China Law Blog recently did a post entitled “Protecting Your Intellectual Property in China—The Starbucks Perspective”. The post recounts advice Kim Teraberry, Director and Corporate Counsel at Starbucks, presented as part of a two day conference held by the US Patent and Trademark Office.
The post opened with a piece of advice that can’t be said enough: register your trademarks early! Moreover, a company should not assume that their Roman script mark will protect them against a Chinese character version. Thus, a company should consider registering a translation and a transliteration of their company name. When choosing a Chinese mark, Teraberry said that a company should consider marketing objectives, multiple dialects, traditional and simplified characters, and trademark clearance.
In a comment on the post, IP Dragon emphasized that there are a variety of dialects in China and a company that wants to take advantage of the Cantonese speaking market, which includes Hong Kong, should take into consideration the Cantonese pronunciation of their company and product as well as the Mandarin pronunciation. Furthermore, places such as Hong Kong use traditional characters; consequently, a company should also consider registering their trademarks in traditional characters as well as simplified.
Dan Harris of China Law Blog strongly suggested that a foreign company that expects to do right by its trademarks in China must retain professionals fluent in both Chinese and English that are familiar with both cultures. Harris said, “I am often asked by small companies if it is worth it to do all that is necessary to protect their name and brands in China. My response is that if their name and/or brands are their most valuable assets, then they really have no choice but to do what it takes to protect them.”
I enthusiastically join Harris’s opinion.
The Sleeping Giant is Awakening.
Anyone who has been to Beijing’s Forbidden City since the year 2000 knows that Starbucks is seemingly everywhere in China. Starbucks has opened 140 outlets in mainland China and used the name Xingbake since the company entered the mainland in 1999 (“xing” means “star” in Mandarin, and “bake” sounds like “bucks”).
In January of 2006, there was a series of court decisions protecting Western trademarks, including verdicts in favor of Chanel, Prada, Burberry, Moet-Hennessy, Luis Vuitton, Gucci and Dunhill. Starbucks joined that litany of favorable verdicts when Shanghai No. 2 Intermediate People’s Court ruled that Shanghai Xingbake Coffee had copied the Seattle-based Starbuck’s logo and name. The judge ordered Shanghai Xingbake Coffee to pay Starbucks 500,000 yuan (US$62,000) (see the Asia Times article here).
A Qingdao court also ruled in favor of Starbucks on November 16, 2005, and the opinion of that court was recently published. Steve Dickinson of Harris & Moure, pllc, and China Law Blog, wrote an incisive two-part analysis of the Qingdao court’s decision (see Part I and Part II). Dickinson extracted the following lessons from the Starbuck’s decision:
- Register your trademarks early.
- Register your Chinese name even if you do not plan to use it right away. This is especially important if your Chinese name is different from your company name, as was the case with Starbucks.
- Registering your trademarks in China is a necessary start towards protecting them, but it may not be enough. The Chinese government will not protect your trademark for you. You must enforce the trademark yourself.
- If you properly register your trademarks in China you will probably succeed in an enforcement action. However, you must be prepared to incur the legal costs of enforcement. China is a huge and complex country. If your product is successful, there is a good chance it will be copied. You will need to vigorously defend your rights from the very start in order to prevent this.
Since joining the WTO in 2001, China has adopted or amended over 140 laws and regulations and deleted another 500 laws. China’s entry into the WTO should be seen as the beginning of a legal development process, which is illustrated by the recent decisions in favor of Western trademarks. Prior to China’s Amended Trademark Law, which took effect in 2002, China’s trademark enforcement authorities only protected those trademarks that the Chinese government recognized as “well-known.” This amendment was supposed to reconcile Chinese law with WTO standards and international treaties, and the recent decisions are evidence that the amendment may be having the desired effect.
For more information about China’s 2002 Amended Trademark Law, see Alisa Cahan’s article in the Cardozo Journal of International and Comparative Law, Summer 2004, titled “China’s Protection of Famous and Well-Known Marks: The Impact of China’s Latest Trademark Law Reform On Infringement and Remedies.” (12 Cardozo J. Int’l & Comp. L. 219)
Cahan’s article also suggests potential problems of enforcing the new laws as required by the WTO:
- There is an inherent ideological difference in thinking behind Chinese intellectual property rights. Namely, copying is not seen as harmful, but is viewed as a form of flattery. Also, communist ideology has propagated the notion that all creative works and innovation are owned by the people as a whole (i.e. through the State).
