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Trade Marks and Branding in China

China is one of the leading global manufacturing hubs and the fastest growing consumer market in the world. As an operating base, manufacturing for export to other Asian economies, and as a consumer market in its own right, China offers almost unparalleled opportunity for foreign businesses looking to trade.  

Chinese businesses are very IP savvy, and clearly see the value in registration and enforcement of their IP rights in China. The numbers are staggering. China received 2.88 million single-class trade mark applications in 2015, an increase of 24% from 2014. 96% of applications were from domestic applicants. Every year, the Chinese authorities oversee hundreds of thousands of administrative trade mark disputes (oppositions, revocations and cancellation actions).

This IP landscape is what UK businesses will face when looking to expand into China. Here we will explain some important considerations for those looking to trade in China and what to prepare for.

1. Trade mark Registration:

Before a business enters the Chinese market it is essential to carry out a search to ascertain whether its trade mark or something similar to its mark is already registered in that country.  If it isn’t, it should apply to register its mark with the Chinese Trade Mark Office immediately. Failure to do so could result in a competitor or an unscrupulous third party filing an application in their own name.  Such an application would not be rejected by the Office, which accepts marks for registration on the basis of ‘first to file’ rather than ‘first to use’

2. Trade Mark Enforcement:

Once a business has registered its trade mark, it should also register the mark with Chinese Customs. Without this separate registration, enforcement against counterfeit products entering or leaving China can be difficult. Should a registered mark be infringed, Chinese law requires that the parties first attempt to resolve the dispute through negotiation. Should that fail, you may bring an action in the courts or an administrative action in the Administrative Department of Industry and Commerce. Enforcement is usually limited to damages and the destruction of the infringing goods.

3. Licensing Your Mark:

Like any other contract in China, a Licence Agreement must be very specific in order to protect the brand and business. During preliminary negotiations, a brand owner should draft a combination of non-disclosure, non-circumvention, and non-competition clauses. After negotiations are complete, these clauses should be incorporated into the final Agreement. It is also important to carefully manage trade secrets (such as customer lists) to limit the business’s exposure to damage in case of breach and infringement. Finally, because damages in these cases are hard to calculate, a foreign party should include within the Licence Agreement a liquidated damages clause and a specific performance clause, allowing for the destruction of the infringing goods.

4. Adapting the Mark to the Chinese Market:

If you are doing business in China, it is important to consider the pros and cons of adapting your mark to cater for the Chinese market. In some instances, maintaining the “foreignness” of the brand is a distinct advantage. However, many businesses have translated their mark with great success; a prime example being Coca Cola when they first sold in China in 1927.  In China, translations and transliterations of foreign marks can be regarded as different to a business’s core trade mark and consideration should be given to registering not just the mark in its original form, but also the translated and transliterated versions.

5. Policing Your Mark:

It is also wise for brand owners to monitor whether third parties are attempting to encroach upon their rights by applying to register similar trade marks.  The most effective way of doing so is putting in place a trade mark watching service, which ideally should cover all variations of one’s mark.

This article is not legal advice and should not be taken as such. The right advice always depends on the detail of your circumstances and business objectives.

At Mathys & Squire we have helped a number of our clients set up their IP successfully in China and we would be delighted to discuss your requirements with you.

For more information about this article and to find out more about doing business in China, contact Sean Leach on SALeach@mathys-squire.com or 020 7830 0000. 

By Rob Hawley (RJHawley@mathys-squire.com)

Partner and Trade Mark Attorney - Mathys & Squire