Strategies on Trademark Snatching Prevention and Remedies

Issue 14 By He Min'gang,[Trademark]

In July, Shenzhen Bolangwen Science & Technology Development Co., Ltd. tried to steal more than 180 domestic well-known trademarks in Hong Kong, indicating that trademark snatching has become a "turbulent shocking storm" to the Intellectual Property (IP) field in China. In recent years, with China's fast and sustained economic growth, Chinese enterprises have become stronger and ever more integrated into the global economy. And with this integration comes an increase in snatching Chinese trademarks both in China and abroad. For Beijing alone, a series of celebrated trademarks such as Da Bao (大宝), Hong Xing (红星), Tong Fang (同方), Tong Yi (统一), and San Yuan (三元), among others, have been snatched in the US, EU and Hong Kong. In Canada, there is even an "Old Trademark Transferring Company" specializing in snatching old and famous Chinese trademarks. This presents a latent danger for Chinese enterprises, which are increasingly involved in fierce competition in the global market. The prospects for Chinese brands have aroused concern for the whole society.

I.Trademark Snatching is a Kind of Commercial Behavior

As regulated in its Trademark Law, China adopts the principle of first application in trademark registration. Natural persons may also apply for registration and this makes trademark snatching possible and inevitable. Therefore a group of "professional trademark snatchers" have emerged, who use trademark snatching as a kind of investment, snatching some well-known trademarks or trademarks which are similar to well-known trademarks. Many domestic enterprises, as a result, have to pay a tremendous amount to buy back their own trademarks.

Many large foreign companies and their overseas agents are frantically snatching well-known Chinese trademarks in many countries, but do not use them in a large scale for products. Some are snatched purposefully by some advanced western countries wanting to create IPR barriers in a new form to contain Chinese enterprises. Most of these snatching practices are commercial in nature, to either slow Chinese enterprises’ pace of gaining more market share or to profit from large trademark transferring fees.

II.Trademark Registration Awareness Needs to be Improved

Though many domestic enterprises have succeeded in developing famous trademarks of their own after years of efforts, they have little awareness for their protection. These enterprises may squander their money to use stars as spokespersons while spending little on trademark registration and protection. Most Chinese enterprises register their trademarks under only one class of goods and some even do not register them at all at home, not to mention register them abroad. It was once reported that among China's 500 Most Valuable Brands released by the World Brand Lab in 2004, 46% had not been registered in the US, 50% had not been registered in Australia, and 76% had not been registered in the EU. Besides, in 2004 the number of Chinese brands registered abroad numbered less than one hundred, while more than 10,000 trademarks were registered by foreign companies in China.

III.Strategies on Trademark Snatching Prevention

Domestic IP experts appeal tp Chinese enterprises to include IPR protection in their management strategy. Enterprises should try to build a "firewall" for their trademarks, not only to prevent them from being snatched by others, but also to be more responsive in cases of being snatched.

1.Strategies on Prevention of Trademark Snatching

A. Timely application for trademark registration
       Enterprises should have strong brand protection awareness. They can apply for trademark registration either prior to the use of trademarks or whilst using them, to protect their own brands in advance from being snatched. But few domestic enterprises can apply in time and even some well-known trademarks have not been able to register. For example, Harbin "Zheng Yang He" (正阳河) Soy Sauce saved about RMB 1,000 by not registering its trademark only to lose RMB 500,000 by getting it back from the snatcher, excluding money and time spent on mediation and litigation. This is really not worthwhile. What's more, enterprises should renew their registration in time. Failure to do so will give some professional snatchers the opportunity to apply for registration themselves and these enterprises will end up spending tremendous time and efforts getting back their valuable trademarks.

B.Strategic registration
       The trademark registration application should be based on the principle of "one application for a trademark in each class of goods" and one trademark can be registered in dozens of classes. It is never sufficient to just register in one class for an enterprise with sustainable development. For instance, Beijing "Hui Yuan" (汇源) only registered its trademark in the class of "juice and drinks" at the time of its establishment. After several years of development, Hui Yuan now produces and sells more than ten classes of goods and over 400 kinds of products, which are even sold in Europe and US. When Hui Yuan enlarged its operations and tried to apply for extended registration trademarks, it found that the trademark "Hui Yuan" had been snatched by others in other classes of goods. It thus caused Hui Yuan to suffer a great loss.

