The third best-selling sedan in California right now is not Lexus or BMW or Mercedes. It’s an electric car called Tesla. But Tesla was not in the news last month because of its record sales. It was in the news because its expansion plans in China were held back by trademark problems.
A man in Guangdong purchased the Tesla domain name and registered the Tesla trademark in China before Tesla Motors of California bothered to do it. It will likely cost Telsa millions of dollars to buy these intellectual property assets for its Chinese business.
Apple settled for $ 60 million to obtain rights to its iPad brand in China.
Google reportedly paid $1 million for the Google domain name in China several years ago.
All three companies could have reserved their intellectual property in China for less than $500 if they had started sooner. Ouch.
China: Challenges and Opportunities
The problems in China are similar to the land rush that occurred with domain names in the 1990s, when “squatters” bought famous brands and then resold them to brand owners after the brand owners realized that they needed a website. Some may say that these Chinese individuals are acting unethically. In one sense, I agree. On the other hand, they are seizing a business opportunity and making the most of it. And they are not breaking any laws.
In fact, trademark laws in most countries permit the same thing that we’re seeing in China. The difference is that it costs more to register a trademark in most places as compared to China, so squatters are less likely to do it; and brand owners are more likely to be forward thinking in protecting their IP in traditional western markets in Europe, even though—in the back of their minds—they know they need to do something in China.
My point is that you don’t want to be in the next news story.
Several of my clients have already faced trademark problems in China.
Brand protection in China can be challenging. The language is very unfamiliar to most of us. Laws are still being revised. (A revision to the Chinese trademark law was passed last month for the third time since 2000.) Those who are not working with a Chinese business partner may feel lost. Businesses may also think that enforcement of their rights in China is impossible, so why bother even trying.
But as Chinese businesses develop their own brands, enforcement of brand protection for foreign companies continues to improve. Smart businesspeople realize that the challenges can be overcome. They invest a little to get their brand protection in place now. Before someone else does.
At Wells IP Law, we can manage protection of your intellectual property in China through several qualified attorneys that we work with. Or we can connect you directly to them.
But don’t wait. And don’t blame anyone but yourself if your brands are already taken when you get there.
Tips for Brand Owners Entering China
- If you’re big enough to afford a U.S. trademark registration, you should already be thinking about this issue and considering whether you might ever want to be in the Chinese market.
- Realize that someone in Asia is probably already ahead of you. They’re just waiting to see if you’re big enough to be worth their time.
- Commit to investing $ 500 to protect your brand in China. If Tesla, Apple, and Google had done just this much early on, their trademark troubles would not be in the news.
- If possible, protect both English and Chinese character versions
- Consider registering a China domain name in either regular or Chinese characters, if not both.
- Remember that a trademark registration in China is not enough if you are also doing business in Hong Kong, Macau, and Taiwan. You must register brands in all four jurisdictions separately.
- Look for a Chinese business partner through trade missions or government programs. Sharing some of your profits is worth the benefit of having a knowledgeable local presence.