Recently, there has been an upswing in ‘IP horror stories’ originating in China.
We have heard accounts from various IP practitioners whose clients have essentially been ‘green-mailed’, after having failed to adequately protect their trade mark position in China.
Unlike Australia, China operates a ‘first to file’ trade mark registration system as opposed to our ‘first to use’ system. This means that the first person to lodge an application for a particular trade mark (as opposed to the first user of the trade mark) will be the one who is entitled to be granted and maintain registered trade mark rights.
A number of businesses mistakenly believe that if they only manufacture their products in China for re-sale outside of China and do not ever intend to sell their products within China itself, that there is no need to protect the trade marks applied to these products.
Unfortunately, nothing can be further from the truth.
There are a number of unscrupulous operators trawling factories in China for the sole purpose of determining the trade marks that are being applied to products being produced in these factories. Following this exercise, an investigation is undertaken as to whether these trade marks are registered in China.
If these operators learn that the trade marks have not either been filed for or registered, they themselves file trade mark applications seeking registration of these marks in China. Once these marks have then been registered, they lodge the equivalent of a ‘customs seizure notice’ with the relevant Chinese authorities to impound these goods in order to prevent them leaving China, on the basis that they are the registered owner of the trade mark used on the goods.
Once the goods have been seized, invariably, the ‘rightful’ owner of these brands will receive a letter, either directly from the unscrupulous operator or from their legal representatives, asserting that as they are the registered owner of the trade mark in China they will only release the impounded goods if ‘damages’ are paid to them. In some circumstances, these operators offer to sell their trade mark to the rightful owner, which would then facilitate the release of the goods impounded at their directive.
Further, if a third party has your trade mark or a very similar mark registered in China, your manufacture and/or export from China of products bearing the mark could result in infringement proceedings being initiated against you, even if you have used the mark earlier than the registered owner of the trade marks applied to goods manufactured in China.
To avoid all of this ‘unpleasantness’, which is perfectly legal in China, it is imperative that if you either manufacture goods in China or if your business is heavily dependent upon the continued and uninterrupted supply of goods from China, that you seek to register the relevant trade marks for these goods in China now.
Kliger Partners has an established relationship with a number of well respected law firms specialising in intellectual property matters in China and we would be happy to assist you in protecting your position in China if required.
More information
For more information, please contact Jeremy Goldman, Principal Lawyer, on (03) 8600 8886 or jgoldman@kcllaw.com.au or Daniel Kovacs, Special Counsel, on (03) 8600 8859 or dkovacs@kcllaw.com.au.
If you are interested in receiving our Intellectual Property legal updates, please click here.