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Arezou Rezai | 4th September 2017

Restoring of the trade mark balance in China


Arezou Rezai | 4th September 2017

Restoring of the trade mark balance in China

It is no secret that China, along with certain other international territories, has a trade mark abuse problem. Counterfeit goods are often sold openly in street markets by counterfeiters protected by Chinese trademark law: a trademark in China is awarded to the first company to file for it, and these companies would not usually be expected to give a reason for filing for it. This leaves genuine brand owners unable to protect their brands in China without having first gone through a revocation action. Early protection in China to avoid this situation arising, is always an important part of an international protection strategy.

However, a recent case has given hope to international brands in China.

The American sportswear brand New Balance was awarded 10 million yenn ($1.5m) by a Court in Suzhou by way of compensation for an infringement against their trade mark, the instantly recognisable slanting ‘N’. Whilst the figure awarded is small by international standards, it is believed to be the largest sum ever to be paid to a foreign company in a trade mark dispute in China: it therefore represents encouragement for other foreign companies in China, and those working for greater brand protection there.

It also represents a change of direction with regard to counterfeiting tactics. Since it started selling shoes in China in 1995, New Balance has taken on many counterfeit manufacturers and rogue suppliers, with nowhere near the success of its most recent victory. This is an unfortunate but consistent theme among other large companies in China. In April 2015, New Balance was fined $16 million after losing a case to a man who had registered the trade mark for the Chinese name for New Balance (the figure was reduced to $700,000 after appeal by the US company). Similarly in 2016, New Balance was ordered to pay 5 million yen to a local company after losing another trade mark infringement action. Much of this difficulty can be attributed to a change in counterfeiting tactics: counterfeiters no longer simply produce copies of products, but seek to mirror everything about the brand, short of the name. Evidence of this comes from the arrival of Chinese companies such as New Boom (the defendant in this case), New Bunren, and New Barlen, who New Balance is currently suing.

This most recent victory is at least due in part to continuous trade mark reform in China. Strengthening of trade mark laws in China began with the nation’s entry into the World Trade Organisation in 2001, but since then has undergone several reassessments and upheavals, the most recent and important of these being the new trade mark law of 2014. This raised the amount of damages paid in most infringement cases from a tiny 75,000 to about 450,000 yen. However, these changes are unlikely to have been motivated by Chinese concern for foreign firms: as Chinese companies started to produce more advanced products themselves, gaining more valuable intellectual property, Beijing sought to protect these companies with stricter trade mark law. This bolstering involved increased damages paid and heavier fines for counterfeiters (especially repeat offenders). Four specialised IP courts were also set up.

Despite the growing sense of responsibility to protect brands in China, further work is still required. Trade mark infringement is still a widespread problem, especially for less well-known brands or brands not yet expanding into China, whose logos are perhaps not quite as recognisable. At Paris Smith, we would advise any business seeking to trade internationally, or manufacturing products in China to consider applying for Chinese registrations in respect of their name and any associated logo in order to give some protection to the brand. Although a registered trade mark won’t completely stop counterfeiters, it may, in light of this recent ruling, deter some and give valuable protection to the brand in a territory which is renowned for its counterfeit market.

If you would like to discuss how you can best protect your brand both in the UK and globally, get in touch with IP team here.

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