Therefore, well-known trademarks should also be registered respectively in similar or different classes to be effectively prepared against trademark snatching. The practice of Hangzhou "Wahaha" (娃哈哈) is highly recommended. The company Wahaha registered the trademark "Wahaha" not only in its major classes of goods, but also in other classes. It also registered trademarks which may be confused with ""Wahaha", like "Hawaha" (哈娃哈), "Hahawa" (哈哈娃) and as well as others.   

 Of course, the best strategy is to register the trademark in all classes of goods, i.e. to register the same trademark in all the classes of the goods to obtain exclusive trademark right to all goods and to rule out the possibility of being snatched by others; also, this is the most effective way to ensure the distinctiveness of the brands and to enhance the brand value. It is a common practice adopted by famous international brands. But the cost of registering in all the classes of goods may be higher, so enterprises can use their own discretion.

C.Timely international registration
       Faced with current economic globalization, Chinese enterprises have to "go global" to seize more of the international market. The first thing on their agenda should be international registration of their trademarks to prevent them from being snatched by companies of another country and losing their market shares in that country due to IPR.

As China is a member of the Madrid Union, those trademarks already registered in China or whose applications have been submitted may apply for international registration to the International IP Bureau of the Madrid Union (hereinafter referred to as the "International Bureau") through the Trademark Office of the State Administration for Industry and Commerce in accordance with the Madrid Agreement Concerning the International Registration of Marks (hereinafter referred to as the "Madrid Agreement") and the Protocol Relating to the Madrid Agreement Concerning International Registration of Marks (hereinafter referred to as the "Madrid Protocol"). At present, the Madrid Union has 79 members, including developed countries such as the US, European countries, Japan and Korea. That means that if an enterprise submits a Madrid international registration application to its own country, it can obtain trademark protection from a designated country. Therefore, Madrid international trademark registration is the best choice. But the Madrid system of international registration of trademarks does not cover all countries. For example, Canada and Laos are not members of the Madrid Union. Yunnan "999" battery trademark was once snatched in Laos. Twenty years ago, Yunnan "999" battery entered into and seized control of the Laos market but failed to register its trademark there. In the end, the "999" trademark was snatched and the snatcher also applied for protection from Laos Customs. The Laos government prohibited the import of "999" battery from China. Yunnan "999" battery was forced out of the market completely and could do nothing.

In addition, enterprises may also adopt regional trademark registration. If protection is to be sought from EU members, the EU registration method may be used; if protection is to be sought from African countries, registration may be actualised through the African Intellectual Property Organization (OAPI).

D. Good knowledge of foreign trademark systems
       At present, countries mainly adopt principles of "first use" and "first registration" in trademark registration. "First use" means that the person who uses the trademark first owns the trademark right. This principle is mainly practiced in countries with common law systems such as US, UK, Australia, Canada and Singapore. In these countries, an enterprise should use a trademark as early as possible and keep the evidence indicating its first use. If the trademark is snatched by others, the enterprise can regain it through a trademark opposition procedure or litigation. The principle of "first registration" means that the person who registers first owns the trademark right, and it is adopted mainly by countries with continental legal system such as Japan, Korea, Spain and Italy. In these countries, enterprises should try to apply for early trademark registration to avoid their trademarks from being snatched.

In addition, some international treaties also contain regulations regarding trademark protection. For instance, the Paris Convention for the Protection of Industrial Property (hereinafter referred to as the "Paris Convention") protects well-known trademarks by providing that: each contracting country shall, ex officio if its legislation so permits, provide legitimate protection to the trademarks which are ascertained as well-known trademarks by the competent authority of the countries in which the trademarks are registered or used regardless of whether the trademarks have been registered. At present, the Paris Convention has over 160 contracting members (including China). All Madrid members are members of the Paris Convention.

2.Remedies for trademark snatching

Though people always hope "to spend proper amounts of money to get certain things done", things do not always work out that way. Trademark represents the brand and brand decides the market, which means economic interests. If one's trademark is snatched, especially if it is snatched abroad, the enterprise has to try all means to find a remedy.

A.By means of law
       Law is a double-edged sword. Enterprises should make good use of this sword and use other countries’ laws to protect their own rights. In particular, laws and regulations regarding the first use and well-known trademarks have become two very sharp swords for enterprises to fight against the snatching of their trademarks.

