A monumental shift in perceptions about the quality of Chinamanufactured goods reflects the immense growth experienced in China over the last 30 years, growth which has seen the national economy skyrocket to the world’s second largest.
It also reflects the growing
sophistication of Chinese manufacturing, and a newfound confidence in Chinese companies, now mature and ready to step out from the shadows of their OEM “big brothers” to establish and successfully market their own brands and build their own identities.
Hand in hand with these global shifts in brand perception are new opportunities for Chinese companies wishing to build their own brands and their businesses overseas, including in Australia.
This article is intended to provide some general points of guidance for Chinese companies wishing to build their brands in Australia, focusing in particular on practical aspects of the brand protection process that may be unfamiliar to Chinese entities used to working with the PRC’s intellectual property regime.
We will also touch on issues of protection and enforcement that are unique to owners of Chinese language marks. Such issues result from the occasionally inconsistent approach taken by the Australian Trade Marks Office to the examination of foreign language marks.
THE AUSTRALIAN TRADE MARKS SYSTEM
In China, rights in a trade mark are acquired on a “first-to-file” basis – meaning the first party to file an application for the trade mark with the China Trademark Office enjoys superior rights in the trade mark. That rule applies regardless (in nearly all cases) of whether a third party has been using that trade mark in the past, in China or elsewhere.
Australian trade mark law, however, provides that ownership of a trade mark arises either from first registration or first use. This means that rights can exist in a trade mark which is used but not registered, purely by virtue of the use of that mark in commerce. These are often referred to as “common law trade mark rights.”
For Chinese companies, the implications of common law trade mark rights are double-edged.
On the one hand, the Australian system provides an economical (perhaps even free) means of securing a certain level of protection around trade marks. A Chinese company that exports products bearing its trade marks to Australia may already be accruing rights in those marks in Australia through sales made by importers – even in the absence of a licence agreement with those importers.
On the other hand, the possible existence of common law trade mark rights created through use means that others may be accruing rights in a mark similar or even identical to your mark. This means that it is impossible to have confidence that a brand is available for use in Australia. Without conducting comprehensive trade mark clearance searches (being searches that look beyond trade marks appearing on the Australian Trade Marks Register).
BENEFITS OF OBTAINING A TRADE MARK REGISTRATION
A trade mark registration provides a statutory monopoly in the mark and confers a right to sue others for infringement of that registered right. A trade mark registration also poses a presumptive block to attempts by others to register marks that are “deceptively similar” to the registered mark and which claim protection for similar goods or services.
There is also a deterrent aspect to trade mark registration: the database of the Australian Trade Marks Register is open to all (including would-be infringers) to see.
Finally, if recorded with Australian Customs, a registered trade mark can also be used as a means of identifying and seizing goods of others bearing similar or identical marks, allowing Customs to prevent their importation and keeping the market clear for goods bearing the registered mark.
ENGLISH-LANGUAGE BRAND SELECTION CONSIDERATIONS
One of the many factors for Chinese companies to consider when establishing a brand in Australia is the form that brand will take and in particular, whether a word mark should be used and registered in Chinese, English, or in both languages.
Many Chinese companies are still filing applications in Australia for trade marks consisting solely of Chinese characters, without seeking protection for corresponding English translations or transliterations.
- an application for [Click here for mark] filed in the name of Wuxi Jiangnan Cable Co.,Ltd; and
- an application for [Click here for mark] filed in the name of Jiangsu Sun & Moon Lighting Co, Ltd.
Another common practice of Chinese companies is to seek registration of their Chinese-language marks superimposed with a transliteration or a Pinyin Romanisation of the characters which may not distinguish the mark or be easy to pronounce (let alone make sense) to non-Chinese speakers. Examples include:
- Hung Choy Cosmetics Manufacturing Company Ltd’s registration for [Click here for mark];
- Jala Group Inc’s registration for [Click here for mark];
- Ningbo Tianxiang Electrical Appliance Co Ltd’s registration for [Click here for mark]; and
- Shandong Zhangqiu Blower Co, Ltd’s registration for [Click here for mark].
Many Western companies adopt a similar practice when looking to manufacture their products in the PRC for export (ie they apply only for English-language versions of their trade marks). There are serious potential consequences stemming from such a decision:
- it potentially limits the Chinese audience for these “Englishonly” brands to English-speaking Chinese consumers or to Englishspeaking expatriates in China;
- it invites Chinese consumers to themselves create a Chineselanguage version of those brands – using characters, slang, or connotations that may not have any rational relation to the brand owners’ message; and
- it creates an opportunity for pirates to use China’s “first-to-file” system to gain early control of the Chineselanguage brands discussed in (2), potentially hobbling the growth of the brand in China.
There are similar potential impacts to Chinese brand owners that apply for and register only their Chineselanguage brands in Australia.
Whilst there is a large and growing Australian Chinese population, there are only a handful of Australians not of Chinese descent who can speak and read Chinese fluently. Failing to adopt, use and register an English-language version of a Chinese character brand will necessarily limit the appeal of that brand to a sliver of the population. That may be acceptable in the case of niche products which are likely to appeal predominantly to speakers of Chinese (such as red bean ice cream and aloe-flavoured beverages) but for any brand owner with larger aspirations, protection of an Englishlanguage version of that brand should be prioritised.
