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Business in China often means fighting TM squatters

If you have ever heard the phrase, "the devil is in the detail," you have one nugget of simple wisdom for how to protect your intellectual property when doing business in China. As we noted in one previous post, Chinese law on trademarks can be complicated and frustrating. Compared to U.S. intellectual property law, practices in China can seem arcane. Not only can cases take a great deal longer to resolve, but even positive outcomes can prove to be less than satisfactory.

It is important to note that while the laws in China are changing, some issues continue to benefit from the application of an experienced legal hand. Among them is the problem of trademark squatters.

'First to file' v. 'first to use'

Trademark squatting in China is a practice under which a Chinese business absconds with the trademarks of another firm for their own benefit. This happens because China's law recognizes who files a trademark first, not who happened to first use the mark. Squatters take advantage by anticipating a U.S. firm's intentions and being first to trademark the name that will work best in the Chinese market.

For example, the transliteration of the last name of sports superstar Michael Jordan's last name is Qiaodan, pronounced "chee-ow dahn." Jordan and his business team apparently didn't register that transliteration when entering the Chinese market. That allowed a competing local sportswear firm to claim the name Qiaodan Sports.

It's not exactly clear how things played out, but the usual scenario in such cases is that the squatter, having trademarked the most lucrative name, tries to sell it back to the original holder for a huge profit. In the Jordan case, it took a protracted legal battle and several turns through the Chinese courts to reach resolution.

The lessons to take away are these:

  • Be first to register your trademark
  • Register any name that might be most identifiable or appropriate to the Chinese market
  • Register under as many categories as your budget allows
  • Keep proper records in the overseas office
  • After registering, monitor for possible infringement

Obviously, it makes sense to consult with experienced legal counsel, as well.

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