforcement. The reality is that many foreign companies fail to register their trademarks in China and thus have no real right to complain about any “infringement” there.
There are actually a number of people in China who make a living usurping foreign trademarks and then selling a license to those trademarks to the original, foreign, license holder. Once one comes to grips with the fact that China, like most of the rest of the world, is a “first to file” country, one can understand how easy this usurpation is, and also, how easy it is to prevent it.
The fact that you are manufacturing your product in China just for export does not in any way minimize the need for you to protect your trademark. Once someone registers “your” trademark in China, they have the power to stop your goods at the border and prevent them from leaving China. That’s right, they can stop your goods from leaving because they own the trademark, not you. We are aware of companies having to pay hundreds of thousands of dollars to get their trademark “back” and to get their goods flowing out of China again.
As my firm’s lead China trademark lawyer is always saying: the key to protecting trademarks in China is to register them in China before you do business there. This can usually be done at a relatively small cost. You should also consider getting the Chinese language equivalent as well.
For years my law firm has probably averaged a call a week from someone who had lost their trademark to someone in China who had filed for it before the non-Chinese company did so. Then, starting maybe 5 or 6 years ago, the number of these calls declined. I have ascribed this decline to two things. First, foreign companies started getting wiser about the need to get their brands, their logos and their company names registered as trademarks in China. Second, and of equal importance, China instituted rules to try to stop Chinese manufacturers and trading companies from registering as trademarks the brand names and logos and company names of the foreign companies for whom they were manufacturing or sourcing products. To simplify a bit, your China agent could not hang on to a China trademark that you were using before you brought them on for your manufacturing or product sourcing. We went from one China trademark “theft” call a week to maybe one a month.
But starting about a year or so ago, our China trademark lawyers started getting a ton of China trademark theft calls and the number of those calls has been accelerating ever since. Why has the tide on trademark “theft” come in again? Two reasons. One, there is hardly a sole in China who does not know how to get around the prohibition on an agent registering the trademark that rightfully should go to the foreign company for whom it is acting as an agent. If your manufacturer in Shenzhen wants to secure “your” trademark in China it will not register it under its own name as it knows that cannot work. So instead of registering the trademark under its own Shenzhen company name, it will ask a cousin or a nephew in Xi’an to register it under its company name, making it nearly impossible for you to invalidate the trademark. Two, many Chinese factories are hurting right now and they desperately want to improve their profit margins. What better way to do so than to sell a product under a prestigious or well-known American or European brand name — or even just any brand name? See Your China Factory as your Toughest Competitor.
Our China trademark lawyers have been getting so many trademark theft calls of late that they now have a somewhat formulaic email response to those. The following is an amalgamation of a few that recently crossed my desk.
I am sorry to hear that someone has registered your brand name as its trademark in China. Our China trademark lawyers have handled many similar situations and we would love to try to help you with this.
The first thing we usually do in these situations is figure out some basis for challenging this Chinese company’s trademark filing. Our favorite challenge is non-usage of the trademark for more than three years, but in this case because the trademark is less than three years old, that will not work. Our second favorite is when a former factory does the filing because there are laws against that. But to show that it is the former factory, we almost certainly would need to show that the company that actually filed for this China trademark is the same company that you formerly used for your production and that is seldom possible.
If we are not able to get you the trademark you want for widgets, the next thing we do is try to figure out whether there might be a workaround. For example, we had a lawn equipment company that had its brand name filed as a trademark for 17 things related to lawn equipment but the trademark “thief” failed to file for small engines, like those you find on lawn equipment. So our workaround was to get our client the trademark for small engines and then put its name in steel on the engine and then add a sticker or two to the lawnmowers once they hit the United States and Europe where our client sold its lawn equipment. [NOTE: I changed the type of product to make it impossible to be able to identify the company for whom we did this intellectual property workaround]
If none of the above look like they can succeed, we can and should try to buy your name from this Chinese company. Unfortunately, this tends to be a tougher and, more importantly, a more expensive than you likely would expect. We do these buys by lining up a Chinese person (not a lawyer or anyone with any apparent connection to our law firm) in China to handle the negotiations. If someone from our firm were to call, they would will immediately suspect/know we are working for an American company and they will ask for a fortune for you to get your trademark back. It sometimes even makes sense to form a Hong Kong company to do the buy.
Another possibility would be for you to come up with a new name or use another of your names — I am sure you have thought of this and I doubt that it is appealing to you, but it may end up being the only way to go. No matter how we end up proceeding on the name taken from you, I strongly advice that we look at what we can do now to protect whatever other names you use and perhaps your designs as well.
As for your attorneys who you thought had filed for your trademark in China but had not, do you have anything that would indicate you asked them to do so or that they said they would or — better yet — that they said they had actually filed for it? If you have something like that, we could ask that they fund all of the above, assuming that you used real lawyers for this work. See Fake China Law Firms Are The Real Deal and Is This a Real China Lawyer?
Anyway, let’s talk to see if we can help you on this.