Back-stabbed by an acquaintance” is a common term in China’s business circles and its meaning is self-evident. Though the social values of the Chinese people consider an act of this kind as absolutely immoral, this phenomenon has occurred frequently in the field of malicious trademark registrations in recent years. According to statistics of China State Administration for Industry and Commerce (SAIC), approximately 15% of Chinese well-known trademarks have been maliciously registered in foreign countries, and many of them were back-stabbed by their own overseas agents. It seems that foreign countries focus on the content of trademark registrations rather than the origin or basis of the applicant’s right to register and receive trademark protection.

When exploring the unpredictable international market, enterprises need global vision and should adapt to local conditions. Malicious trademark registration has become the obstacle and risk faced by Chinese enterprises preparing to expand overseas market and it is important to be cautious.

Pain from back-stabbing

Recently JETBeam, a flashlight manufacturer in Shenzhen, was injured when the company was backstabbed by a previous business partner.

Mo Zhangwei, owner of Shenzhen JETBeam Electronic Technology Co., Ltd. set up a solely-owned company in Hong Kong in 2009 by the name of Jinbo Electronic Technology (HK) Co., Ltd. (Jinbo). His brother, Mo Zhangzhuo, was licensed Jinbo to use the JETBeam trademark on its products. In January 2010, Jinbo authorized two trading companies, Ximai and Simai, to use the JETBeam trademark and to sell JETBeam serial products worldwide.

During the cooperation period, Simai successfully registered the JETBeam trademark in Hong Kong on February 9th 2010 and in the European Union (EU) on January 21st 2011. It also applied to register the trademark with the Australia Intellectual Property Office. Simai also published news on its company website and industry BBS, claiming that JETBeam was its own brand.

During negotiations, Simai and Ximai brought JETBeam and Mo Zhangwei to court on grounds of unfair competition, seeking 200,000 yuan as damages and other expenses. They also sent litigation documents to overseas distributors and dealers, asking them not to sell the plaintiff’s products.

On June 24th 2013, Shenzhen Bao’an Court heard the unfair competition case between the plaintiff Ximai and defendant JETBeam. The two sides debated on whether the plaintiff had the right to operate the trademark, whether the defendant infringed the plaintiff’s goodwill and whether the defendant had the right to terminate the distributorship.

The two sides are now completely estranged. The case still has no final result. In fact, the final result does not matter so much, because trademark disputes lead to the loss of business opportunity, real money and even the market.

Chongqing Lifan found that its trademark had been registered by a local dealer when the company was preparing to enter Pakistan in 2006. Five years later, Chongqing Lifan finally reached a settlement with the dealer.

Coincidentally, Chen Shitian, Assistant Chairman of Susino Umbrella Co., Ltd. (an umbrella giant in Fujian) also has had painful experiences: they almost lost the entire US market because the Susino trademark had been preemptively registered.

According to reports, Susino Umbrella had been doing business in the US for quite a long time but it had not registered the trademark in local IP Office. On December 19th 2007, the intermediary agency who helped them develop the US market registered the English trademark “Susino” under its own name in the US. It also threatened to charge Susino Umbrella $1 million to sell back the trademark so that it could continue doing business in the US market under its own name.

Although Susino Umbrella won the lawsuit, outsiders can never understand the twists and turns during the four years.

Qiaqia recently got good news: It received the final judgment from the German Federal Supreme Court, which dismissed the appellate request of the German company that maliciously registered the trademark of Qiaqia outside China. To this end, the 7 years overseas trademark infringement case finally drew to a satisfying conclusion.

However, is it a complete success? Lawsuits can last for four, five or seven years, but the market is ever-changing. In only a few months or even a few days’ time, it is possible for competitors to expel you from the market. As an industry leading enterprise in China, Qiaqia experienced extremely rapid expansion in overseas markets. Since 2001, it registered Qiaqia related trademarks in many countries and regions. However, the Qiaqia trademark was registered by others in Germany. According to the EU regulations, Qiaqia commodities can never enter Germany and the entire European market. This lawsuit blocked Qiaqia’s road to Europe.

