Time-honored Brands Gain Riches as Time Goes By

2010/08/09,By Doris Li, China IP,[Comprehensive Reports]

On March 31, 2008, China released the Opinions on Protecting and Promoting the Development of Time-honored Brands (the Opinions) to implementing the spirit of the Party’s 17th National Congress with respect to facilitating the nourishment of China’s international famous brands and strengthening the excavation and conservation of national cultures, guiding time-honored enterprises which possess independent intellectual property (IP) and inherit traditional Chinese cultures and arts to accelerate innovation and development, and giving full play to time-honored enterprises in the economic and social development.
The release of the Opinions, together with government’s concern, has drawn unprecedented attention to the development and protection of time-honored brands. How to promote the development of Chinese brands and ensure effective protection in their development have become questions both government and enterprises are considering.
At present, when asked, foreign brands are most commonly found on the tip of tongue of most Chinese citizens. It is not easy to find Chinese brands on the list of internationally famous brands. Even within China, many time-honored enterprises with century-long histories are struggling for survival and find themselves incapable of giving full play to their advantages. Wal-Mart CEO Lee Scott once commented that the Wal-Mart’s chain concept originated from China; following in the footsteps of the model Ruifuxiang Silk had adopted such a model about 100 years ago.
The Opinions have laid out detailed plans on the development and protection of time-honored brands. Among them, development of time-honored brands has been incorporated into urban planning and urban commercial network planning. The interests of time-honored brands are being protected in demolitions and renovations, protections of cultural heritage for time-honored brands have been strengthened, and for the first time IP rights protection for time-honored brands have been included in the Opinions.
Regarding the development of time-honored brands, strengthening their market competitiveness has been high on the agenda. The government has provided supports in human resources and material to encourage time-honored brands to innovate their management methods, technologies and arts. The governmental departments have also handed out preferential measures in the selection and treatment of inheritors with respect to nurturing inheritors of traditional technologies and arts. During our interview with the time-honored brand Neiliansheng Shoes, the enterprise said that the primary qualification in the selection of existing crafts inheritors that exhibit a strong interest in the crafts and the belief in the value of pushing the cause forward. In addition, there are requirements in terms of academic qualifications. Now among the three inheritors of Neiliansheng, one is a college graduate, and the other two hold bachelor’s degrees.
In recent years, governmental agencies have placed an emphasis on the development and protection of time-honored brands, which has also enhanced their sense of rights protection. In August 2007, Wangzhihe Food Group sued German Okai for trademark infringement and unfair competition. The case was tried in a local Munich tribunal specializing in IP disputes in Germany. Although Wangzhihe “won” the case at after a great deal of legal maneuvering, it paid heavily for the victory. It has become common knowledge that overseas trademark squatting of brands is not rare. In addition to the Wangzhihe trademark, Okai alone had previously registered Laoganma, Qiaqia, Jinmailang, Baijia and other trademarks of well-known private enterprises in China. Unlike Wangzhihe, not many enterprises have taken action to protect their rights, and more enterprises prefer private settlements and shy away from the sort of direct litigation taken by Neiliansheng.  
According to statistics from the Trademark Office of the State Administration for Industry and Commerce, since the 1980’s there have been more than 2,000 cases of preemptive registrations of trademarks for China’s exported products, resulting in an annual loss of about 1 billion Yuan in intangible assets. There are more than 100 cases of overseas preemptive registrations of China’s trademarks each year, such as 狗不理(GO BELIEVE), 六必居(LIUBIJU), 冠生园(GUANSHENGYUAN), 五粮液(WULIANGYE), 红塔山(HONGTASHAN), 同仁堂(TONGRENTANG) and other famous Chinese trademarks. Hundreds of time-honored trademarks have been even marketed online in large quantities. Research for this article revealed that currently the major threats of trademark squatting to Chinese brands abroad come from international speculators, individuals and foreign distributors.
The old businesses need to develop and build Chinese brands, thus to integrate development and protection in an effective and timely manner before it is too late. Time-honored brands have become more enlightened and have begun to take action, however the road ahead is destined to be bumpy and difficult.
