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Strategy for effective trademark protection in China. Ferrari, Apple, Pepsi Cola and other case studies

  • 27 July 2012
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China is the worlds second leading country in terms of international trade. Because of this, China has developed from being a massive factory to becoming the main global market for companies everywhere. As a result, the Chinese authorities are becoming increasingly keen to create an intellectual property protection framework that will allow innovation to prosper in the country. If they dont, the worst affected will be the people of China.
China belongs to the World Intellectual Property Organisation (WIPO). It is therefore bound by the Intellectual Property Law of 1982 (amended in 1993 and 2001), the 1992 Patent Law (modified in 2000 and 2008) and the Unfair Competition Law of 1993.

As far as those aspects are concerned, trademark registration requirements in China are almost the same as they are in other countries that have signed the Madrid System for International Registration of Marks. However, there are some significant differences: sound and smell marks are not recognised, trademarks registered in Latin and Chinese characters are considered different trademarks (and must therefore be registered separately)… Important examples of the introduction of new trademarks in China that take the latter into account are companies such as Nestlé, Coca Cola, Mercedes Benz, Google…

Some practical examples of how major brands made mistakes with their initial brand launch strategies in China are the following:

•Pepsi Cola: When the company launched its new “Blue Storm” trademark in China a local company sued the beverages giant for trademark infringement. The court ruled in favour of the Chinese company and ordered Pepsi Cola to stop using the trademark and to pay the plaintiff compensation 3,000,000 yuan.
•Apple: In this case, the mistake was not to register the trademark in the appropriate subclasses. Apple applied for iPhone in 2002 in subclass 0901 for computers and computer software. In 2004, a Chinese company, Hanwang Technology, registered iPhone in subclass 0907 for navigation instruments.

Apple opposed the registration but, because of disparity as regards its application between the different subclasses, the opposition procedure and subsequent appeal were lost, ending up paying millions of dollars to buy back its trademark.

This example illustrates why a brand wanting to enter the Chinese market should register its trademark quickly and in good time. In this case, Ferrari had to spend 11 years fighting in court when it had already registered an image of a horse for use on clothing back in 1995.

It is recommended to register a Chinese version of the foreign trademark (translating this or using a phonetic transcription) because if only the Latin characters are protected, the version in Chinese characters is not protected.

Failure to choose a suitable name, in terms of phonetics and calligraphy, can leave the trademark vulnerable to third parties taking control of and causing serious damage to the trademark or company concerned.

Trademarks can be registered in China by taking the national route (with a local agent, fees payable according to the number of products or services, with several substantive and preliminary examinations, considerably dragging out the procedure…). They can also be registered internationally (with a unified procedure but, as you are well aware, you must have a basis trademark from Spanish Patent and Trademark Office (SPTO) or Office for Harmonisation in the Internal Market (OHIM)).

In both cases, and in the same way as it is required in Mexico and the United States, use of the trademark within three years must be certified.

To conclude, it is important to remember that before moving into the Chinese market, the trademark must be duly registered in that country. It is critical to pay particular attention to the legalities of any contracts or agreements signed with local distributors where the Intellectual Property of the trademark is regulated.

One example of the importance of the latter is the agreement between the Russian Government and the Chinese company “Shenyang Aircraft Corporation”, signed in 1996 to assemble 200 units called J11 in China. After sending 95 kits and 180 AL31F engines to China, in 2004, China cancelled the programme. What a surprise when, in 2007, China presented its new supersonic fighter, the “Shenyand J11B”!

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Strategy for effective trademark protection in China. Ferrari, Apple, Pepsi Cola and other case studiesStrategy for effective trademark protection in China. Ferrari, Apple, Pepsi Cola and other case studies