This is one episode you can’t afford to miss. Tune in as we give you a quick rundown on trademarks in China – an area that is currently making waves in the world of business. Take a closer look at the risks businesses don’t even know they are exposed to when they manufacture or buy products from China or when they plan to use their brand there. Make this episode a priority
- Why we need to talk about trademarks in China
- What makes China different
- Risks of trademarks in China
- Apple’s trademark risk experience back in 2012
- Important action items
Joanna: Hi it’s Joanna Oakey here and welcome back to talking law now today we have our resident trademark expert with us Grace Yi from Aspect Legal. Hello Grace, welcome onboard again.
Grace: Hi Joanna. It’s great to be back.
Joanna: Great. All right. So today what we’re talking about is trademark risks coming out of China and I guess we should preface this by saying this is an absolute must listen episode. If you have goods that you manufacture in China or buy from China or I guess who else is this particularly important for grace.
Grace: I guess anyone who sells their products or services in China or is going to use their brand in China.
Joanna: Yeah. So really a wide range of audiences that might be interested in what we’re talking about today which is some really hard hitting issues because this is a really quickly changing area.
So I think that’s the first thing that I want to say here. Grace it’s evolved rapidly hasn’t it recently.
Grace: Yeah it’s at a government level. It’s a hot topic.
Joanna: Yeah. So why do we first start with what the problem is so why are we talking about this issue at the moment.
Grace: Yeah. So I guess the reason why we need to talk about it is that it affects a lot of businesses.
It has affected all the big brands even.
Joanna: I guess just stepping back when we say it is affecting I guess what we’re saying is there’s risks coming out of China at the moment that create a situation where businesses who are manufacturing in China or have any reason to want to mark in China might be missing out on the ability to get a trademark registration in China if they are not listing China as one of the main priorities in their trademark registration strategy. And that can really impact the business that they’re doing in other countries as well. So I guess this is the issue right it’s in China in registration but not just that this issue permeates other jurisdictions as well for businesses who aren’t on top of the risk. Maybe if we can backtrack a little bit. Grace can you talk to us first a little bit about what the difference is between China and say Australia and America and other sort of common law systems in relation to trademark registration.
Grace: Yeah. So the type of system that we have in Australia and the US and countries like the UK is that we have a first to use system. So essentially it means that even if somebody else manages to get onto the trademark register first with even an identical or similar mark if you as a trader you have actually used the mark before an earlier registration though the registration systems will recognize your prior rights and allow you registration as well.
Joanna: So and I guess we call that first to use the country.
Grace: That’s right.
Joanna: So we first to use countries in that whilst timing of filing is really important in terms of ease of filing at the end of the day if you’ve been the first use you still have ongoing rights in relation to the use of the money.
Grace: That’s right and our law recognises that the person who has the best rights to a brand is actually the first use. So that’s the first to use system. What’s different about a country like China is that they don’t have that recognition. They are what we call a first to file country. So their trademark system is more about who actually manages to get onto the register first with a filing.
Joanna: So how does this play out then. And we’ve seen this play out in a number of ways and I think some big stories around about big brands also having the same sort of struggles. So let’s talk a little bit about those.
Grace: So what happens is a lot of the time a trader will find out we’ll actually receive an e-mail that looks a bit like a scam e-mail or a spam email and I’ll start receiving a whole heap of emails from people who represent themselves as being legal firms in China actually notifying them that trademark application is on foot in China for their trademark and then inviting them to lodge an opposition.
Joanna: So I guess this is stepping back a little bit. I guess this sort of comes doesn’t it from experiences that we’ve seen and certainly with big brands as well. Manufacturing in China but deciding not to or not even thinking about having a trademark registration so manufacturing in China and then suddenly realising someone else has registered this trademark or applying to registered their trademark in China. And what’s the impact of that Grace.
What happens if someone is manufacturing in China but that trademark is then held by someone else.
Grace: Potentially the risk is that if they are able to secure the registration of that trademark in China they will then own the brand and potentially cause all sorts of issues ranging from as far as stopping the export of your branded products that’s an infringement of their brand. It could go as far as stopping your ability to sell your products in China. So essentially it’s losing the right to have that brand and using that brand in China.
Joanna: And I just think what’s so critical here like it’s amazing isn’t it that it’s such a big thing because you know even if you if you’re not planning to sell in China you’re merely manufacturing in China and applying your trademark to the goods that are being manufactured.
Say for example on the labelling somewhere of the goods you might get into big trouble if you’re manufacturing there and then trying to export out of China as well. So I guess this links in to the risk then that you are actually breaking the law at that point if someone else holds his trademark registration you are breaking the law in China by having goods manufactured with the mark that someone else there now owns and certainly this can be picked up if point of you taking those goods out of China to deliver to whatever country your retailing or selling them in.
Grace: That’s right.
Joanna: So let’s talk about some of the big brands that have been caught up in this sort of issue Grace. What Sort of thing have we seen you know anecdotally on the street into what’s happening here.
Grace: Yes. You might recall the issue that Apple had back in 2012 they had to settle a dispute over the iPad brand and it actually cost them 60 million dollars reportedly to settle that. So that’s a huge company that had a bit of an oversight there in relation to that brand their branding in China.