NEILIANSHENG Shoes – Protection precedes development
Neiliansheng, which was founded in the 3rd year of Xianfeng (1853) in the Qing Dynasty, started as a shoemaker for Mandarines. The soles are comprised of 32 layers. Specialty products such as “a thousand-layer” soles have 81 orderly flax stitches per square inch and are all made by hand even to this day.
“内联升” (NEILIANSHENG) is a business name and a brand as well. “Nei” means the imperial courts and “Liansheng” denotes that customers wearing the imperial shoes made by the shop will have an illustrious career in officialdom and receive successive promotions. In the past, as a household saying showed, Beijingers showed off their wealth by wearing Majuyuan (hats), Neiliansheng (shoes), Eight Xiangs (silk clothes) and having Four Hengs (bank notes) in the pocket. The so-called “wearing Neiliansheng” means that it was a display of prosperity if one could wear shoes made by Neiliansheng.
Neiliansheng is also the first enterprise to have VIP users. Neiliansheng would the record shoe sizes and styles of each civil or military official who came to the shoemaking shop to buy footwear. If they decided to buy shoes again in the shop, upon notification, custom shoes would be sent to them immediately based on VIP customer records. In addition, this also made it convenient for lower-level officials to buy gifts for imperial officials before their visits. As a result, Records of Shoes detailing shoe sizes and styles of kings, princes and aristocrats was published and released. Records of Shoes was also China’s first “customer relationship management file” and has been incorporated into the databases of MBA cases of the Guanghua School of Management, Peking University.
Neiliansheng is well-known to many elderly people in Beijing, but less so among younger people; besides, no extensive publicity is available beyond Beijing. According to Wang Qiang, Assistant to General Manager of Neiliansheng, it has been beefing up publicity efforts every year and has planned to strengthen advertising on television, radio and other media to promote recognition of the time-honored brand. In addition to extensive publicity, Neiliansheng continues to make innovative products. It is learned that the Neiliansheng design team also comprise personnel studying fashion design in France. Many new cloth shoes, sandals and boots introduced in 2009 bear distinctive elements of fashion, but these innovations are not known by young people.
The Neiliansheng trademark has obtained registrations both at home and abroad, but combating counterfeits has always been a headache for the enterprise. Wang Qiang said: “The traditional cloth shoe market in Beijing is still relatively in chaos, and there are cases of shoddiness, free-riding of famous brands and counterfeiting. We have also hired a full-time monitoring agency. In 2009 we sued a Hangzhou-based enterprise for its unauthorized use of the Neiliansheng trademark. Although the amount involved in the counterfeiting was not large, the case played a crucial role in Neiliansheng’s foray into the southern markets.”
It was revealed that in 2009, apart from the lawsuit against the Hangzhou-based enterprise, Neiliansheng also sent written notifications to several Beijing-based enterprises exploiting its brand and infringing its rights, and successfully stopped their infringement. Wang Qiang said: “This year Neiliansheng will ratchet up its efforts in rights protection despite satisfying effects on rights protection in 2009. We have realized the importance of protecting IP rights for time-honored brands.”
Protection of time-honored brands is not only on the trademarks of the enterprises, but also more on the goodwill of brands. Recently Neiliansheng received a delegation of French mayors, and the visit was originally scheduled for only 15 minutes. But visitors stayed for almost an hour at the shoe sales stands on the first floor after they learned that the cloth shoes by Neiliansheng were all hand made during a visit to Neiliansheng’s shoe culture and intangible heritage exhibition. Every visitor left satisfied with shoes.
Talking about the prices under time-honored brands, Wang Qiang looked a little helpless and said, “In recent years Neiliansheng has not changed much in prices, which range from 100 Yuan to 300 Yuan, or 500 Yuan for a pair of hand-made cloth shoes. However, a pair of tailored shoes made for four to five days by a master craftsman, who was granted by the country as a traditional crafts inheritor, is priced at a little more than 1,000 Yuan; equal to the price of an ordinary pair of leather shoes. It is no match for some hand-made crafts from abroad. It does not mean that we don’t want to raise prices, but we dare not raise prices. As our prices go up, counterfeiting products will make up the number with lower prices.”