- The enforcement of written laws requires a fully functioning legal system with judges and attorneys competent enough to enforce the laws. Post-Mao China is trying to “cultivate a legal consciousness among individual citizens and economic actors and build a foundation of professional academic training institutions for attorneys, judges, officials, and administrators.” China is in dire need of more lawyers that are competent in the area of intellectual property law.
Piracy of intellectual property will continue until it is no longer profitable. However, there will always be a market for knock-offs, stolen software, and ripped DVDs. Profiteers will be drawn away from these illegal markets more and more as it becomes obvious that greater profits can be made by cultivating their own intellectual property. China’s harmonization with world IP and trademark laws and standards is creating a sanctuary in which the creative and innovative ideas of Chinese nationals can flourish. A perfect example is Beijing Li-Ning Sports Goods Co., founded by former gymnast Li Ning. His home-grown global brand rivals Nike, Reebok and Adidas. Li-Ning holds a ten percent share of China’s athletic-shoe market, domestically outselling all foreign brands combined.
As the sleeping giant, China, awakens, the world indeed trembles, but not with so much fear as it does with anticipation. The country that at one time was innovative enough to invent the first stirrup (Third Century AD); the first law of motion (Fourth Century BC); the first understanding of musical timbre (Third Century AD); the first plastic (Thirteenth Century BC)—just to name a few!—has just had its morning coffee.
"Register Your Trademarks Early!"
In his analysis of the Qingdao court ruling in favor of Starbucks (see Part I and Part II), Steve Dickinson of China Law Blog said, “Register your trademarks early.” This short statement is chimerically simple, which is made obvious by unpacking the statement. China is known for its infamous name brand knock offs and trademark piracy and, consequently, a great amount of political pressure has been put on China to adopt and enforce laws that protect well-known trademarks.
The first Chinese trademark law, which was issued in 1963, did not provide trademark ownership rights. The amended trademark law of 1982 aspired to “improve management of trademarks, to protect exclusive rights of trademark owners and to encourage manufacturers to guarantee the quality of their goods and maintain the reputation of their trademarks.” (see 12 Cardozo J. Int’l & Comp. L. 219) However, the enforcement of this law was ineffective.
Enforcement was sparse because it was believed that trademark infringement was in the national interest and the Chinese consumers benefited. In 1993 the Chinese amended the trademark law again, and this time provided trademark owners with ownership rights. This amendment was the result of the USA threatening trade sanctions and China’s own interest in taking home-grown trademarks into the international market. This exemplifies earlier discussion that China’s own burgeoning domestic market has and will continue to displace its industry of piracy and knock-offs.
As a result of the 1993 amendment, there is a key difference between Chinese and American trademark law. China uses a “first to file” principle whereas the USA utilizes a “first to use” principle. This has caused huge problems for international companies that had yet to register their trademarks in China. Moreover, foreign companies were wary of moving into the Chinese market and registering their trademarks because their English names were not well-known in China, which meant that the foreign company would have to utilize and register their mark in Chinese.
Since China is now a member of the WTO it must abide by international trademark law as established by TRIPs and Article 6bis of the Paris Convention for the Protection of Industrial Property. China joined the Paris Convention in 1985 and is obligated to recognize and protect well-known trademarks. Although a number of countries are members of the WTO and must abide by TRIPs and the Paris Convention, each country still has its own unique body of trademark law that is enforced or not enforced by its governmental agencies. Although a country is obliged to follow these international treaties by virtue of its membership in the WTO or the UN, seeking redress through the WTO or ICJ may not be as simple as bringing an action within the offending country’s legal system. IP Dragon's excellent post "Chinese IPR Concessions Could Stave Off US WTO Lawsuit Against China" is a current example of international politics at play.
Whether a company is relying on a recognized international authority to protect its trademark or the domestic agencies of the country, if planning to venture into China, it is best to “register your trademarks early.”