Enterprises can take advantage of the principle of first use and grasp evidence of first use to ensure their trademark rights in countries where such a principle is adopted. For example, China's mosquito-repellent incense "Xiong Ji" (雄鸡) is sold widely in Africa and South America. But the trademark was snatched in Nigeria and a large amount of infringement compensation was claimed. Xiong Ji took advantage of the regulation of "first use" regarding trademarks in Nigeria, collected much powerful evidence proving its first use, and finally won the case after three years of litigation.

In addition, enterprises should pay attention to another detail, i.e. Hong Kong SAR is different from Mainland China in that it adopts the principle of "first use". In March of this year the trademark of "Cai Shi" (采诗) was snatched in Hong Kong. Cai Shi argued that it had sold products in Hong Kong and broadcast TV commercials, proving its "first use". Finally it won the initiative and the snatcher had to cancel its trademark registration.

For well-known Chinese trademarks, regulations on the protection of well-known trademarks such as the Paris Convention for the Protection of Industrial Property and TRIPS can be used to fight against snatching and recover trademarks snatched abroad. For instance, after the Chinese pinyin spelling of trademark Wuliangye (五粮液) was snatched in South Korea, Wuliangye Group immediately raised its opposition. Many pieces of evidence were provided and after 15 months of litigation the Korean Trademark Office finally made a ruling favorable to the Wuliange Group. That is: "Based on the points and evidence provided by the Opposing Party, the quoted trademark is ascertained as a well-known trademark not only in China but also in South Korea. Therefore the trademark was snatched by the South Korean company for the purpose of unfair competition by confusing the consumer of the origin of the product under the trademark." The application by the Korean snatcher was rejected. Likewise, in a trademark dispute with German Bosch-Siemens, Chinese Hisense (海信) won back its trademark rights at the lowest cost by relying on the fact that Hisense is a well-known Chinese trademark. Thus it is obvious that the status of being a well-known trademark is an internationally protective umbrella for enterprises’ trademarks.

The two means mentioned above are common remedies. There are some other regulations that may help Chinese enterprises to protect their rights and interests abroad. Enterprises may refer to the regulation of Article 6 of the Paris Convention to prevent their overseas agents from snatching their trademarks, which provides that "If the agent or representative of the person who is the proprietor of a mark in one of the countries of the Union applies, without such proprietor's authorization, for the registration of the mark in his own name, in one or more countries of the Union, the proprietor shall be entitled to opposing the registration applied for or demand its cancellation." In addition, enterprises should also strengthen market monitoring so that their trademarks will not be snatched successfully due to the failure of raising timely opposition in time. Cai Shi and Wuliangye won additional time to raise opposition and to provide evidence through the monitoring of markets in Hong Kong and Korea respectively, which detected the snatching in time. 

B.By means of negotiation
       The motivation of snatchers is only profit. If the enterprise can sit down and negotiate with the snatcher, it is possible to come up with a strategy that is good both for the market and efficiency. For instance, in the dispute between Hisense and Siemens, through negotiations the two reached an agreement within two weeks. Though a mystery remained over the  "free transfer or six-digit transfer fee", the agreement gave Hisense time to enter into the European market. All Hisense trademarks are under the control of Hisense.

It is worth noting that trademark negotiation is by no means a simple matter of money but an overall competition involving strength of public relations in the government and society. In the "Hisense vs. Siemens" case, Hisense actively responded to the litigation from the very beginning, cooperating voluntarily and broadly with the media to report and assist the media in launching a grand "Seminar on Rights-Protection for Chinese Enterprises Abroad", which was attended by representatives from Ministry of Commerce of the People's Republic of China (MOFCOM) and the Trademark Office. These actions imposed great pressure on Siemens, which was forced to give up its registration.

C.Changing trademarks and attacking instead of defending
       If it is impossible for an enterprise to get its trademark back through negotiation, and if it also lacks resources to engage in legal procedures, the simplest solution is to change its trademark. When Legend intended to march into the international market, it found out that the trademark "legend" could not be registered in many countries and this would slow its pace of globalization. Confronted with potential global trademark litigation or negotiations, Legend chose to take the initiative by changing its trademark to"lenovo". Though this strategy was made because it has no choice, it has proven to be the right path. In addition, as Chinese trademarks are in Chinese and foreign markets do not readily recognize the Chinese logos as having  "value-added" functions, to present a new English logo in due course will not impact the market but may lay a solid foundation for creating new brands.

About the author:
    He Min'gang is in the Beijing Intellectual Property Office

                                                                                      (Translated by Luo Duoqun)

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