Doing Business Internationally: Check your Trademarks

1. Be Afraid for Your Brand Name, Be Very Afraid

From time to time when we write something on here with which a reader disagrees, we get a comment or an email accusing us of scare-mongering. I am not afraid (pun intended) to admit to that being my goal with this post. If I can scare a few more companies into not losing their trademarks I will have achieved my goal.

Our clients that have their products made overseas are typically very concerned about their foreign counter-party or some local competitor stealing their product design and yet they are often quite relaxed about protecting their brand names. This approach ignores that stealing a brand name is a lot easier and usually a lot more profitable than stealing a product design. My law firm’s international IP lawyers deal with probably three trademark theft cases for every one design case.

This favoring of design protection over trademark protection is often compounded by misunderstandings on how trademark works in most of the world. Western companies too often believe a trademark is important for them only in the countries in which they are selling their product. However, under the laws of many countries, the manufacturing of a product with a trademark constitutes the use of the trademark. Western companies also too often believe that their being first to use a trademark means they own it, but in most countries, the first to file for a trademark owns it.

2. Bad Things Happen When Others Register “Your” Trademark

It matters because if someone beats you to registering “your” trademark and you are having products made with that trademark on it, the person or company that owns “your” trademark can stop you from manufacturing your product or exporting the product with the trademark on it. The The trademark owner — of what you thought was your own brand name — can also register that mark with its own country’s customs authorities and then have customs seize products at the port that contain that mark, preventing your shipment from leaving the country in which it was made. This is a particularly nasty surprise if you have already paid for the product.

Who is going to register your trademarks? It is typically someone you know, like someone tied to your factory, one of your competitors or even a disgruntled employee. One of our international manufacturing lawyers loves to talk about what happened a few years ago when he gave a series of lectures in China on how to protect your brand and product when manufacturing in China. After the talks, he went to dinner with a group of disgruntled foreign company production managers who talked of how they had for years been urging the foreign companies for whom they worked to register their trademarks. The foreign companies consistently refused, claiming such registrations were a waste of money. These production managers then told our China lawyer the following:

We are in the process of forming our own trading company to register all the important trademarks of our employers in China in the name of that trading company. When we get fired or quit, we will register “their” marks with China customs and completely shut down their Chinese operations. It will serve them right for being so stupid and lazy.

Now just for the record, the laws in many countries would not allow these employees to get away with this, but the mere fact they were plotting this ought to scare many of you. Your bigger threats to register your brand name is someone tied in with your manufacturer (they do this so they can stop you from going to someone else) and your competitors (they do this so they can stop you).

Note though that these operation managers did not say they were going to steal their employer’s product design. That would be difficult and expensive and they were choosing the easier route. The only cost to them would be the expense of registering the marks. But this small expense  might give them considerable power over their former bosses.

Years ago, we represented a very high level sourcing agent in a dispute with a large U.S. company. The dispute involved allegations of the U.S. company having gone behind the back of the sourcing agent to deal directly with a bunch of Asian factories. The parties settled their dispute, but unbeknownst to the large U.S. company, the sourcing agent in the meantime had gone off and registered all of the U.S. company’s relevant trademarks in China, Vietnam, Thailand and Mexico (where this large company had its production), assuring us he just wanted this “in his back pocket” if the U.S. company ever again tried to [bleep] with him again.

3. Protect Your Brand Name(s) with Trademarks, In the Right Order

The message here is simple. Your brand name is important and you need to protect it in both the countries in which you sell a decent amount of your products and in the countries where you have them made. It is fairly common for companies to instruct our international IP lawyers to get them a trademark and a patent and a copyright in every country in which they do business, but only massive companies can afford that.

Our international IP lawyers work with our clients to figure out what is truly central to their business and needs protecting and then they work from there to focus on the easy and inexpensive protections first. It usually makes sense to take care of those first and then move on when ready to the more difficult and expensive protections.

If you are manufacturing in most of the leading contract manufacturing countries, the cost benefit analysis on trademark registrations is simple. Trademark registrations are simple and inexpensive and the result of failing to register can be devastating. So the first step for every nearly every company engaging in OEM manufacturing in should be to register its marks and logos in every appropriate class and subclass.

And then move on to the more difficult and expensive measures to protect your brand and product.

Leave a Reply

Your email address will not be published. Required fields are marked *