By Dan Harris
Your brand name and your product name and your logo are almost certainly some of your company’s most valuable assets. Most companies realize this. Yet most companies do not realize how they put these things at extreme 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.
Let me explain.
China is what is called a first to file country.Companies need to know that China is a “first to file” country. See China Trademarks and the Real Meaning of First to File. This is by far the most important thing you need to know about China trademarks. First to file means that (with very few exceptions) whoever files for a particular trademark in a particular category gets it. Three examples of what this means and how horrendous this can be for your company will hopefully nail home this point
- If your company’s name is “Nuvealass” and you make widgets and you been manufacturing your widgets in China for the last two years and selling Nuvealass widgets in Europe, Canada and the United States for the last ten years and someone registers the “Nuveulass” trademark in China for widgets, that someone now owns the “Nuvealass” trademark. And what this means is that someone can stop 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.
- 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 class for SaaS before you do so, 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.
- If your company’s name is XYZ and you have a really great consulting company and you are contemplating having your business work for Chinese companies and another company registers the XYZ name as its own trademark in the class for 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 these sort of things happen all the time.
If you are thinking you are safe from all of this because you are a small company and hardly anyone knows who you are, you are simply wrong. Five years ago, maybe, but today, absolutely not.
Let me explain.
Because of this blog our China lawyers are always getting contacted by companies with China trademark problems, most of which we simply cannot solve. From these contacts I have determined the following:
1. A company that sends anyone to China is at real risk of having someone register its trademark in China. Why does this increase the risk? Somehow or other (and you can draw your own conclusions here) trademark trolls will learn of your business. How do I know this? Because in the past year or so 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 that “someone just sought to register your company name as a trademark in China.” These emails then suggest hiring the sender 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 almost certainly 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. 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. Why does merely communicating with any company in China increase your risk? 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 run off and 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 really big, really reputable American company and surely that company would not damage its own name by running off and filing to secure a trademark in our own company’s name.” My response to that is that they are absolutely correct. Giant American company is not going to file for the trademark, but what about a poorly paid employee who hears about the deal? Do you really believe there is no risk of that employee having his or her cousin go off and seek to register your company name as his or her 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. See Bad Faith Trademark Registration In China. Good Luck With That.
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 if it does that it 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 we 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 mere filing fee.
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.
Dan Harris is founder of the Harris Bricken law firm, a boutique international law firm focusing on small and medium sized businesses that operate internationally. China is the fastest growing area for the firm. Dan writes ChinaLawBlog.com as a source of China legal and business information.