Trade Mark Protection in China

Planning on exporting to or manufacturing in China? First protect your trade marks  

Generally trade mark protection is available in almost all countries of the world on the basis that entitlement to a trade mark is based on the “first-to-use” or “first-to-file” principle.

Australia has a “First to Use” system

Briefly, according to the “first-to-use” principle, the owner of a trade mark is the person who can prove first use of the mark irrespective of whether the trade mark has been registered. These unregistered rights accumulate and are actionable at common law and the Trade Practices Act. Those countries having a Common law legal system including Australia, New Zealand, the United States of America, Canada, United Kingdom, Malaysia and Singapore have adopted the “first-to-use” system.

Even though registration of trade marks is not compulsory, it is cheaper and easier to enforce registered trade mark rights when compared to relying upon common law rights. Also, more remedies are generally available to an owner of a trade mark that is registered under this system, than for an unregistered mark. Furthermore registering a trade mark provides an asset which can be given a value, sold and licenced (i.e franchised).

“First to File” Principle

In contrast, in the “first-to-file” principle, a party who first files an application for a trade mark has superior rights over another party who has been using the unregistered mark in the country prior to the filing of the application.    In fact a person who has merely been using an unregistered trade mark has no rights in the trade mark. This is unless the mark in question is a famous mark, for example, McDonald’s^® or Coca-Cola^®.

This system is adopted by a those countries having a codified system including China, Indonesia, Japan, Korea, Taiwan, continental Europe, south American countries and many African countries. The “first to file’ principle of trade mark protection encourages earlier registration by providing greater certainty of protection of trade mark rights to the party that first files an application for registration.

Unfortunately, a claim to a mark on the basis of prior use is unavailable for an applicant under this system. In this regard, a genuine user of an unregistered trade mark will not gain any rights over that mark and will have no right of action if an unrelated party (who is acting without fraudulent intent) files an application to register that mark.

Trade Mark Protection in China

China has in the past been criticised for not having much regard for intellectual property rights including trade marks.   However, since becoming a member of the World Trade Organization (WTO) in 2001, China has strengthened its legal framework and amended its intellectual property rights (IPR) and related laws and regulations to comply with the WTO Agreement on trade-related aspect of intellectual property rights (TRIPs).  In addition the Chinese have become very active in protecting their trade marks within China.  In this regard since the introduction of the Trademarks Law in 1983 the trade mark filing in China total 2.7 Million and in 2006 the number of applications filed increased by 0.7 million (10% increase over 2005) and of those applications only 55,000 were filed by foreigners.

Implications for filing and maintaining trade marks in China

So, what are the implications for Australian trade mark owners or applicants, seeking protection in first-to-file countries like China?

One proactive option is for an Australian trade mark applicant who is interested in moving into the Chinese marketplace, to file a trade mark application in China within six months of their corresponding Australian trade mark application. This will provide them with protection of their mark in China from the date the Australian application was filed.   It would also prevent a third party from obtaining information about their mark and proceeding to file an application for the mark in China in order to block their future activities or try to procure a payment from them for the transfer of the mark.

Filing a corresponding Chinese application for an Australian trade mark is also recommended where goods to be sold under the mark will be manufactured in China and exported to Australia and other countries; even when there is no intention to sell the goods in China. The reason for this is that if the manufactured goods are also being branded in China, this equates to use of the mark in China. So, if another party has filed an application for an identical or substantially similar mark, the manufacture and export of goods bearing the registered trade mark will amount to an infringement of that registration, even if the goods were not sold in China.

Registration of trademarks before the product enters the stream of commerce in China is the principal means of ensuring that the mark is eligible for protection under Chinese law. It is also beneficial to develop and register a Chinese language version of the mark, and do so throughout the other jurisdictions of "Greater China," including Hong Kong, Taiwan, Macao and Singapore. Registering a trade mark in neighbouring countries provides both for potential expansion and to block others from registering similar and/or confusing marks. It is also appropriate for Australian companies who are selling their goods and services into the Chinese market to adopt a “Chinese” trade mark.  A trade mark which is not a famous trade mark and which is in Roman characters has the same significance in the Chinese market as does a trade mark wholly comprised of Chinese characters in the Australian market. 

China has a population of approximately 1.32 billion and each year, an increasing proportion of the population move into an improved socioeconomic position allowing them to purchase goods and services at an increasing rate.  As a result, significant opportunities are available for Australian businesses wishing to expand into the burgeoning marketplace of China.   The traps for inexperienced or uninformed trade mark owners wanting to build a reputation in their mark are numerous and no “mercy” is given to foreigners who lose or miss out on rights in this first-to-file trade mark system.

To ensure that their reputations are protected, Australian businesses entering China for the sale or production of goods should seek sound advice on all aspects of trade mark law in order to deal with an unforgiving registration system, a vastly different political landscape, numerous languages and dialects, and a poor reputation of controlling counterfeiters. 

Dave McCarthy

davidm@wray.com.au