Indeally, protection for a version of the trade mark that has been adapted for an English-speaking market should also be sought. Examples of companies that have successfully developed adaptations of their marks to suit the Australian market include:
- AGV Products Corp, who have protected both [Click here for mark] and [Click here for mark]; and
- Tee Yih Jia Food Manufacturing Pte Ltd, who have protected both [Click here for mark] and [Click here for mark].
Common law trade mark rights acquired through use of a mark in commerce create a risk, too. Waiting too long to register or use optimal English-language, transliterated or Romanised-versions of Chinesecharacter trade marks could permit others to co-opt those marks, thus preventing Chinese brand owners from using the most faithful English-language translations or transliterations of their trade marks.
It is also important to note that Australia’s Chinese-speaking population is continually evolving. Members of the current generation of Australian-born Chinese may not feel as connected to their parents’ homeland as previous generations and may not be as able as their parents to “connect” with Chineselanguage brands. For this reason, care should be taken before making assumptions based upon the language capabilities of Australian born Chinese.
We would never suggest that Chinese companies jettison their Chineselanguage marks in Australia: those marks are part of their brand “DNA” and history, and appropriate trade mark protection should be secured for such marks. Nevertheless, it is in the best interests of Chinese companies seeking to reach beyond Chinese-speaking consumers in Australia to maximise their brands’ growth potential by designing, using and registering non-Chinese versions of their brands that will “speak” to the broadest possible range of consumers.
DON’T ASSUME THAT REGISTRATION EQUALS ENFORCEABILITY
As a general rule, any company that secures a trade mark registration in Australia can take comfort from the fact that, at least in the eyes of the Australian Trade Marks Office, their trade mark is sufficiently distinctive to warrant registration.
But owners of Chinese language marks need to be alive to occasional deficiencies in the examination practice of the Australian Trade Marks Office. Those deficiencies can result in the registration of Chinese language marks which, owing to their status as non-distinctive, may be vulnerable to cancellation at any time during the term of their registration. Possible examples include:
[Click here for mark]
- (meaning “high concentration red wine”) and which was accepted in respect of wine; and
[Click here for mark]
- (meaning “sweets house”), registered in respect of goods including jam and sugar.
The Australian Trade Marks Office requires applicants for marks incorporating foreign characters or words to provide a translation or transliteration of their mark before the mark is taken for examination, but evidently, such translations or transliterations do not always figure into the Office’s distinctiveness analysis. This can cause uncertainty for brand owners, who may consider that they are prevented from using or registering a mark in Australia on the basis of an apparent conflict with an earlier mark with questionable validity.
Chinese companies that wish to manage and control the growth of their brands in Australia should also be aware of the dangers posed by Australia’s lax parallel importation laws.
The effect of those laws is to freely permit parallel importation of trademark- bearing goods (as opposed to copyright-protected material) for commercial purposes, provided that the trade mark thereon was applied with the consent of the trade mark owner.
By way of example, if a Malaysian distributor for a Chinese brand owner, without the consent of that brand owner, exports the Chinese brand owner’s televisions to Australia, such conduct will not typically be prohibited by Australia’s infringement provisions even if the Chinese brand owner objects to those goods being imported and sold here, and/or has a different “exclusive distributor” for its products in Australia. This can make it difficult, if not impossible, for brand owners to effectively manage and control the market for their goods in Australia.
The only way for Chinese companies to avoid this result is for them to impose strict contractual restraints on their manufacturers’ and distributors’ activities that dictate to whom – and to where – those goods can be sold and exported.
Chinese companies wishing to gauge the scope of risk posed by Australia’s parallel importation laws to their distribution process should conduct a thorough review of all their distribution agreements. Ideally, agreements with distributors not based in Australia should impose specific restraints on their activities, such as prohibiting them from selling to anyone other than “end users,” ie, resellers, and should expressly exclude Australia from their designated Territory.
LICENSING AND FRANCHISING
Chinese companies must also ensure that their licensing arrangements with Australian distributors are well drafted. For example, to ensure that any use of a licensed trade mark by the licensee will inure to the Chinese brand owner’s benefit – without rendering the mark vulnerable to removal on the ground of non-use – the licence should contain provisions imposing a quality standard to which the goods sold by the licensee must adhere, and mechanisms by which the licensor can monitor compliance with those standards. In the absence of such quality control provisions, the licensee’s use of the registered trade mark might not be “credited” to the licensor, making the registration vulnerable to removal for non-use. Finally, it should be noted that Australia has a complex franchising law. If it is anticipated that a licence agreement with an Australian distributor will go beyond a pure “distribution of branded goods” arrangement, consideration should be given to whether that agreement potentially qualifies as a “franchise agreement” under Australian law (which would have the effect of placing additional burdens on the licensor of the trade marks). Care may need to be taken by the “licensor” in drafting the agreement to ensure that it does not become an unintended “franchisor” and thereby fall into the territory of franchising law.
An edited version of this article was originally published in the Chinese- Language version of Managing Intellectual Property Magazine (December 2012 edition).