Zoe Liu
Rouse & Co International

(1) A Mexican lock manufacturer has been sourcing original equipment manufacturers (OEMs) in China for more than 10 years. The manufacturer became increasingly reliant on the China supply and even considered closing its Mexico plant. It decided to file the trademark in China and then found there were three prior applications and that the applicants were in the same town where their suppliers were located.

(2) A Canadian garment factory, after carefully assessing various Chinese clothing factories, decided use a Chinese OEM. In its second exportation, US$120,000 worth of garments were caught by the Chinese customs authorities – the brand had already been registered and filed with the Chinese Customs General Administration by a Chinese company.

(3) A Spanish garden tools company that occasionally used Chinese OEMs found counterfeit tools from China being sold in its home market. It planned to take action against the Chinese counterfeiter only to find that the counterfeiter owned their brand in China.

The above companies are far from being huge international companies – their brands are all local brands, possessing a certain degree of reputation in their home markets only. They have no intention of expanding their market into China. Some of them have big plans in China purely for cost-saving purposes, and some do not even have that. However, their businesses have all been affected by Chinese trademark pirates; some have been seriously hampered (such as the company in the first example above) and some are suffering considerable financial losses (such as the company in the second example).

Considering that it takes three years to register a trademark in China, the Chinese trademark pirates must have paid attention to those local brands at the very early stages of their development, when the brand owners knew very little about China let alone about applying for registration in China.

What Should the Local Legitimate Brands Owners Do?

Firstly, if they plan to use OEMs from China, they should apply for trademark registration as early as possible.

Secondly, if someone else has already applied for the registration of their brand but it has not yet been granted, they should keep track of the process and file opposition once the brand has been published for opposition.

Beating the opposition will certainly be a tough battle. Success depends on many factors, such as how unique the brands are, and whether there are written records of a business relationship concerning the brand in question between the legitimate trademark owner and the pirate, and whether this relationship predates the pirate’s filing.

The opposition process will last for several years which will give the legitimate brand owners time to diversify their business plan or find an acceptable solution.

Thirdly, if the brands have already been granted to Chinese pirates, the legitimate brand owners have to assess the situation and the price they would be willing to pay to recover the brand.

The first step is to know who the pirate is and what the pirate really wants. Past experience indicates that pirates are quite diverse: some have no actual business, and plan to sell the brands; some want to monopolize all OEM production orders; some plan to develop the brand for the China market; some are manufacturers and some are individuals; some are rich and some are poor.

Depending on the different circumstances in each case, the legitimate brand owner will have options:

1. File for bad-faith cancellation and use the cancellation as leverage to negotiate for a settlement.

2. Stop sourcing from China (although there is a risk that one day the pirate will start exporting counterfeit goods to the legitimate brand owner’s home market or to other key markets).

3. Abandon the brand.

The best way to prevent all the above trouble is to file trademarks in China as early as possible, even before commencing business operations in China.

Rouse & Co International
Unit 1403, NCI Tower, No.12A Jianguomenwai Avenue,
Chaoyang District, Beijing 100022, China
Tel: +86 (0) 10 65693030
Fax: +86 (0) 10 65693040
Website: www.iprights.com