Brand Strategy China – 2017 (Shanghai)

Anyone who works in an internationally open industry and does not keep an eye on the latest developments in China in his activities risks missing out on effective protection. Long before you consider using suppliers from China or even entering the Chinese market, you have to be careful and plan your protection.

Although there are still many poor copyists in China, it is now undisputed that manufacturers have developed that can meet the highest Western standards. These companies can become active in the western markets, provided that they can introduce their goods into the distribution channels via suitable brands. Western companies that do not properly protect their brand are facing a difficult situation.

The times when you had no chance to enforce your intellectual property rights (trademarks, patents, design) in China are over. Today, not only the legal prerequisites exist but also the practical experience for successful litigation.

What does this mean for the brand protection strategy of a European company?

If you protect your European brand and, if possible, your product design also in China, you have the possibility of stopping illegal deliveries already at the Chinese export port. This is much more efficient than having to find and stop the import to every single European country. The Chinese customs authorities today are well prepared and willing to cooperate with the owners of trademarks and enforce the law against infringements of industrial property rights. This is not possible without a registered trademark in China. One should always cover China for international trademark protection. The effort for this first step is hardly worth mentioning.

If you have made the trademark registration, and you have specific fears or indications that trademark-infringing products are being exported, you can also register the trademark rights with the customs authorities. This will create the basis for a quick blockade of illegal exports.

If you want, or if you have to, for cost reasons, to involve Chinese suppliers, the protection of your own brand (or patents or design) is essential. You should also think about a Chinese transliteration or translation of your own European brand. To do this, you need to involve local brand specialists so that you can build the desired effective protection.

But trademark registration is not enough. You also need to install brand monitors to detect if similar third party brands are registered. You have to keep in mind that the filing activity of the Chinese has reached a great extent. It is estimated that in 2017 up to 5 million new trademarks will be registered. Suppliers also want to hedge their risks and ,therefore, they sometimes register the brand (or its Chinese variations) of their foreign business customers. Failure to object to such trademarks of Chinese companies can lead to major problems in enforcing your own brand. Also, the scope of protection of one's own brand will be narrowed over time if too many similar third party brands are registered.

The broad extent of e-commerce in China is affecting not only B2C but also B2B. Therefore, you should monitor and eliminate brand-infringing offers. You have to register your trademark rights with the online platforms, so that you can report incriminating offers to the operator of the platform. Alibaba has recently introduced a single electronic complaint mechanism for its various sales platforms to reduce the administrative burden on brand owners. According to Alibaba, about 20 million complaints are treated each year. 97% of them were processed within 24 hours. 80% lead to the immediate cancellation of the discriminatory offer (left). The large platforms strive to suppress trademark infringements and punish repeated injuries. They are also developing new software to detect tricky piracy (such as fuzzy and mirrored brand imagery).

If you have concrete hints to a trademark infringement, you need not be unnecessarily afraid of legal proceedings. The statistics show that the plaintiff wins in well over 90% of the first-instance trademark infringement claims. The "local protectionism" plays a much less important role than you think. It is more important to go to a court that statistically has a trademark-friendly practice.

The significantly higher ceilings for damages since 2014 and the admissibility of triple punitive damages for bad faith trademark infringement lead to painful consequences on the part of the infringer. If the prerequisites exist for prosecuting the infringer, then one usually has a good chance of reaching a financial agreement at civil law level. The impending loss of personal liberty (prison) is one of the most effective means of bringing an infringer to raison.

The problem of legal action is usually not unfair litigation, but getting the required evidence before starting the trial. It is therefore important to use search companies that have the necessary contacts and networking to get to the crucial information and evidence. Presently, the authorities are still reluctant to preliminarily confiscate evidence. They seem to prefer to do nothing but do something wrong.

Ford China's goal in China is to make it worthwhile pursuing legal violations on the bottom line. Trademark violations are systematically pursued and should not only lead the consumer traffic back to one's own products (soft recovery) but should also be financially measurable (hard recovery). In recent times, Ford China claims compensation and settlements have resulted in higher revenue than legal costs. This shows that it makes perfect sense to consistently enforce his rights in China.