China has not had a particularly good reputation for protecting intellectual property. People focus on the occurrences of IP infringement in China and mistakenly conclude that there is effectively no IP protection here. China’s present IP dilemma is rooted in the concept of “rule of the man – Emperor.” Western civilization’s concept of “rule of law” was not adopted by China until about 25 years ago when Deng launched the modernization of China. Since then, China has been faced with a huge challenge of establishing an internationally acceptable legal framework. China has made significant progress in the enactment of laws, establishment of a court system, and training of legal personnel which have substantial vested interest in protecting their own IP. The fact is that IP protection is available in China today. This area has been a key focus of the Chinese Government and China’s emerging high-tech industries. Thus, significant ongoing progress in IP protection in China can be expected.
IP adds value to one’s business and it is important to register and protect one’s IP rights in China. Even companies with no business in China should seriously consider obtaining IP rights in China as a defensive measure. Without IP rights in China, one has no grounds to ask the Chinese legal system for help in stopping infringing activities. The Chinese legal system does not recognize foreign IP rights. Therefore, it is important to include China in one’s IP strategy from the very beginning.
This article focuses on a hypothetical involving trademark rights in China. What is a trademark? Words, phrases, designs, logos and other commercial symbols used to identify products, services, or their producers in the marketplace can all be protected as trademarks, service marks, trade names or trade dress. A company name can be protected against the use of similar names by others. A color scheme or unique theme for a business or product packaging can be protected as trade dress. Trade mark protection in China is based on a “first to register” basis. Trademark rights would be lost, for example, if another party is the first to register a trademark.
The hypothetical involves BikeOne, which is a United States based bicycle company with operations in the United States, Germany, and Japan. BikeOne uses the mark TIGER in connection with a series of bicycle parts, clothing and apparel, and has trademark registrations for the mark TIGER in the Unites States, Germany, and Japan. Although BikeOne does not have business in China, it did not want a third party to use the mark TIGER in China without is approval. Thus, BikeOne preemptively obtained a registration in China for the mark TIGER for the goods bicycle parts, clothing and apparel.
CopyBike is an Australian bicycle company with products very similar to those of BikeOne. CopyBike’s operation is limited to Australia. CopyBike also launched a line of products under the mark TIGER and obtained an Australian trademark registration for the mark TIGER. CopyBike manufactures its bicycle parts branded with the mark TIGER in China, and then sells those products in Australia. What recourse, if any, does BikeOne have against CopyBike with respect to the TIGER branded products?
Since CopyBike does not sell products in the U.S., Germany or Japan, BikeOne cannot take any legal action against CopyBike in those countries. BikeOne also cannot stop CopyBike’s activities in Australia because CopyBike is the legal trademark owner of mark TIGER in Australia. However, as the legal trademark owner of the mark TIGER in China, BikeOne can stop CopyBike’s manufacturing in China. CopyBike’s manufacturing of bicycle products branded with the mark TIGER is considered an act of infringement under China’s Trade Mark Act.
An injured party generally has three avenues for enforcement of its IP right – administrative enforcement, civil enforcement and criminal enforcement. Administrative enforcement is conducted by government agencies and is generally the faster and more efficient route. Civil enforcement is a lawsuit initiated and carried forward by the injured party. Criminal enforcement is reserved for more serious cases such as those involving a large volume of infringing goods and high illegitimate income. In addition to these three avenues, the rights holder can also request Chinese customs to seize infringing products.
In this hypothetical, BikeOne can initiate an administrative action by filing a petition with the local administrative authority for industry and commerce (AIC) where CopyBike’s manufacturer is located. Once the AIC accepts the petition, it will conduct a raid as soon as possible, and – where infringing items are found – order CopyBike to cease and desist, and seize and seal up infringing goods and tools. Subsequently, the AIC examines the evidence seized during the raid, make a written decision and usually order CopyBike to pay a fine to the AIC. Upon a finding of infringement by the AIC, BikeOne can also take the case to court and ask the court for damages and/or criminal sanctions against CopyBike.
In this case study, BikeOne had the foresight to register its trademark in China. As a result, it could successfully stop the infringing activities of CopyBike. This case study shows the benefits of proper IP strategy planning.