Your brand name and your product name and your logo are likely some of your company’s most valuable assets. Most companies realize this. Yet most companies do not realize how they put these things at risk by exploring doing business with China without FIRST applying for a China trademark. And in the past year or so this risk has greatly escalated.
The most important thing you should know about China trademarks is that China is what is called a first to file country. This means that (with very few exceptions) whoever files for a particular trademark in a particular category first gets it. The following three examples of what this means and how horrendous this can be for your company will hopefully nail home this point:
1. If your company’s name is “BestNew” and you make widgets and you have been manufacturing your widgets in China for the last two years and selling BestNew widgets in Europe, Canada and the United States for the last ten years and someone registers the “BestNew” trademark in China for widgets, that someone now owns the “BestNew” trademark for China. This means that the person or company that owns the China trademark for BestNew can block your widgets from leaving China because your widgets violate its trademark. This is not a hypothetical example as this sort of thing happens all the time.
2. If your company’s name is EFGH and you have a really great SaaS business and you are looking to go into China with that business and another company registers the EFGH name as its own trademark in the China trademark class that includes SaaS before you do, the odds are overwhelming that you will never be able to use the EFGH name for your SaaS business in China. This is not a hypothetical example as this sort of thing happens all the time.
3. If your company’s name is XYZ and you have a great consulting company and you are contemplating doing consulting work in China and another company registers the XYZ name as its own trademark in the China trademark class that includes consulting businesses the odds are overwhelming that you will never be able to use the XY name for your consulting business in China. This means that if you try to use the XYZ name for your business in China or even if you stay in the United States and market your XYZ business in China, your company is at risk of being sued for trademark infringement by the company that owns the XYZ trademark in China. This is not a hypothetical example as this sort of thing happens all the time.
If you are thinking you are safe from all this because you are a small company and hardly anyone knows who you are, you are wrong. Ten years ago this may have been true, but today, absolutely not.
Our law firm’s IP lawyers are always getting contacted by companies with China trademark problems, many of which we simply cannot solve. From these contacts I have determined the following:
1. A company that sends anyone to China is at risk of having someone register its trademark in China. Trademark trolls pay people at the airports in China to give them information on foreigners entering China so they can learn about your business and secure your brand names as their trademarks. I know this because it has become commonplace for American and European companies to get an email a few weeks after their China visit (just enough time for someone to file a trademark application) saying “someone just sought to register your company name as a trademark in China.” These emails then suggest hiring the sender of the email to prevent that trademark registration from going through. And here is where it gets interesting. Sometimes no trademark has been sought and the sender merely seeks to profit from the threat. Other times though, the sender (who is connected with the company or person that has filed for the trademark) will then offer to help you purchase your company or brand name from the person or entity now in line for getting it in China. For how to respond to such a trademark email, I suggest you read China Trademark Emails are a Scam!
This situation gives rise to Rule Number 1: Apply for your China trademarks BEFORE anyone from your company sets foot on China soil.
2. A company that communicates with any company in China is at risk of losing out on securing necessary trademarks in China. This is because your communication is a tip-off that you are interested in doing business in China and that alone makes it valuable for someone to file a trademark application to secure your company or brand name as their own China trademark. When a company in the midst of discussions with a China company calls me about those discussions, I always ask whether they have registered their company and/or brand name in China, and if they have not, I strongly encourage them to do so immediately.
Many times though their response is to provide me with one or more of the following reasons why they have nothing to fear:
a. “But the company we are dealing with in China is a big and reputable American company and surely that company would not damage its own name by trying to secure a trademark in my company’s name.” My response to that is that they are correct in believing that the big and reputable American company is not going to file for the trademark, but what about a poorly paid Chinese employee at that company who hears about the deal? Do you really believe there is no risk of that employee having their cousin register your company name as their own trademark in China? If you think this is impossible, you have not done much business with China and you are not a regular reader of this blog.
b. But the company we are dealing with would not run off and register my company’s name as a trademark in China because it knows that doing that would damage its relationship with our company. Not true. First, an errant employee of the company could go off and have a cousin or friend register the trademark, totally outside what either company wants. Second, one would think this would be true, but our China lawyers have seen too many instances where it is not. In fact, we have seen many instances where the Chinese company applies for the trademark and then when negotiations or the relationship with the foreign company are not tilting in the Chinese company’s failure, it pulls out the trademark registration as a negotiating ploy. What if things are going well and the foreign company learns of how the Chinese company filed for a China trademark in the foreign company’s own name? In that situation, the Chinese company will say it “did that to protect you” and then offer to give it to you for the cost they incurred in getting the Chinese trademark.
This gives rise to Rule Number 2: Apply for your China trademark before anyone in China (or ideally, anywhere else as well) has any clue that your company is looking to do anything in or with China.