Wang Qiang said that governmental agencies have increasingly strengthened their efforts to support time-honored brands in recent years and provided great economic and policy supports. Since the corporate restructuring in 2002, there has been a growth of 55% in profits. However, there are many problems time-honored brands don’t have the strength to solve alone. For example, he said, “As regards Internet infringement, many international brands cannot find good solutions, therefore, time-honored brands, based on their economic capacity, are not likely to come up with effective rights protection measures. Regarding infringement at stores, the manpower limits for time-honored brands means we can only tackle infringing stores occasionally and there are more than we are capable of solving. In the rights protection of time-honored brands, the government has not provided explicit supportive methods. I think priority protection should be offered from the perspective of legal acts. Besides, the governments should grant supports in maintenance fees to encourage time-honored brands to protect their rights. Then there is the issue of how to achieve, ‘a unified coordination across the country.’ We often receive local protection in our rights protection. Finding solutions to rights enforcement in other jurisdictions may have a good effect on improving the protection of time-honored brands.”
Wuyutai Tea Shop – Pursue innovation for development
Wuyutai Tea Shop, originally called Wuyutai Tea House, was founded in the 13th year of Guangxu in the Qing Dynasty (1887) and has a history of over 120 years. After more than 100 years of development, Wuyutai has had over 170 chain outlets with unified images and styles, a tea processing and distribution center, a tea culture exhibition hall, a tea etiquette demonstration team and three tea shops. It has grown into a middle-sized chain enterprise with over 100 million Yuan in annual sales volume.
When it comes to tea drinking, few Beijingers are unaware of Wuyutai or Zhangyiyuan, and tea culture has been deeply rooted in the people. But these days fewer young people drink tea; even tea products people often drink in summer are rarely made in China anymore. Despite its great reputation, Wuyutai faces the biggest challenges of both innovation and development.
2005 was a great year for Wuyutai’s development. That year it completed its restructuring and becoming the first holding company among Beijing’s time-honored brands. Wuyutai’s General Manager Ms. Sun Danwei said the restructuring has given Wuyutai a competitive edge in capital and management mechanism, further enhancing the development of its chain outlets. The construction of warehouses and logistics, which have been brewing for years, has been put on the agenda. In the meantime, fast development of time-honored brands is beneficial to the expansion of corporate culture and more scientific internal management.
Talking about government’s support in protection of time-honored brands, Ms. Sun said, “If time-honored brands hire advisory and design teams, Beijing Municipal Commission of Commerce will grant financial subsidies while other provinces in China won’t. Wuyutai has hired a special design team to design and plan its shops, and the government has generally granted 200,000 Yuan to the enterprise. In terms of brand protection, the State will grant 200,000 Yuan in financial subsidies after a successful registration of a well-known trademark in order to enable enterprises to better protect their trademarks.”
In the interview Ms. Sun said that Wuyutai began gradually to register products in all classes in 1997 and will register any trademark deemed to be beneficial to brand protection. So far Wuyutai brand has secured Madrid trademark registrations in 34 countries. Ms. Sun further said, “Although we have tried to perfect our protection, there are some unlawful market behaviors. In fact we have difficulties in many aspects, such as free-riding of famous brands like Xinyutai and Huangyutai. Regarding such behaviors, opinions differ, some relying on the “first-to-file” system. Though Wuyutai has a history of over a century, the Trademark Law follows the doctrine of first-to-file. I think this is a problem and protection of time-honored brands should take that into account.”
In addition, Wuyutai has experienced the challenges of “cyber-squatting,” such as “Yutai.com” and “Wutai.com,” and cyber-squatters had intended to sell them to Wuyutai at high prices. After court hearings, Wuyutai ultimately secured its own interests. Through such cases, Wuyutai applied to the State Administration for Industry and Commerce (SAIC) for a well-known trademark status which was approved in March 2008.
Wuyutai has been exploring ways to go abroad in recent years to promote the brand to the world. However, Ms. Sun also expressed her concerns, “for enterprises, going out costs money, and capital is the primary problem for time-honored brands. The second is on how to promote tea culture and brands in coffee-drinking countries, and the third involves legal matters, cultures, languages and personnel quality.”
