The following cases illustrate some of the difficulties Western companies face when protecting and enforcing their brands in China. However, if these decisions are properly understood, they dispel the myth that favouritism of Chinese companies is an important factor in Chinese brand enforcement. In fact, Western companies are now succeeding in a large proportion of cases, and the courts’ application of the law is usually rational and robust.
Apple’s reputation in question?
Apple objected to an attempt by a Chinese company Xintong Tiandi to register the trade mark IPHONE in relation to leather goods, including covers for mobile telephones and tablets. As the leather goods in Xintong Tiandi’s application were not similar to the electronics goods for which Apple had registered its own IPHONE trade mark back in 2002, Apple needed to rely on special broader protection granted to “well-known” trade marks. This failed because Apple was unable to prove that its iPhone was well-known in China before Xintong Tiandi Technology applied for the trade mark in 2007, as required under Chinese law. Although it was certainly well-known by the time the case was brought in 2010, Apple’s iPhone was only released in China in 2009, so had not acquired the required reputation at the relevant 2007 date. While this may seem a strange outcome, it is a common feature of trade mark cases, including in Europe, for the courts to have to rule on the position at a particular date in the past, with sometimes counter-intuitive results.
In another case, Facebook sought to prevent a third party from protecting the name “face book” in connection with canned vegetables, crisps and other food and drink products. In an echo of Apple’s case, due to the dissimilar goods, Facebook argued that its FACEBOOK brand was well-known in China. This was understandably rejected, given that Facebook’s website is blocked in mainland China. However, Facebook’s lawyers did not stop there – they also tried to rely upon a law that, on its face, should only have been applicable at a later stage of registration of the brand, stating that the trade mark should be cancelled as it was obtained by fraud or other improper means. Having failed in this argument before two lower tribunals, Facebook appealed to the Beijing High Court where its position was vindicated. The court said that, if a trademark is filed by fraud and this can be shown at the earlier stage, the Tribunal should not be prevented from exercising its powers just because the trade mark had not yet reached the later registration stage.
This surprising case demonstrates that the Chinese courts may even overlook the letter of the law in order to produce just outcomes, regardless of who is behind the case.
New Balance loses its footing
In a third case, the US sports footwear manufacturer New Balance suffered a bruising defeat in a lengthy battle against a Chinese individual, Mr Zhou, who first sought to protect the name ‘Xin Bai Lun’, a Chinese transliteration of ‘New Balance’ in 2004, before New Balance had itself protected the Chinese language version of its name. Zhou obtained a registration in 2008 and now has an established brand of men’s shoes using the brand. When New Balance started to combine the same Chinese name with its English-language marks NB and NEW BALANCE, Zhou sued New Balance for brand infringement. New Balance lost the case, initially facing a huge damages bill of RMB 98 million (approximately £10 million), though this was subsequently reduced to RMB 5 million (approx. £500,000) on appeal.
This case highlights the ‘first-to-register’ brand protection system in China. As Zhou was first in time to register the Chinese-language brand, New Balance was always fighting an uphill battle to regain its footing. In hindsight, it may have been better cutting its losses and selecting a different Chinese translation of its brand when it discovered Zhou’s earlier registration – it is normally possible to translate a Western brand in different ways, and it should surely have been possible for New Balance to devise an appropriate but non-infringing name.
The last case acutely highlights the importance of obtaining trade mark protection at the earliest possible stage. In general, failure to engage with China’s intellectual property system at an early enough stage is what most often lands foreign companies in hot water. With the legal system offering increasingly robust protection of rights no matter who owns them, it is all the more important to seek advice and obtain brand registrations at the outset. If you do not have registered IP rights in China, then you cannot claim the improving protection that the regime offers.
Michael Conway is an associate and chartered trade mark attorney at major European intellectual property firm, Haseltine Lake LLP.