In this protracted war, the enemy was definitely a back-stabbing veteran for Chinese enterprises. OKAI Import Export GmbH (OKAI) was also the enemy of Wangzhihe, a time-honored brand in China known for its overseas trademark lawsuit. OKAI registered several trademarks; besides the above mentioned trademark, OKAI also registered trademarks of the Laoganma chili sauce, Jinmailang noodle, Baixiang vermicelli, and other well-known food enterprises.

Distributors and dealers succeed again and again which shows that the enterprises did not have high IPR protection awareness. The business operators did not fully realize the enormous brand effect and economic value of the trademark and they should enlarge the vision for longterm investment.

Most of the enterprises are private companies and have developed into certain size. However, the companies do not formulate a complete set of IP protection strategies and have no monitoring and early warning systems for the brand market. Some enterprises have developed a strategy for IP protection, but they worry that the implementation of the strategy might cost excessive human, material and financial resources. Also, these companies hold onto the outside chance that they might not encounter IP problems, so that they do not implement their IP protection strategies. Some companies think that their reputation is not high enough, so that it is premature to register for trademark protection. Some might think that they do not have to worry about the sale of goods, so that there is no need to register the trademark. There are a variety of reasons for their failures in trademark protection.

Essential trademark strategy

Before exporting products to foreign markets, enterprises should register the trademarks abroad. In countries and regions which follow the first-to-file principle (such as Japan, South Korea, Spain, Italy, etc.), trademarks should be registered as soon as possible; otherwise others may seize the opportunity of cybersquatting. In countries and regions which follow the first-touse principle, enterprises should also register trademarks. Meanwhile, enterprises should also keep evidence and records for business activities in the target exporting countries, because evidence preservation is essential in these countries. The effective evidence for use includes invoices, contracts, advertising materials, product brochures, labels, etc. Thus, even if others register the trademarks, enterprises can fight them back by legal means based on this valuable evidence. Also, if the trademark has not been registered in overseas markets, enterprises can sign agreements with overseas agents to prevent them from registration.

Companies facing the legal risks need to arrange early warning measures for overseas markets; analyze t rademark laws and regulations in the target countries, such as whether the country has joined Paris Convention and other international treaties; and learn about remedies for trademark cybersquatting. For example, in the trademark case between Wuliangye and a Korean citizen, the trademark agency of Wuliangye Group found that a Korean preemptively registered the phonetic transcription of Wuliangye and promptly raised application during the opposition period, which prevented the malicious trademark registration successfully.

When the trademark was registered maliciously, many companies suffer from injustice and believe that their legal rights have been violated. They may take legal means to safeguard their rights. It should be noted that malicious registration and trademark infringement are two completely different concepts.

Malicious registration means that others register the trademarks that are actually owned by other enterprises; while infringement means that the enterprises have registered the trademarks but others use the trademark illegally. Lawyer Gui Jia suggested that enterprises should deal with malicious registration calmly. Enterprises should first analyze the reasons for cybersquatting. Then they should take legal actions in the targeted countries and regions. If they can’t get back the trademarks by legal means, enterprises could also try to negotiate with the registrant and seek reconciliation.

Another way is to seek support from government and the social forces to promote reconciliation. For example, the Hisense trademark of China Hisense Group was registered by Bosch-Siemens in Germany. The case lasted for five years and the two sides finally reached a settlement agreement. The Chinese Ministry of Commerce and the EU agencies in China actively participated in mediation, which promoted the settlement between the two sides. In addition, the Seminar on Overseas Protection for Chinese Trademark also played an important role. Moreover, SAIC also introduced a series of service measures in 2011, including strengthening international registration and overseas trademark protection work for model cities (districts) and enterprises, supporting enterprises in “going out” strategy, etc. Enterprises can also benefit from the serial measures.

(Translated by Li Guanqun)