As regards the issue of IP protection, Ms. Sun said that she was not very worried because Wuyutai has paved the way for IP protection before it planned to go out.
In order to seek development and enable more young people to know time-honored brands, in 2009 Wuyutai marketed matcha ice cream and jasmine ice cream and got a good market response. This year, the time-honored brand has advocated “Beautiful Life Begins with Tea” to integrate green lifestyles with the World Expo. The chewing gum to hit the market does not have gum bases and is made of pure jasmine tea; it is directly soluble and environment friendly. In addition, a series of tea food products will hit the market to expand the line of products other than tea, so that there will be much room of development for time-honored brands.
Ruifuxiang Silk – Heavy responsibilities in development and protection
The Beijing Ruifuxiang Silk Shop, which opened in 1893 (the 19th year of Guangxu in the Qing Dynasty), is a time-honored brand well-known both at home and abroad. It came on top of the “Eight Xiangs” in old Beijing.
In the first year of Daoguang in the Qing Dynasty (1821), Ruifuxiang put up a placard on the Zhoucun street. In 1835 its first branch - Ruifuxiang Silk Shop - opened in Jinan and entered the Beijing market when its second-generation inheritor Meng Luochuan began to do business in Beijing. In 1876, Ruifuxiang shifted its eyes on Beijing’s most dynamic and prosperous commercial area – Dashilan. In the early years of Guangxu, Ruifuxiang rented a house at Chaoshou Hutong, Xianyu Alley in the Qianmen area and engaged in wholesales of Danian cloths. After the 19th year of Guangxu (1893) there was a large influx of foreign cloth into China. Meng Luochuan then invested 80,000 tael of silver to buy a store in Dashilan and founded the Ruifuxiang Silk Shop. At the end of the Qing Dynasty and the beginning of the Republic of China, Ruifuxiang had become the largest silk shop in Beijing.
In 1900, Ruifuxiang was destroyed by the Boxer Movement and reopened shortly afterwards. After the Liberation, the first five-star red flag raised in the Tiananmen Square was made of fabric from Ruifuxiang designated by Premier Zhou Enlai. Chairman Mao had mentioned Ruifuxiang several times at working conferences convened after liberation, saying, “historical names should be preserved ... ... Ruifuxiang should be preserved forever.”
During our Journalist’s visit to Ruifuxiang, its General Manager Xue Shiyi happened to return from a trip to Europe, reportedly to review a series of IP protection works conducted in 2008 to pave the way into the European market. Xue said, “We apply for registrations in Europe and other countries mainly because of warnings from the ‘Wangzhihe case’. We consider it to be mending the fence after sheep are lost. The government also noticed the precedent of overseas trademark squatting of time-honored brands and thus launched a number of policies to push for overseas registrations of time-honored brands. Luckily, Ruifuxiang got on the bandwagon.”
Although Ruifuxiang has obtained registrations in a number of foreign countries, currently the registrations have not been made full use of. This year Ruifuxiang plans to strengthen the protection of existing stores in Beijing, continue high standards in ongoing protections and build plants of its own in preparation for the establishment of branches outside of Beijing in two years. The trip to Europe made Xue feel hopeful about Ruifuxiang’s overseas markets. He said, “I wish to open a Ruifuxiang shop on Champs Elysees, because our hand-made crafts are in no way inferior to those of other countries. Besides, in recent years the world has shown a strong interest in Chinese silk, cheongsam, Tang suits and others dresses.”
Ruifuxiang’s plan to expand overseas sounds very exciting. There is a map of the world at Xue’s office desk and he hopes that Ruifuxiang’s overseas registrations are not meant for “decoration” only, and that Ruifuxiang shops will appear in registered countries, so that it will be meaningful for the brand to go out.
