Foreign Enterprises continue to be shocked by the fact that often, before they enter China, they find their trademarks are already being registered, not by them, but by an opportunist in China that now prohibits their own entry into the China market.

A “Classic” Trademark Case in 2014

One of the most famous China trademark cases in 2014 was the Tesla Case trademark battle, which ended in a dramatic settlement.

Case Background

Tesla Motors Co., Ltd, hereafter referred to as “Tesla Co.”, founded in 2003 in Silicon Valley, United State, is an automotive and energy storage company that designs, manufactures, and sells electric cars, electric vehicle powertrain components, and battery products. Since 2010, Tesla Motors, a public company had traded on the NASDAQ stock exchange under the symbol TSLA. On September 6, 2006, a Cantonese, Mr. ZHAN, filed a trademark application of “TESLA” in class 12, which the designated goods were motors and other similar goods, under application No. 5588947. This application was approved to be registered on June 28, 2009.

Then when Tesla Co. wanted to enter into China’s market, they encountered a trademark infringement issue. From 2009 to 2013, Tesla Co. entered a long negotiation with Mr. ZHAN, however, because the two parties could not reach a deal, they never settled the dispute.

In March 2013, Tesla Co. filed a 3-year-non-use application to the CTMO (Trademark Office of the State Administration for Industry & Commerce) against the trademark “TESLA” with application No. 5588947 (hereafter referred to as the target trademark); In April 2013, Tesla Co. filed an invalidation application to cancel the target trademark to TRAB (Trademark Review and Adjudication Board of the State Administration for Industry and Commerce). For striking back, Mr. ZHAN filed a trademark infringement lawsuit against Tesla Co., and requested Tesla Co. to stop selling infringing products and related promotional activities and pay compensation of 23.94 million RMB.  

On August 5, 2014, according to the successful mediation under Beijing 3rd Intermediate Court of People’s Republic of China, both parties reached a settlement. Mr. ZHAN gave up all usage of TESLA marks and at the same time, Tesla Co. removed all claims for damage against Mr. ZHANG.

This is a ‘classic” example of how trademark squatting can bring tremendous trouble and cost to a company including blocking entry into the China market. 

Normal Remedial Models for Trademark Squatting:

Generally speaking, the following 4 patterns are the usually remedies for the trademark squatting:

  1. Filing an opposition to CMTO against the squatting trademark during the publication period preventing successful registration;
  2. Filing invalidation to TRAB against the squatting trademark within the 5 year registration period from registration date. However, if the squatting trademark was recognized as a well-known trademark, then the owner of the well-known trademark shall not be bound by the five-year limitation when filing the trademark invalidation;
  3. Filing a 3-year-non-use application against the squatting trademark when it has not been used for a long time;
  4. Purchase the trademark from the prior registrant (often at a high price).

For the above 4 methods, if the right owner has the opportunity, we, HFG, suggest using as many methods as you can to fully protect your our own rights.

During the process of trademark protection, the rights owner should collect all kinds of evidence to assure the CTMO or the court will accept their perspective and point of view. 

Typically, the rights owner focuses on collecting evidence on its own reputation, rather than that of the trademark squatter. However, in practice, the evidence of the trademark squatter, for example, use in bad faith is the key evidence and also the most difficult to collect for many cases. 

In China, it is important to monitor your brand and investigate the real usage of the trademark, to ensure relevant evidence can be used to further help the right owner win their case.

[Part 2] In the next article, we will present a new case explaining how evidence collected in the trademark investigations can reverse a case and gain a positive outcome.