Apple has recently lost a few IP infringement cases in China. Earlier this month, there was a case involving the Beijing Municipal Bureau of Intellectual Properties’ suspension of the sale of all models in Apple’s iPhone 6 series due to alleged infringement of appearance design patent of Shenzhen Baili’s 100C medel mobile phone. Earlier this year, Apple lost a trademark case with a leather goods firm in Beijing, Xintong Tiandi, which used the word ‘IPHONE’ on leather wallets.
Some foreign companies assume that if they registered their trademark in their country of origin, it will be protected in China. This is not the case. As a result, IP disputes frequently happen in China because, unlike in the West, China’s State Administration for Industry and Commerce (AIC) has a “first to file” system that does not recognize trademark registrations overseas.
China’s first to file system awards the trademark rights to the first party to apply, even if the trademark is already registered in other countries. This system gives rise to the common problem of “trademark squatting” where companies in China look out for well-known trademarks and register them before companies come and claim them.Trademark squatters then wait for the companies with those trademarks to enter the China market and sell the trademark to them for a profit. This happened to Tesla Motors, the American electronic automotive company. A Guangzhou-based man acquired the rights to the Tesla trademark in China in 2009 and Tesla Motors had to purchase the trademark rights from the man when it entered the China market
This legal differences challenges even the largest of foreign investors, making it clear that quickly registering a trademark within China is of the utmost importance.
Before registering a trademark, a company must first check that no similar or identical trademarks exist or have already be registered. The following materials are required for an application and must be filled out only in Chinese and signed and stamped with the company’s official seal:
- Trademark registration form (or Power of Attorney if applying via an agency);
- A copy of the company’s certificate of incorporation;
- The company’s name and address supplied in English and Chinese;
- Company director’s signature;
- Six copies of printed digital version of proposed trademark;
- Category of proposed trademark and 10 auxiliary categories;
- Trademark explanation.
A company must specify the product’s category. There are 45 classes for goods and services according to the World Intellectual Property Organization’s Nice classification. However, unique to China, these 45 classes are divided into further sub-classes.
The China Trademark Office determines the eligibility and completeness of each trademark application. If the application is accepted, the AIC will issue a preliminary approval, and publish the trademark in the China Trademark Gazette, where other companies have the period of three months in which to oppose the registration of the trademark. If there is no opposition during this period, the AIC will approve the trademark registration. This approval will be published as a notification in the Gazette.
The overall trademark registration process can take from around 12 to 18 months, and a trademark is valid for 10 years.
As Apple’s numerous cases show, even large multinational companies are not immune to trademark disputes and cannot always settle them in their favor. A trademark is essential for a businesses’ recognition and identity among competitors that already hold the rights to their names and logos. With such a long processing period, it is important for a foreign company to plan well ahead before entering the China market. Without the protection of trademark, products sold in China will be left open to abuse or squatting.
Asia Briefing Ltd. is a subsidiary of Dezan Shira & Associates. Dezan Shira is a specialist foreign direct investment practice, providing corporate establishment, business advisory, tax advisory and compliance, accounting, payroll, due diligence and financial review services to multinationals investing in China, Hong Kong, India, Vietnam, Singapore and the rest of ASEAN. For further information, please email [email protected] or visit www.dezshira.com.