Exporting Wine to China Seminar – Part II

New Chinese Trademark Law – Effective May 1, 2014

For decades, China has been criticized for shielding “trademark hijackers” – individuals or entities who have registered well known U.S. marks in China despite having no affiliation with that brand. If a winery failed to apply for their trademark in China often it was not too long thereafter that the brand would be registered in China without knowledge or permission from the brand owner. While this practice continues to this day, the new Chinese Trademark Law (adopted on August 30, 2013 and entering into effect on May 1, 2014) will emphasize the principal of good faith to aid in the crack down against trademark hijacking and will impact trademark matters in China occurring from May 1, 2014 forward.

The new law states that trademarks shall be registered and used in accordance with the principal of good faith. An injured party can use the good faith principle to challenge a trademark hijacker’s Chinese trademark registration during an opposition or invalidation proceeding even if the injured party does not hold an identical or similar trademark registered in China covering identical or related goods or services. The new law also increases the penalty cap for trademark infringements to RMB 3 million (around $491,892 U.S. Dollars). Despite these amendments, it may likely remain difficult and frequently impracticable for western entities to quash bad-faith filings of their trademarks if their brands are not registered in China.

The new law provides for specific measures to discourage bad-faith filings under certain circumstances. On the one hand, distributors and manufacturers are advised to refrain from applying for a trademark identical or similar to a trademark which has been used earlier (but not yet registered) by their partners, with respect to identical goods or services. “Partnership” is interpreted in a broad way to include contractual relationships, business relationships and other relationships.

As an added boon, the amendments prohibit a trademark agent in China to handle a trademark application if it knows or should know that the client’s application is an attempt to usurp or hijack another person’s trademark or is made with intent to preemptively register, in an unfair manner, a trademark that is already in use (but not registered) by another person who enjoys a certain reputation. Moreover, trademark agencies are prohibited from registering trademarks in their own names for other services outside IP services.

Even with the new law, the best defense is a good offense–register your brands in China. Like the United States, China is a contracting member to the Madrid Protocol. Under the Madrid Protocol, U.S. trademark counsel can apply for a trademark in China based on a client’s U.S. trademark application or registration. Utilizing the Madrid Protocol may remain the most effective strategy for protecting your brands in China.

Considering that the world has more than 7 billion inhabitants of which the majority or 1,317,471,458 billion of them reside in China, (in comparison, the U.S. population is estimated to contain 317,471,460 inhabitants[1]), with such a large potential market, it makes sense to register your brand in China. Doing so is cost effective especially in light of the frequent hijacking of wine brands. If you are planning to sell in China in the near future or would be upset to learn that your brand has already been registered in China, albeit to someone else, the most cost effective strategy to prevent such abuse is to register your brand in China. The initial outlay in registering a brand in China pales in comparison the costs associated with losing your brand to a hijacker or marshaling resources to get the brand back.

Part I of the “Exporting Wine to China Seminar” was published on LexVini on October 17, 2013.