We have to talk about China.
Once the Chinese market gets a whiff of your best-selling product, that marks the beginning of mass production, lower prices, mass trading or commercialization of replicas, and, of course, your frustrated existence as a highly-priced competitor of your own product.
For a small business, the unfamiliarity with trademarks is a scary territory, especially since fighting off cross-border trademark claims and lawsuits will drain your accounts dry.
And is there anything you can do about it? Let’s discuss.
Surprisingly to many, China has one of the best trademark protection mechanisms; it’s how Western SMEs approach it that determines the eventual consequences.
The Problem
China uses a first-to-file system. The party that applies to register the trademark first will generally be granted exclusive rights. When you delay registering your brand in China, you may find that the trademark has already been granted to a Chinese company, which then holds exclusive rights to that mark in China. Often, these trademarks are registered with the intention of selling them back to the foreign company at an inflated price.
There is a serious problem with trademark squatting, the bad practice of registering a trademark before its original owner does. For example, New Balance struggled against copycats in the Chinese market like “New Balanced” and “New Barlun”; Adidas faced “Qdidas,” “Abidas,” “Abidos,” etc., as well as various Chinese translations of its brand name. All these are bad-faith registrations.
In 2024, China proposed amendments to its trademark law aimed at combating malicious trademark registration activities.
Another challenge, especially for those dealing with Chinese manufacturers, is that Western NDA agreements are not valid in China. This means a typical Non-Disclosure Agreement does not hold in China as it would in other countries.
Even though there is international registration, it doesn’t guarantee full protection in China. The only formal certificate for Madrid System trademarks is issued by WIPO, and China does not issue its own separate trademark certificate. You must request a Chinese trademark certificate before raising a trademark infringement case in China. It is easy enough to request one based on a WIPO registration, but it takes a few months to obtain it.
China does provide a recourse for those whose marks have been registered in bad faith, but opposition is limited to a three-month period after a trademark announcement. The trademark office will not accept protests afterward, so if you fail to present your opposition, you may be brewing a serious cross-border legal dispute.
So, what do I do to prevent all this, Joyce?
This is what you do: act fast in setting up operations and registering your IP locally in both Chinese and English. You should register a trademark in China through the national system, i.e., filing directly with the China Intellectual Property Administration (CNIPA), rather than through the international system. Do not wait until your products have gained huge popularity and a wide base before attempting to enter the Chinese market; by then, someone may have already listed your brand name in China.
If you are manufacturing your products in China, you must have a localized Chinese contract and a signed NNN (non-disclosure, non-use, non-circumvention) agreement. This is necessary because the Western NDA is not valid in China.
Bottom Line
Many brands have successfully defended their trademarks in China; Louboutin was successful in defending its red bottoms, Adidas in fighting off “Qdidas.” In 2017, New Balance won a record trademark infringement payment for infringement of the brand’s “N,” and there are many other brand success stories.
China is not an impenetrable market when it comes to IP protection and enforcement; it just requires vigilance and quick action.
There is more to discuss about trademarks and China—many more differences in its laws compared to other countries, which I intend to cover at a later date.