Tesla Motors Inc. sued for infringement in China

In what appears to be a classic case of trademark trolling and is a surprising development, Tesla Motors Inc. USA (“Tesla”) was recently sued in China for infringing the trade mark “TESLA”.

Consequent to a trademark dispute that arose in January this year between a Chinese entrepreneur Zhan Baosheng (“Zhan”) from the southern province of Guangdong and Tesla that had prevented it from using the mark "Te Si La" but which was apparently resolved, Tesla commenced delivery of Model S sedans to its Chinese customers.

Zhan had registered "Tesla" as a trademark in China in both English and Chinese in 2006 and well prior to Tesla’s entry into China. Zhan has now sued Tesla before the Beijing Third Intermediate Court seeking to restrain it from (i) carrying on sales and marketing activities in China (ii) ceasing to operate showrooms and power charging facilities and (iii) paying him 23.9 million yuan ($3.85 million) by way of compensation. According to the details appearing on the Court’s website the case will be heard on 5th August.

Tesla’s operations and activities in China are now faced with uncertainty and thwarted its ambitions of China becoming its largest global market in the coming years.

Reputed multi-national companies such as Apple Inc. have faced similar situations in the past whereby Apple paid $60 million to settle a dispute relating to the trademark “iPad” in China with Proview International Holdings Ltd, which had applied to Chinese custom authorities to stop local shipments of the iPad.  

Insofar as the position in India is concerned, Indian trademarks law permits a person to seek protection of proprietary rights in a trademark on a proposed to be used basis and without any requirement of use. It would be advisable for multinational companies to take advantage of such enabling provisions, file trademark application(s) at insignificant costs and assert proprietary rights in their trademarks irrespective of whether or not they may have used the same. This would thwart the attempts and defeat the purposes of any unscrupulous parties from filing an application(s) for identical/similar trademark(s) prior in point of time and thereafter subject the rightful proprietor to litigation in order to establish his bona fide rights in and unto the same and which could be a prolonged and expensive affair. This strategy provides an effective recourse to possible attempts of trade mark trolling.