We are currently aware of a rise in the number and impact of international trade mark squatters who continue to take advantage of the Chinese trade mark law and practice. By so doing, they acquire rights in highly reputed marks in China, thus barring expansion plans for the holders of legitimate trade mark rights elsewhere into China.
Consequently, companies are now faced with two options, firstly they must either re-brand their products in order to access the Chinese market or they must enforce their rights through local court action. Based on the uncertainties surrounding international trade mark enforcement, the latter route is not desirable given the associated costs and time involved. Despite this, provided the UK applicant can establish non-use of the mark or a global reputation therein, revocation may be attainable.
The trend for ‘squatting’ currently plagues Chinese commerce and will impact on all undertakings looking to expand to that part of the world. To counter the situation, a proactive approach needs to be taken to registering and enforcing trademarks overseas, even if opportunities and plans for expansion are in the formative stages.
The position described arises through China relying upon a first to register system for trademarks. By contrast, the UK approach centres on the first use of the mark in commerce, giving more favour towards the reputation and goodwill attained in the relevant marketplace. This ensures that the public is protected by identifying the source of origin.
An international reputation has clearly not been enough to encourage Chinese law enforcers to revoke the free-riding registrations. Large UK brands such as John Lewis, Waitrose, Sainsbury’s, Saville Row, X-Factor and Strictly Come Dancing have all suffered from the speed of squatter’s wrath causing their marks to consequently weaken in relation to the goods or services protected elsewhere.
Currently in China, a third party now possesses the manufacturing rights to the Asda mark in relation to garments, shoes and belts; whilst Dixon, has lost the rights to mobile phone manufacturing since the proprietor has registered the Chinese translation of the mark and has made sales of around ten million mobiles under that trading name. In comparison, Top Shop has retained certain rights for fashion and retail services, despite losing control of similar markets until 2019. Endless sports stars and celebrities have also been ‘acquired’ including Michael Jordan, or Qiaodan (pronounced chow-dan), the sports company are valued at around $350 million. Similarly, Facebook although banned in China has been registered for an array of services.
As a form of due diligence, Trademark owners must attempt to retain the strength of their marks and be proactive in registering them in all foreign countries, particularly those with a first to file system such as China. This will act as a deterrent against third party attempts to legitimately steal the goodwill and trading reputation that has been attained both at home and overseas.