UKIPO provides insight for small businesses and trade mark protection in China
The UK Intellectual Property Office (UKIPO) commissioned a programme of research among UK businesses to understand the extent of bad faith trade mark applications and to gain insights into how they affect UK businesses operating in China. The research consisted of quantitative interviews and in-depth interviews with businesses and trade bodies. For the purposes of this research bad faith trade mark applications are defined as a company registering another’s name or mark with intent to either sell it back to the rightful owner for profit, or deliberately use that company’s established name to market their own products, i.e. outside normal commercial practices.
China is an important market for UK businesses with many identifying it as a long-term priority market. Businesses no longer see China as just a manufacturing hub and many now sell their products and services within China. While China presents many opportunities for businesses, it also has many challenges. Bureaucracy, cultural differences and language were all identified as key issues by businesses. However, intellectual property is highlighted as the top challenge, with a third of businesses surveyed experiencing an IP problem in China. Around a quarter of businesses participating in the research experienced a bad faith trade mark application. Bad faith trade mark applications are not just affecting businesses that have not sufficiently protected their brands; in some cases, those impacted are global brands with very robust IP strategies and protection. UK businesses do not always protect their brands sufficiently; only half of those surveyed indicated that they have registered trade marks in China. Some wrongly assume that their UK trade mark registration also covers them for the Chinese market. For others, the cost of protecting in all operational markets is a barrier so they do not register in some markets, including China.
Bad faith trade mark applications can have a very negative effect with some businesses ceasing to operate in China while others have been unable to enter the Chinese market as a result. This usually occurs when a business learns of the bad faith application after the trade mark has been successfully registered. The majority of businesses experiencing a bad faith trade mark application incurred some costs as a result. The costs of opposing a bad faith trade mark application (legal fees and filing costs) vary from case to case; some businesses have paid £2,000, while for others costs have been as high as £40,000, as well as costs businesses are less able to quantify, e.g. loss of expansion opportunities and diversion of resources from important areas, which ultimately impact businesses profitability. Among smaller businesses, a bad faith trade mark application can also take a personal toll with the stress of dealing with the situation highlighted as a problem. Evidence suggests that bad faith trade mark applications were primarily driven by the intention of selling back to the rightful owner.
However, half of businesses affected by a bad faith trade mark believe that applicants intended to use and manufacture under the trade mark and benefit from the reputational value of the original brand. The majority of businesses affected by bad faith trade mark applications have since taken measures to strengthen their IP. Many believe that other UK companies should ensure that China is included within their IP strategy and is one of the countries on their trade mark and IP filing list. Early filing will mean that if the UK business eventually decides to enter the Chinese market, they already have protection in place and they are also able to oppose any bad faith trade mark applications and in the meantime any potential alternative applicants will be deterred by their registered trade mark. One tool businesses advocate and find invaluable is the protection of their trade marks through a trade mark watch service. This has the benefit of alerting them to any attempt to use or register trade marks or marks very similar to their brand across different markets. Early detection of a bad faith trade mark application allows a business to oppose the registration before it is granted which is particularly useful in China.
China’s IP system has developed rapidly, the first law was implemented in 1983, and there has been a steady programme of reform ever since with significant amendments implemented in March 2014. Two of UK businesses’ major concerns about the Chinese trade mark system are addressed in the new law but these changes have not yet filtered through to businesses. Many UK businesses believe it currently takes too long to obtain a resolution to a bad faith trade mark application in China – oppositions can take between two to three years and with an appeal it can be up to five years. While the time it takes may be comparable to some markets businesses operate in, companies often compare the resolution time to the UK which is significantly shorter than China. Furthermore, the frustrations with the time it takes to obtain a resolution are also borne out of the fact that if a trade mark is already registered in China, the UK business is unable to trade under their trade mark while they oppose the registration. However, faster trade mark procedure processing times is one of the key elements of the new Trade Mark Law.
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Attorney at Brian Bacon & Associates