Overseas brand expansion is a big blueprint and Ruifuxiang needs to take a stable step–by-step approach. But domestic “harassment” has never put Ruifuxiang at ease. Xue said: “Development of time-honored brands has been highlighted by the governments since around 2007 and enterprises themselves are becoming increasingly aware of the importance of IP rights. But the highlight also gives rise to some troubles. Over the previous two years I have often received phone calls from law offices across the country, stating that they had found a local ‘Ruifuxiang Restaurant’ and ‘Ruifuxiang Tractors’ and they ask whether we agree to fight back. If we agree, then we were told to pay 5,000 Yuan. However, two days later, there would be a pesticide or grass cutting machine also called Ruifuxiang. If you agree to fight back, you have to pay. Last year, the price went down from 5,000 Yuan to 3,500 Yuan. There are so many such cases; how can we handle them all?”
Xue seemed to be helpless as he remarked. He did not understand it: why can so many identical or similar trademarks still be registered since Ruifuxiang is already a well-known trademark?
Around 2008, Ruifuxiang experienced the biggest headache - “Ruifuxiang shroud clothing” could be seen commonly throughout in Beijing. Making full use of the Ruifuxiang brand, the shroud shops did better in sales than ordinary ones. With support from the government, Ruifuxiang launched a comprehensive crack-down on the infringing shroud shops and Beijing administration for industry and commerce cleaned up a number of “Ruifuxiang shroud clothing” shops. Xue said, “Beijing governmental departments are very supportive of rights protection of time-honored brands, and currently the Beijing administration for industry and commerce has often taken the initiative to ask us for any developments.”
Ruifuxiang has improved greatly in brand fame and protection efforts in Beijing, but will everything be “smooth sailing” as it expands to other cities across the country?
In the north there is a Ruifuxiang, and in the South there is a Qiantaixiang which also is well-known in Suzhou. However, in the proximity of the century-old shop there is a silk shop named “Ruifuxiang” (identical with the time-honored brand in Chinese pinyin but different in the first two characters). This is not only an eyesore for Ruifuxiang, but also a thorn in Qiantaixiang’s foot.
Xue expressed his full confidence in the brand development of Ruifuxiang. However, when it came to brand protection, he commented: “We have heavy responsibilities and a long way to go.”
Xinyuanzhai– The bafflement of trademark dispute
Today’s Xinyuanzhai has faded from its glory of a century ago. Created out of extensive connections with the Mandarins, Xinyuanzhai has become a quiet part of the more than 100 time-honored brands today.
The business of Xinyuanzhai was set up in the 5th year of Qianlong (1740) of the Qing Dynasty, originally located in Liulichang East. Zhu Yifan, an academician of the Hanlin Academy in the Qing Dynasty and a tutor of China’s last emperor Pu Yi, showed his great appreciation over dried plums and suan mei tang (literally, plum juice) made by Xinyuanzhai and penned a placard of “信远斋蜜果店” (Xinyuanzhai Dried Fruit Shop)  to hang on the lintel.
“Instant-boiled lambs from Zhengyanglou, roast ducks from Bianyifang, baked steambread from Tongheju, preserved bean curd from Wangzhihe, and plum juice from Xinyuanzhai” were once popular household delicacies in Beijing alleys devoted to “eating.” At present, few people know about Xinyuanzhai, and even if they know it is a time-honored brand, they may not be familiar with its products. Nowadays, very few people would pay any attention to the best-known Xinyuanzhai plum juice. When talking about plum juice, most people may blurt out Jiulongzhai. However, Xinyuanzhai’s plum juice has a strong historical background and enjoyed a high reputation among literati and celebrities. Mei Lanfang, Shang Xiaoyun and Ma Lianliang were regular visitors. Wen Tonghe, a tutor for two emperors of the Qing Dynasty, wrote a verse for Xinyuanzhai praising its high reputation and great fragrance.
In addition to plum juice, Xinyuanzhai engages in making a variety of dried fruits, sour plum pastries, sour plum stew, sesame halva, sherbet, bean flour Halva, sherbet and autumn pear grease. These tasty snacks, which were very popular in the past, seemed to have become disconnected from the daily life of people today.
Xinyuanzhai currently has only one plant in Changping District (in Beijing) and an office in an apartment building in Dongcheng District. It does not have its own delicatessen like other time-honored brands, and the former store in Dong Liulichang remains in name only. After learning that our journalist was interviewing on IP issues for time-honored brands, Chang Xin, General Manager of Xinyuanzhai Beverage Co., Ltd., showed some frustration, saying, “I really do not want to discuss this issue. I have been in Xinyuanzhai for five years and most of that time is spent in lawsuits, leaving many ‘regular jobs’ unattended.”
