Foreign companies should have a strong IP protection strategy in China

Registering a trademark in China is often not enough. Foreign companies manufacturing or selling products in the country should develop a comprehensive strategy to ensure that their brand is well protected.

The Chinese government recognizes the importance of intellectual property as a part of the country's development and has taken several steps to improve the legal protection of IP in general.

Recent amendments to China’s Trademark Law, including those relating to bad faith registrations and use requirements, may take some time to come into effect. Unpleasant situations may occur if brand owners don’t stay vigilant and believe that they can relax.

The proposed changes to the law reflect Chinese authorities’ intentions to strengthen the intellectual property system by improving the trademark scene and the practice of CNIPA (China National Intellectual Property Administration) and the Courts.

Foreign companies operating in China can benefit from these changes by designing more effective brand protection and enforcement strategies, as well as make any necessary adjustments.

Due to its business growth, economic development, and improved Chinese law regarding the protection of intellectual property (IP), in the last few years China has become a more attractive market for foreign companies.

There are six important aspects that companies should evaluate and consider when creating an IP protection plan.

Portfolio management strategy

1. Filing defensive applications

Article 22 of the draft amendments state that where many applications for registration of the same mark are filed without any intention to use the mark, those applications will constitute bad faith applications. Brand owners using defensive filings to prevent trademark squatting should reevaluate the applications they file.

Defensive filings may still be necessary; however owners should prioritize the marks and goods/services they wish to register and whether and what evidence of use, or intended use, can be filed.

2. Developing new trademarks

Article 22 classifies as bad faith applications, those for marks that are detrimental to the national or public interest or have otherwise significant negative associations. This should be considered carefully, particularly in marks that contain political, religious, racial, or sexual elements.

3. Fulfilling use requirements

The amendments to the law, though not yet finalized, seek to improve the trademark system by reducing the number of filings in an already overcrowded registry. An obligatory declaration of use of a registered mark every five years has been contemplated with the Trademark Office checking and requiring evidence. Brand owners should create and maintain appropriate evidence of use of all their marks. Regular audits are also necessary to confirm that evidence of use is in place.

Enforcement strategy

4. Greater use of enforcement authorities for action against trademark infringers

Enforcement authorities will be able to impose more stringent penalties against infringers to force them to stop the infringement. Until now, because of the limited penalties enforcement authorities could impose, even successful administrative actions would often not be sufficient to deter infringers.

5. Combatting bad faith registrations

Bad faith trademark applications have been a problem in China for decades, however local authorities are working to change this situation. Article 83 of the draft amendments state that any party suffering damage from a bad faith filing can bring a civil action and claim damages, which would include at least the legal costs of taking action. The draft also makes provision for applications to CNIPA for the mandatory transfer of bad faith registrations, under certain circumstances.

6. Actions based on well-known mark protection

Because the draft amendments extend the scope of protection available to well-known marks, action may now be available in situations where in the past it would not have been. Cross-category protection, for example, has been extended to unregistered well-known marks. Both local and international registrations will be considered in determining whether a mark is well-known. Further, dilution, tarnishment, and free-riding are prohibited in relation to marks that are “familiar to the general public”. Brand owners should be ready to act and provide solid evidence.

If your company is actively marketing goods or services in China, it is usually easy to provide evidence of use. Packages, containers, labels, manuals, advertisements, product displays, signage or even on the Internet or at exhibitions are all likely to be sufficient. In general, original documents are required.

It is all too common for foreign companies to order products from their China manufacturer for years using English-only documents that never identify the trademark on the products, and often never identify the product with sufficient specificity.

That makes it almost impossible to prove use to the CTMO’s satisfaction. Chinese language documents that clearly demonstrate the use of mark in China on the products covered by the trademark registration are necessary. These could be invoices, shipping documents, quality inspections, and customs export declarations.

Companies should regularly update documents for each of their China trademark registrations. Photographs are helpful to provide context but, standing alone, are usually insufficient to demonstrate use.

Typically, most (or all) of the documents that can prove trademark use for export-only products are held by the factory. It is important to keep your own documentary proof of use while you are on good terms with the factory. If things change with the supplier, you don’t want to risk your trademarks.

A well-designed trademark protection and enforcement strategy, adjusted and evaluated regularly, will empower brand owners, and help them react quickly when a defensive action is needed.

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Woodburn Accountants & Advisors is one of China’s most trusted business setup advisory firms.

Woodburn Accountants & Advisors is specialized in inbound investment to China and Hong Kong. We focus on eliminating the complexities of corporate services and compliance administration. We help clients with services ranging from trademark registration and company incorporation to the full outsourcing solution for accounting, tax, and human resource services. Our advisory services can be tailor-made based on the companies’ objectives, goals and needs which vary depending on the stage they are at on their journey.

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