Joanna: And that just related to the fact that they manufactured in China but didn’t hold the iPad brand trademark in registration in China is that right.
Grace: That’s right. They wanted to sell the product there as well but it was about they didn’t secure the brand.
Joanna: I think this just demonstrates what a moving target this is at the moment. And certainly I think you know many times I think we talk about China as the Wild West of IP right.
But it used to be this philosophy that registration of intellectual property rights in China was there was no point to it because it’s hard to enforce but certainly this new situation the new developments and turn that on its head and it almost if you are manufacturing in China now or looking to sell in China for any reason but perhaps for our audience the more the higher likelihood is wanting to manufacture in China. China should be probably one of the first on your list at the moment. I think that’s where we’re at at the moment. Grace what do you think?
Grace: Yeah absolutely. I mean the cost of getting a registration relative to having to face the risks of somebody else securing it and then I guess it’s essentially being held to ransom by these sorts of unscrupulous third parties in China and because it is the manufacturing center of the world isn’t it. Combined with the fact that people do companies do take advantage of this situation and will systematically go through international registers and try and get on the register first in China. I think that’s what we’re seeing happening quite often.
Joanna: As we said this has been quite quick to change and I think it will continue to evolve very quickly as well.
So it’s just about getting on top of this and making sure you’re getting the right legal advice at the right point so you can stay on top of this area because it’s unfolding so quickly. So let’s maybe throw then to a few things for our listeners to think about in terms of action items. I think number one we talked about the need to consider filing in China as one of the first components of your strategy. So I think that’s the action point number one. Yes. So if you manufacture in China if you think that you’re going to have any representation in China in any way then that’s a very first thing. Talk to someone who understands this area to consider whether or not China is someone that you should be registering in absolutely urgently. I guess number two if you you’re already manufacturing in China and you haven’t been on top of this recent information we forgive you because it’s moving so quickly. You’ve completely forgiven but don’t just accept that someone else now holds those rights.
I think the lesson there is to get advice as quickly as possible.
Grace: And I might throw in there as well that you should be considering your branding position internationally if that’s something that’s relevant to you.
And then also considering if all the countries that are relevant to your use of the brand if any of those particular countries are also first to file countries because this the first to file countries are not limited to just China.
There are other countries as well that have first to file systems so it might be a good opportunity to remind everyone to think about this as it applies to your brand and how you’re using it and turning your attention to the fact that you might be using your brand in another country that is also a first to file system.
And it’s worth looking into that soon as you can.
Joanna: I guess that leads on to another issue which is if you’re at the process of choosing a new brand for a new product or service or you’re rebranding a business product or service then really we need to be thinking about expanding our searches as we always say it’s really important before you choose a brand that you’re searching to make sure you’re not infringing in the primary jurisdictions that you’re operating. So the primary countries are operating but now on top of this if you’re also going to have any sort of representation in China whether that’s through manufacturing or selling in China or taking revenue from China you really need to think about searching in China as well as say Australia or wherever your business is based.
Before you’re choosing that brand.
Grace: That’s right and it’s something that’s unique to China as well and some of these foreign jurisdictions is that in China on the ground it’s not English that’s used it’s Chinese characters. So it’s also important to secure the Chinese transliteration of your brand there as well so the way that you’re mark is phonetically pronounced in Chinese and then the Chinese catcha equivalents of those phonetic equivalent so that actually affected a big brand like Penfold’s who didn’t protect the Chinese language version of their mark. And it actually ended up in them having to have their products removed from the shelves of various hotels so and of course once a legal dispute starts it can really cause havoc for years and in Penfolds case it carried out for close to a decade.
Joanna: So I mean isn’t that amazing. So they thought to register Penfold’s but they didn’t think to get the Chinese language version but that then meant that their wines couldn’t be sold in hotels in China.
I mean that’s it’s huge isn’t it. So they did actually think to register there but they just didn’t get the Chinese translation. So I think the message out of this is that it really is an area where you need to seek advice as quickly as possible because it’s a moving target. And there’s a lot of different ways that risks can rear its head in the area. Absolutely. Well wonderful. Thank you Grace so much for coming in to talk about this today. I know we have run through this really quickly but it’s not relevant information to all of our listeners so we just wanted to give you a snapshot. If you are a business or you deal with businesses where this might be applicable we have help for you. Just head over to our Website at www.aspectlegal.com.au and there you can use the free appointment booking tool to book a discussion with Grace or the fabulous trademark team to discuss the issues that apply to you or your clients so that we can give you a bit of an overview of how we might be able to assist with those or the sorts of things that you should be thinking about as well. Great. Well look Grace, thank you so much for coming back on to Talkinglaw to talk trademarks again.
Grace: Thanks for having me Jo.
Joanna: Brilliant. Okay. Alright well look and to you our listeners if you missed that link to aspect legal to use booking calendar to book yourself a consultation then just head to our show notes which you’ll find in your podcast. Or you can find at talkinglaw.com.au Click into this episode. And in that episode you’ll be able to find a transcript of this episode as well as links through to the booking calendar to set up an appointment for us to talk to you or your clients about how this might relate to you or their business. And finally if you enjoyed what you heard today then please pop over to iTunes and leave us a review. Well thanks again for listening in. You have been listening to talking law proudly brought to you by a commercial legal practice aspect legal see you next time.
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