Trademark Protection In China:

Legal And Practical Measures to Help Prevent Loss

 

by May Y. Hao

 

15 November 2002

 

We all know that the Chinese government is making efforts to pass new regulations in order to award effective legal protection to intellectual property rights, including trademark rights, in China. However, in practice, trademarks are frequently infringed and counterfeited products are manufactured and sold on a large scale in China. Therefore, a challenge facing a US company doing business in or with China is: what should it do in order to protect its trademark in China?

 

There is no easy answer.  However, companies should at least take all legal and practical measures available to them in China to reduce risks and possible losses.

 

The Chinese Trademark Law provides for a trademark registration system, which lays down the legal foundation for trademark protection in China.  As in the United States, a company should engage a professional to perform an initial screening to make sure its trademark can be registered in China. Since China has a centralized registration system (which is different from the United States, where a trademark may be registered at both federal and state levels), the process for screening and/or registration is fairly easy.

 

One major difference between the trademark laws in China and in the United States is that the United States adopts the “first-to-use” system, while China adopts the “first-to-file” system.  That means, a US company may lose legal protection in China if a similar mark has been registered in China ahead of it.

         

Both China and the United States are members to the Paris Convention. As a result, a US company that has registered its trademark in the United States may have the same priority date in China if it registers its trademark in China within 6 months after its initial registration of the same mark in the United States.

         

Despite legal protection, it is always a challenge to protect a registered trademark in China effectively.  Depending on such factors as whether a trademark is a “well-known” mark, the budget of the company, available internal monitoring capability, etc., a US company should consider taking the following steps: 

 

1. before entering the Chinese market, negotiate with its Chinese partner and make it a contractual obligation for the Chinese partner to maintain the validity of a registered trademark and prevent it from being misused;
2. put similar provision and restriction in the contract with any licensee and distributor in China;
3. set up an educational program for managers and employees so that such people can make trademark protection efforts part of their daily operation (such as educating customers through sales or post-sale services);
4. use a local law firm or trademark agency to help monitor possible infringement cases;
5. put the Chinese phrase “注册商标” (“Registered Trademark”), which functions as the symbol ®, on its products in order to give notice to consumers.

If an American company’s registered trademark is seriously infringed or counterfeited products are produced and sold in China, the US trademark owner may do any of the following: 

1. sue the relevant party in a Chinese court. 
2. resort to the State Administration for Industry and Commerce ("SAIC") or its local counterparts;
3. report to the police department and/or customs to request a seizure of counterfeited products. 

 

In recent years, many of the major cities in China have set up either a separate court or a division in a high court to handle or to supervise the lower court to handle intellectual property rights cases.  In fact, in the last a couple of years, more and more Chinese local courts are adjudicating trademark infringement cases, not only involving foreign mark holders, but between Chinese parties.

 

Under Chinese Trademark Law, the SAIC or its local counterparts may take the initiative to investigate a trademark infringement case and impose a penalty on the infringers. In addition, the findings of an infringement investigation can be independently used as evidence in a subsequent legal proceeding.

 

A company may lodge a complaint with law enforcement, however the police department often will not take action unless such counterfeited products are concentrated in certain locations.

 

In short, while the Chinese legal system currently does not provide adequate protection for trademarks, a US company doing business in or with China still should make efforts to utilize all available legal and practical measures to reduce risks and mitigate damages. v

 

May Y. Hao provides legal services to companies involved in China-related transactions.  Ms. Hao received the Master of Laws degree from China University of Political Science & Law in Beijing in 1988 and a JD degree from Northwestern University School of Law in 1993. After graduation from Northwestern, she practiced law with three leading US law firms, White & Case (New York and Hong Kong), Baker & McKenzie and Mayer, Brown, Rowe & Maw (formerly known as Mayer, Brown & Platt). She can be contacted at sradvisors@gmail.com.