Recently the Chinese Trade Mark Office reduced its fees in relation to trade mark matters. Effective 1 April 2017, Office fees were reduced by 50 percent for trade mark applications, registrations, renewals, assignments and transfers, change of name or address, trade mark oppositions and cancellations.
The reduction in trade mark filing fees will be particularly useful for small enterprises and start-ups; where trade marks will be registered in large amounts of goods and services classes; and for preventing trade mark hijacking by third parties through defensive trade mark filings.
In addition to the fee reduction, other measures recently established by the Chinese Trade Mark Office include collaborative examination centres outside the existing main centres, electronic trade mark registration and simplification of trade mark application procedures.
Strategic context for these developments
The reduction in trade mark fees is one component of the Chinese Government’s goal to facilitate entrepreneurship and innovation. China adopted its 13th Five-Year Plan in March 2016, outlining China’s goals and targets for its development from 2016 to 2020. An October 2016 report by KPMG Global China Practice states the two important paths to be pursued in the 13th Five-Year Plan period are enhanced creation (specifically, innovation and entrepreneurship) and consumption as a primary driver of growth. To this end, the Chinese Government is promoting foreign investment into emerging sectors, investment into acquiring overseas technology to serve advanced sectors in China and expand and enhance consumer consumption of quality goods and services.
The Government also released a national plan in early 2017 in relation to the protection and enforcement of intellectual property rights to be carried out during the 13th Five-Year Plan term. The national plan is aimed at improving the legal system for intellectual property, enhancing market value and strengthening the management of intellectual property rights in China. The China National Copyright Administration also released a similar plan in relation to copyright law reforms and improvement of administrative enforcement of copyright.
The above plans follow from earlier steps to encourage brand owners to protect their trade marks in China. The Chinese trade mark laws were revised in 2014 in order to create a fairer trade mark system for local and overseas brand owners.
While historically China has had a perceived lack of regard for intellectual property rights, the above developments signal a purposeful intention of the Chinese government to create an economy where intellectual property rights play an important role. We outline below what the trade mark fee reductions and overall strategic advances in China mean for your brand.
Your brand in China in 2017
With China’s status as a manufacturing powerhouse and the growing Chinese consumer base, there are huge opportunities in China for New Zealand businesses. Before exploring these exciting opportunities and implementing business interests in China, it is important to ensure you have a clear intellectual property strategy in place. In terms of your brands, your strategy should consider trade mark searching, filing and enforcement of your trade mark rights, as well as timing and costs.
Whether you will be manufacturing in China, exporting your goods and services to the Chinese market or you already have a physical presence in China, there are numerous benefits of securing registered trade mark rights in China. Prior to filing a trade mark application, it is important to ensure the trade mark is available for use and registration by undertaking a search of the Chinese trade mark records. It is also important to bear in mind the timing of filing your application as the trade mark registration process in China can take up to a year, and in some cases longer.
China has a ‘first-to-file’ trade mark system whereby a trade mark registration is the only way to secure certainty in trade mark rights in China. Unlike many jurisdictions, common law rights acquired through use of a trade mark in the territory hold no weight except for in some very limited circumstances. A key benefit of registering your trade mark is to prevent third parties from appropriating and registering your trade mark before you do. This is known as a ‘bad-faith registration’ or trade mark hijacking and is common in China. If third parties register your trade mark they may demand a huge price to sell back the trade mark, they can prevent your entry to the Chinese market and they may even be able to intercept your goods bearing your trade mark at Customs.
The best prevention of third party interference is to use the Chinese trade mark system proactively and register as early as possible. Another key benefit of filing a Chinese trade mark registration is being able to rely on your registered intellectual property rights in relation to counterfeit products. New Zealand Trade and Enterprise states the United States Government estimates that around 20 percent of consumer products sold in China are counterfeit. Obtaining a trade mark registration (as well as other intellectual property rights where possible) puts you in a better position to prosecute third parties who are producing or selling counterfeit products.
A trade mark registration also reduces the risks during discussions and negotiations with potential third party distributors and licensees as you have certainty and security in your intellectual property rights. As well as filing trade mark applications before these discussions take place, it is also important to ensure the correct non-disclosure or confidentiality agreements are in place.
Overall, while brand protection in China brings with it more complex considerations than some other markets, this is outweighed by the potential advantages of doing business in China. Here are some initial, practical steps you can take in relation to protecting your trade mark in China:
- Take advantage of the recently reduced filing fees and file for your trade marks as early as possible. There is simply no substitute for early registered rights.
- Register your trade marks in English, Chinese characters and pinyin to protect the correct meaning of the brand and prevent others using your trade mark in different formats and potentially incorrectly.
- Where applicable, register for copyright protection simultaneously. China is one of the few countries where you can obtain a copyright registration for your works.
- Take advantage of international filing routes to streamline the filing process, particularly in China and Hong Kong, and reduce the risk of your intellectual property being disclosed before it is protected in China.
- Ensure non-disclosure and confidentiality agreements are in place before identifying and working with potential local Chinese partners.
- Ensure your commercial strategy actively recognises the importance of intellectual property in your business’ growth and success, identifies China as a high value but high risk market and employs an appropriate intellectual property plan accordingly.