Finally, A Roadmap to China’s Trademark System

Nadaline Webster,

Amongst the trademark community at large, there are few mysteries so impenetrable as the trademark system in China. Over 5 million trademark applications were filed last year in China showing a staggering rate of growth. In advance of our webinar - 3 keys to the Emperor’s Kingdom - Chinese Trademarks Demystified - I spoke with Amy Hsiao, Partner at Swanson and Bratschun, about her experiences within the trademark system and the launch of a unique book  that will give guidance to many and provide insight into successful navigation in waters that many find to be treacherous!

I am a native Chinese; I came to the United States for the first time in 2004 to enroll as a law student. In addition to the obvious language and cultural challenges, the biggest obstacle I had was the fear of “not knowing”.

In the country where one is from or an environment with which one is familiar, knowing what to do and what to expect is a “given”. You know exactly when to pull the ring on a bus when your stop is approaching; you know when it is appropriate to smile at a stranger and when is not. In a foreign country, these ordinary everyday senses are gone. One no longer has the “sense” to know when is a “right” time to pull the ring on a bus – too early may get you some nasty comments from the busy driver; too late – well – means you need to walk some extra miles.

Western companies have been flooding to China for decades now. However, besides the ordinary legal advice to get as much “Guanxi” (i.e., relationship) as possible, it is very difficult to acquire the “senses” to anticipate what is the right legal move, what must be done to make sure your brand is protected, and what strategies to implement so as to sleep well at night.

A company may see its business booming and its brand getting wide acceptance from the Chinese consumers – 20 years later, the company may find itself in hot (legal) water: the Chinese court has ruled that it is now an infringer to its own very brand and must return profits in the past 20 years. Another company may invest millions on advertisement campaign after getting assurance that its mark is now registered in China. To its surprise, this company may soon realize it has not been promoting its brand, but its Chinese distributor’s brand. Worse, the policemen in Shenzhen are now standing at its factory, demanding to see the trademark registration certificate or else – e.g., having the factories shut down and outbound shipments seized. This is when you start getting panic calls from the company’s CEO, investors and board of directors at 3AM in the morning.

The horror stories can go on and on – the point is the same: businesses simply cannot afford “not knowing” when it comes to protecting their brands in China. The bigger issue is the problem of “you don’t know what you don’t know” – because of cultural differences and a lot of historic reasons, a “YES” from your partners in China may not mean approval; a “NO” from the Chinese lawyer may not mean the deal is for sure dead-end.

The problem of not knowing – or lack of clear explanation and rules – has been one of the central complaints from Western governments and business.

In 2014, China finally had an answer. The best legal minds in China—including judges from the intellectual property (IP) tribunals of the Intermediate Court, High Court, Supreme People’s Court, deputy secretary-general of China Trademark Association, seasoned examiners from China’s Trademark Appeal Board, and people serving as expert consultants to trademark litigation cases—had written a book. The book, which is partly a response to Western criticism about IP issues in China, identifies twenty-six landmark trademark cases in modern Chinese history.

Rather than providing a two-sentence decision about each case, the authors delve into the relevant law in detail, review the relevant law, discuss how the specific facts were addressed by the Trademark Office/Appeal Board/Courts, and provide the rationale supporting each decision. In addition, the authors offer guiding “best practices” for each case. The book is, thus, a practice guide showing brand owners how to survive and prosper in China, a country long perceived as the Wild West in today’s trademark world.

Since its publication, classes, seminars, and training sessions have been offered in big cities such as Shanghai and Beijing to study and discuss the book. Participants span the gamut from in-house counsel, to attorneys at private law firms, academics, researchers, examiners, and officials at different levels within trademark offices across China. The summarized cases involve well- known brands such as CHANEL, BMW, and LOUIS VUITTON; as well as the personal name rights of Kate Moss.

While the book has stirred up quite a buzz in China, the authors are also eager to share these discussions with people in the Western world. The people in China want to be understood; they want the world to understand why their courts rule A rather than B, decide to protect C instead of D.

There was just one problem—the book was written in Mandarin; it is therefore inaccessible to most of the world. Translating this work to ensure its accessibility was the challenge I took on back in August 2015.

After a six-month search, the publisher had been unable to find a suitable translator because the process requires a command of Chinese legalese as well as sufficient experience with Western versus Eastern legal concepts to be able to translate the underlying ideas in a persuasive and thoughtful way; so that the insights shared by a Chinese judge sipping tea in his office in Beijing can be understood by the American executives drinking their coffee across the Pacific Ocean wondering how to make money and also protect their companies’ brands in China.

I was given a test case—I am not at all embarrassed that it took me twenty hours to complete the first draft (despite my professional interpreter background). I am grateful that the publisher was satisfied with my work and decided to engage me. In the last twelve months, I have spent most weekends in the library chewing, digesting, and translating these concepts so as to peel away the mystery surrounding trademark practice in China. 

From this book, you will get answers to “hot” trademark issues in China. For example:

1. Can one invalidate a registered trademark because it was obtained in bad faith?

2.  What are the criteria for recognizing a mark as a “well-known” trademark in China?

3.  Can one invalidate a trademark registration relying on a well-known unregistered trademark in China?

4.  Can one invalidate a trademark registration relying on a well-known registered trademark in China where the two marks cover different goods or services?

5.  Can a registered trademark be cancelled if it has become a generic term?

6.  Can one successfully oppose a trademark application based on copyright?

7.  Can one successfully invalidate a registered trademark if it is similar to a trade name?

8.  Can one successfully invalidate a registered trademark if it is similar to a personal name?

9.  Can one use a design patent registration as defense against a senior trademark registration?

10.  How are damage amounts calculated in trademark infringement lawsuits?

Each case is divided into three parts: (1) the facts; (2) the judgment; and (3) analysis and insight. Prior to diving into these cases, the chief editor provides a brief history of China’s trademark system going back to the first recorded trademark more than 100 years ago, as well as the three amendments to the Trademark Law and the impact made by each.

The experience has been both humbling and educational. It has further clarified in my mind why a pair of glasses that fit me perfectly may not be a good fit for others. China needs a different pair of glasses tailored to its prescription. Subclass may be baffling to the legal professionals in the Western world, but an absolute necessity in China’s legal market.

For fifteen consecutive years, China has been the world’s No. 1 country for receiving and processing the most trademark filings. The number of trademark filings in China in 2015 alone was one-third the trademark filings made around the globe. To put that in perspective, the number of trademarks filed in China in 2015 alone was three times more than the combined trademark filings made in the United States (second place) and the European Union (third place) over that same year. The filing number in 2016 was more than 3.5 million. It is about time we understand how the trademark system works in China. What better way to gain insight into that system than to learn directly from the people who are making those decisions in China?”

Along with Joan Zhang, Senior Counsel at Lenovo and Tiffany Valeriano, Trademark Executive at TrademarkNow, Amy is presenting a webinar which provides an unparalleled opportunity to delve deeply into the Chinese Trademark System, gain understanding of how to successfully navigate it and ask the questions that you have long needed answers to. Click here to register!

Chinese trademarks webinar