The lawsuit Chang Xin mentioned is the ten-year trademark dispute over the name “Xinyuanzhai.” Currently there are three separate businesses by the name of Xinyuanzhai: the first being Xinyuanzhai Beverage Co., Ltd., producing Xinyuanzhai osmanthus plum juice and autumn pear grease with a traditional formula, yet by a trademark “JINGSHAN” since 1986; the second, Xinyuanzhai Food Factory, originally making dried fruits and currently making fast frozen food; the third, Xiaoji Xinyuanzhai Honey Fruits Shop, which is the one involved in the current lawsuit against Xinyuanzhai Beverage Co., Ltd. Xiaoji, and the current owner of the registered trademark “Xinyuanzhai” since 1985.
In 2000, when Xinyuanzhai Beverage Co., Ltd. intended to expand its market, it received a summons from the Beijing Second Intermediate People’s Court. Xiaoji brought it to court claiming trademark infringement. In the meantime, Xinyuanzhai Beverage Co., Ltd. counterclaimed against Xiaoji for bad faith trademark squatting. In 2001, Beijing Second Intermediate People’s Court found in favor of Xiaoji and ruled against Xinyuanzhai for trademark infringement by for unauthorized prominent use of the mark on the product packaging, thereby disrupting the market operations of the honey fruits shop. The court assessed damages against Xinyuanzhai Beverage Co., Ltd. for 80,000 Yuan in compensation to Xiaoji Xinyuanzhai Honey Fruits Shop, and granted a permanent injunction against Xinyuanzhai from further use of the “Xinyuanzhai” trademark. Both sides were dissatisfied with the decision.
Later on, Xinyuanzhai Beverage Co., Ltd. filed with the State Administration for Industry & Commerce (SAIC) requesting a cancellation of the “Xinyuanzhai” registration used by Xiaoji on the grounds of three consecutive years non-use between 1997 and 2000.
In 2001, shortly after Xinyuanzhai’s request for cancellation, Xiaoji responded to the SAIC for a review. Subsequently in 2005, Xiaoji renewed its trademark’s registration, extending it until 2015.
Chang Xin said, “By the end of 2008, we received a High Court judgment overturning the ruling from the Trademark Review and Adjudication Board (TRAB) and upheld Xiaoji’s Xinyuanzhai trademark registration, which we successfully appealed to the First Intermediary People’s Court. Xiaoji thereafter appealed to the High Court in lieu of waiting for TRAB’s pending further result.”
Chang Xin added that Xinyuanzhai has been using the original formula and experienced workers have been monitoring all productions. Their products are sold in supermarkets and shops in North China and Southeast Asia. But Xiaoji has ceased operations due to poor management in 1997 and focus most of its energy on the trademark battle.
Xinyuanzhai is not alone. Daoxiangcun, which enjoys a certain reputation in Beijing, also suffers from trademark disputes very similar to Xinyuanzhai.
When Chang Xin was asked about the Xinyuanzhai drinks on the market, she said: “We are selling quite well. In addition to supermarkets, we cooperate with other time-honored brands, such as Quanjude Roast Duck and Daoxiangcun, to sell our Suanmeitang. It sells very well. We also have chosen some select countries under the Madrid Agreement to apply for registrations in preparation for future ‘going global.’”
When it came to enterprise’s development and promotion, Chang Xin said helplessly, “Currently we dare not to promote, because the more promotions we make, the more likely the opponent party will not let go. Because of this lawsuit, we don’t have the strength to fight some counterfeits on the market. Sometimes we think that if we started with any other trademark we would have done a terrific job by now.”
Regarding the future of the enterprise, Chang Xin wished very much to bring plum juice into the Forbidden City. She thought plum juice itself was a drink from the imperial family and also has Chinese characteristics. Therefore, it will sell well in the Forbidden City. But it is very difficult for Xinyuanzhai currently in face of the difficulty of entry or the cost that come with it. IP

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