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Is Your Brand Safe in Asia?

Columnist: Scott Gerien
January, 2012 Issue
Columnist

Scott Gerien
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Between 2000 and 2010, exports to China from California’s 1st Congressional District grew from an estimated $98 million to $360 million—an increase of 266 percent. By comparison, exports from the 1st District to countries other than China during this same period only grew by 28 percent. Among the top five categories of product exports to China from the 1st District were computers and electronics, crop production and beverages and tobacco.

While $360 million in exports isn’t earth shattering, it’s still significant, especially when one considers the overall volume increase and the potential for future exports to China. Looking to one of the North Bay’s larger industries, the wine industry, Decanter magazine estimated that China’s consumption of wine will increase 20 percent between 2011 and 2014 after a 100 percent increase in consumption between 2005 and 2009. Opportunities in Asia were further expanded in the summer of 2011 when Congress enacted the U.S.-South Korea Free Trade Agreement, which will bring down trade barriers for numerous U.S. products exported to South Korea.

So why does this matter to your North Bay business and its brand? Perhaps it doesn’t. But if you export any branded product, or hope to someday, you’ll likely want to export your product to Asia and, particularly, China. And, if you haven’t protected your trademark there, it may already be too late.

Here in the United States, all trademark rights are based on use of the mark in U.S. commerce. This means you can create trademark rights just by using your mark; if you sell your products throughout the North Bay, you have common law trademark rights in the North Bay for the mark for those products (but not in other places where you don’t use the mark unless you have a trademark registration). Furthermore, you can’t obtain a state or federal trademark registration in the United States without first using your mark in commerce on the products identified in the trademark registration application.

By contrast, in China and most non-English speaking countries, there’s no common law trademark right, and trademark rights may only be established by obtaining a trademark registration in that country. This means if you export product to one of these countries and don’t register your trademark there, you have no trademark rights.

Additionally, in the large majority of these countries, including China, there’s no requirement of use of the trademark prior to obtaining a trademark registration (although most foreign countries require that the trademark be used within the country within three years of registration or be subject to cancellation for non-use). As a result, in many of these countries, and particularly in China, there’s a high incidence of trademark piracy, where a national of the country registers the trademark of a foreign company even though the national isn’t using the mark in the country. This type of trademark piracy isn’t limited to internationally well-known brands, and it’s completely legal absent any evidence of clear bad faith.

As an example, four years ago, a startup brand from a North Bay company was identified in an industry publication as one of the “hot” brands for that year, along with several other brands. Since most of these brands were fairly new, they were only being sold in the United States and weren’t being exported. Therefore, none of the brand owners thought to register the trademarks anywhere outside the United States.

The following year, a single Chinese national filed Chinese trademark applications to register most of the trademarks identified on the “hot brands” list. The North Bay brand owner opposed the Chinese trademark application with a claim of bad faith on the part of the applicant. However, the Chinese system doesn’t allow for the taking of evidence, which makes bad faith very difficult to prove.

In 2011, the Chinese Trademark Office denied the opposition filed by this North Bay brand owner and issued a registration for the brand owner’s trademark to the Chinese national. Now, this Chinese national can choose to use this North Bay brand owner’s mark to sell goods in China that would otherwise be counterfeit had the North Bay brand owner obtained a Chinese trademark registration. Alternatively, the Chinese national may choose not to use the mark and simply block the North Bay brand owner’s entry into China with its branded product. Until the Chinese trademark registration can be attacked by the North Bay brand owner for abandonment after three years of non-use (by the Chinese national), the North Bay brand owner will be unable to use its mark in China.

However, these less-restrictive foreign registration systems can also be used to the U.S. brand owner’s benefit. Even where a U.S. brand owner has no use and no intent to use its trademark in these foreign markets, it can still obtain a defensive registration to block the registration and use of its mark in these foreign countries by foreign nationals or other parties.

Obviously, foreign trademark application isn’t an inexpensive endeavor. However, there is an international treaty, called the Madrid Protocol, which lets U.S. citizens who own a U.S. trademark registration extend that registration for protection in other treaty countries, including China and other Asian and European countries. This can be done for a much lower combined cost than single applications filed directly in each foreign country. This extension for foreign protection is obtained through an international registration applied for through the U.S. Trademark Office without having to retain foreign counsel.

So, as you start this new year and look outside U.S. borders for new markets for your products, remember to first think about your brand and registering your trademark in these foreign countries, so when your product arrives there, someone doesn’t tell you he or she owns your mark and you can’t sell your product there.
 
 

New columnist Scott Gerien is a director in the law firm of Dickenson, Peatman & Fogarty, with offices in Napa and Santa Rosa. He heads the firm’s intellectual property practice group and has practiced exclusively in the area of intellectual property for more than 15 years. He represents clients in protection of their trademark portfolios, both domestically and internationally. You can reach him at (707) 261-7058 or sgerien@northbaybiz.com.

 

 

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