Beware of Chinese IP squatters

IP squatters

Beware of trademark squatters when you are showcasing your wares in China

 

Over a casual dinner with friends recently, I learnt of a horrible experience in China.

A company from Queensland manufacture a range of cosmetics using an ingredient sourced through their long-term contact with aboriginal people in the Kimberley.

Wishing to grow their business internationally, they exhibited at a trade show in Hong Kong.

They had not registered their trade mark for China and China has a ‘first to file’ rule.

That means a business has no rights to their own trade mark unless they register it in China first, before anyone else registers it.

The company followed-up on the enquiries they received at the trade show after returning home from Hong Kong.

They identified a suitable business they wanted to appoint as a distributor for certain regions of China but when the time came for product registration in China prior to market entry, their China partner advised them their trade mark had already been registered by someone else.

Unbeknown to the company, some-one visiting or passing by their stand from China or even cruising their exhibitor profile on the trade show’s website, had noticed the unique ingredient in the cosmetics and registered their trade mark in China.

The company retained a lawyer and contact was made with the person who registered their trade mark – a trade mark squatter – who asked for AU$25,000 to release the trade mark.

All that effort and all the money they had already spent to try and enter the market and if they wanted to go ahead and enter the China market with their own trade mark they felt they had no option other than to pay the money.

The only other option was to change their name and re-brand.

It is so important, if a business is contemplating the China market at any stage, that because of the first to file rule, they apply for a Chinese trade mark registration as early as possible.

Businesses can search the Chinese trade marks register to see if their identical or a similar trade mark has already been registered by going to the Chinese Trademark Office website.

The Office provides a free online search tool at http://wsjs.saic.gov.cn/ – click the ‘English’ link at the upper right of the page.

Be patient, as the website can sometimes be slow to respond or you may need to try again later.   Click on the SISTM search tool and choose the ‘Selective Search’ rather than the ‘Automatic Search’.

If no conflicting marks are found, that is good, but there is a delay of around three to six months between an application being filed and appearing in the database.

Additionally, the search is not conclusive and it is easy to miss relevant marks, but it is a good start.

If a conflicting registration is found a business has several options – if they believe the mark has not been used for three years since registration, they can file an action to have the mark cancelled for non-use.   If it is within the three month opposition period following acceptance, a business can oppose the application.   In both cases though, it is very hard to succeed in establishing grounds of bad faith.

Consulting a trade marks attorney is always a very wise choice when considering the China market and indeed, any international market.   The up-front cost gives peace of mind and can save a bundle of money in the future.

By TCCI TradeStart Adviser, Sally Chandler

For international trade and investment assistance contact the TCCI’s TradeStart Adviser, Sally Chandler, at sally.chandler@tcci.com.au or phone 1300 559 122.

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