With its rapidly expanding economy, the largest middle class in the world, and significant manufacturing capacity, China can be a great new market for American businesses interested in global expansion or manufacturing goods for export in China. Before expanding, however, American companies should first ensure that their brand is sufficiently protected from a common practice in China — trademark squatting.
Unlike the United States, China is a “first-to-file” country. This means that, in order to accrue rights in a trademark in China, a company must be the first to file to register that trademark there. This system is very different from the United States, where the senior user of a mark, regardless of registration, has rights. In addition, the Chinese Trademark Office does not require an applicant to prove that it is using the applied-for mark before granting a trademark registration. This system of first-to-file with no proof of use requirement allows unscrupulous individuals and entities to engage in the practice of trademark squatting, or registering Western brand names (or their Chinese-character equivalents) in China. Trademark squatters in possession of a Chinese registration for a Western brand name will often either: (1) hold the registration hostage and demand large sums of money for a trademark assignment; or (2) sell cheap knockoff goods under the pirated trademark, leading the Chinese consuming public to link the Western brand with inferior products.
Unfortunately, many Western companies and famous individuals have experienced firsthand the consequences of trademark squatting in China. One example is Nike and Michael Jordan’s line of Air Jordan shoes. In 1993, Nike registered to protect the trademark JORDAN in English in China but neglected to file for the Chinese-character transliteration “Qiaodan.” Several years later, Qiaodan Sports registered the Chinese trademark Qiaodan and began operating retail stores offering shoes and athletic wear under the Qiaodan mark, including selling shoes with a basketball player’s silhouette, similar to the silhouette found on Air Jordans.[1] Qiaodon Sports also registered and used other marks commonly associated with the basketball player, such as the number 23 (Michael Jordan’s Chicago Bulls jersey number) and the names of Michael Jordan’s two sons.[2] Currently, Qiaodan Sports operates approximately 6,000 retail locations in China, with many of its customers believing that Qiaodan Sports is endorsed by or affiliated with Michael Jordan.[3] Upon learning of Qiaodan Sports in 2012, Michael Jordan instituted proceedings against the Chinese company.[4] The Beijing Intermediate People’s Court, in finding for Qiaodan Sports, held there was insufficient evidence to conclude that Qiaodan referred to Michael Jordan.[5] This ruling was upheld on appeal to the Beijing High People’s Court.
Companies interested in expanding into China can prevent trademark squatting by registering their English marks (if the company plans to sell goods in China using its English marks) as well as the Chinese-character equivalents. Registering both the English marks as well as the Chinese-character equivalent forecloses the potential avenues trademark squatters might use to financially benefit from a Western company’s brand. Registration can be sought either through Madrid extension filings or through a national filing with the Chinese Trademark Office. — Stephanie Martinez
[1] National Public Radio, The Trademark Woes of Michael Jordan (And Many Others) In China (Aug. 16, 2015), http://www.npr.org/2015/08/16/430998321/the-trademark-woes-of-michael-jordan-and-many-others-in-china.
[2] Id.
[3] Id.
[4] Eben Blake, International Business Times, Michael Jordan Loses China Trademark Lawsuit to Chinese Knockoff Brand Qiaodan Sports (July 30, 2015), http://www.ibtimes.com/michael-jordan-loses-china-trademark-lawsuit-chinese-knockoff-brand-qiaodan-sports-2032080.
[5] Id.
