Home to nearly one-fifth of the total world population, with increasing income and consumer spending and an insatiable desire for foreign goods, China is undeniably lucrative for foreign brands looking to expand their business. To effectively break into the Chinese market, a localised branding strategy that sits well with the preferences of Chinese consumers is necessary.
An effective branding strategy does not stop there but goes further to offer due protection to brand elements, thereby preserving the economic value of the brand. This article discusses ways to help foreign brands effectively protect different types of brand elements in China, and unfolds the interplay between IP rights and the anti-unfair competition law.
Branding is the marketing practice of developing names, logos, slogans, or trade dress that helps identify a product or service belonging to a company and distinguish it from products and services of other undertakings. In other words, branding contributes to corporate identity.
Reputation and brand value follow as brands get recognised by consumers. Owing to the importance of branding, brands should secure protection for brand elements at the outset to maintain their exclusive rights and guard against infringement and unfair competition practice.
Brand owners should be aware of the importance of brand localisation and secure trademark protection – not only for their brand names – but also for the Chinese equivalents. Given that Chinese is the mother language, it is natural that Chinese consumers prefer to use Chinese to name foreign brands. After all, it is easier for them to remember and pronounce brand names in Chinese. A meaningful and iconic Chinese brand name will help brands effectively penetrate the Chinese market.
Another unique consumer practice in China is that consumers will develop nicknames for their favourite products. For instance, consumers have developed the term ‘红腰子’ (meaning red kidney) to refer to the Japanese cosmetic brand Shiseido’s best-selling ‘Ultimune Power Infusing Concentrate’ as they consider the shape of the product is similar to a kidney.
Due to the local regulatory requirements, product names, particularly in the cosmetic sector, may be long and difficult to remember. A catchy nickname can facilitate communication and dissemination. This is further augmented by the phenomenon of social influencers and consumers actively sharing their reviews online. It is recommended that foreign brands take the lead in developing product nicknames so as to maintain control on the choice and secure protection before product launch.
It is never too early to file trademark applications given the rampant trademark squatting in China. Trademark applications should also be filed, even if there is no immediate plan to enter the Chinese market. Recently, squatters have stepped up their game by filing customs recordation to block the import of goods, malicious complaints on online platforms, and even infringement lawsuits. Securing registration at an early stage can help avoid legal expenses and, more importantly, time to fight against squatters.
Another limb of protection is from the Anti-Unfair Competition Law of the People’s Republic of China, which provides that business operators shall not use names similar or identical to others’ commodities with “a certain level of influence” causing confusion to the public. This applies to both registered and unregistered brand and product names. A certain level of influence refers to reputation generated in mainland China (but not in Hong Kong SAR, Macau SAR and Taiwan), and evidence showing long-term and large-scale sales and promotion and awards received in mainland China is required.
Apart from trademark protection and the protection under the anti-unfair competition law, logos can be protected by copyright. Recordal of copyrighted work can be filed with the Copyright Protection Center of China. While copyright recordal is not mandatory nor the prerequisite for protection, it is a good brand protection tool.
Copyright recordal certificates serves as a prima facie proof of ownership and existence of copyright as of the date of issuance of the certificate and are generally required by the authorities and e-commerce platforms when seeking to establish prior copyright. More importantly, prior copyright can be a basis for trademark opposition and invalidation.
Right owners will only have to establish substantial similarity between the copyrighted work and the disputed mark, taking similarity of goods and services out of the equation. This serves as a good weapon against bad faith trademark filings in classes where there is no prior registration.
Slogans are usually short phrases about a company or its products and services. In China, slogans are generally considered non-distinctive. That said, slogan marks may still be registrable if:
i) They are short in length (two to four words);
ii) They are not complete sentences;
iii) They play on words, irony or subliminal messaging;
iv) Consists of other distinctive elements (e.g. logos, brand names, design elements); or
v) They have been used extensively in mainland China and acquired distinctiveness prior to the filing date.
Given the risk of refusal, brand owners may consider filing both a slogan mark and a combination of slogan and house mark. In the event that the slogan mark is refused for lack of distinctiveness, brand owners may still rely on the latter to accord some form of protection to the slogan mark.
Trade dress is commonly understood as product packaging, which is an important feature of a brand and an inseparable part of a product. Precisely, it refers to a collection of elements, such as interior design of retail stores, staff uniforms, or a configuration of the product, which all contributes to the promotion of its product and/or services. Simply put, trade dress is the commercial look and feel of a product or service which creates an overall impression and distinguishes the source of such product or service.
Lawyers may adopt different IP rights, such as trademark, design patent, and copyright, and anti-unfair competition law to maximise protection for trade dresses. Anti-unfair competition law is normally considered as a catch-all provision and can work together with other IP rights to offer a ‘dual protection’ to trade dresses.
In general, two conditions must be satisfied in order to be protected under the anti-unfair competition law: the trade dress should be distinctive and should enjoy a certain level of influence in mainland China. The notion of ‘a certain level of influence’ is commonly understood as reputation generated in mainland China (excluding Hong Kong SAR, Macau SAR and Taiwan).
Two recent cases below highlight the interplay between IP rights and the anti-unfair competition law:
New Balance v New Barlun (China) Co Ltd (2020)
New Balance (NB) has filed an unfair competition lawsuit against New Barlun Co Ltd, arguing that New Barlun is imitating NB’s trade dress of the stylised ‘N’ logo on their infringing products at the exact same position as NB. New Barlun argued that they were entitled to use their logo ‘N’ on sneakers as they obtained trademark registrations and also tried to argue that NB should not be allowed to rely on the anti-unfair competition law since NB already owned trademark registration for ‘N’.
The Shanghai Pudong New Area People’s Court held that NB could demonstrate that, prior to the filing date of New Barlun’s trademark registrations, NB’s ‘N’ logo constituted a commodity decoration with certain level of influence through NB’s long-term use and promotion of the ‘N’ logo and its particular placement on both sides of their sneakers.
The court highlighted that trade dress right, which is a civil right, and trademark right, which is obtained through administrative procedures, are separate rights. An act could constitute both trademark infringement and unfair competition at the same time and they are not mutually exclusive. The court held that New Barlun’s acts constituted unfair competition and ordered New Barlun to pay NB the damages of $1.5 million.
Jaguar Land Rover Limited v Jiangling Holdings Co Ltd and Beijing Dachang Landwind Automobile Sales Ltd (2019)
Jaguar Land Rover (JLR) took action against Jiangling’s ‘Lvfeng X7’ based on unfair competition and copyright infringement of Jaguar’s Range Rover Evoque. In 2019, the Beijing Chaoyang District Court decided in favour of JLR. While JLR’s design patent over its Range Rover Evoque was invalidated due to prior disclosure, the court held that the design elements of Evoque are distinctive and had acquired a certain level of influence through long-standing use and promotion.
The court found that Jiangling’s behaviour constituted unfair competition, as Lvfeng X7 is an imitation of JLR’s Evoque. Thecourt then imposed an injunction against Jiangling’s manufacture, promotion and sale of Lvfeng X7 and also awarded damages of $200,000 to JLR. In its judgment, the court also held that a plaintiff has the right to bring more than one action based on different causes of action (including unfair competition and copyright), and where a design patent is invalidated or has been expired does not necessarily mean that the right holder has lost other rights.
Regular review of IP portfolio
Due to the adoption of standardised descriptions of goods and services, this may limit the expression and scope of specification. As such, it is possible that specifications of existing registrations may not be wide enough to cover newly developed technologies. A regular review of existing IP portfolio and identification of gaps in protection are very important, particularly for technology companies.
Brand owners should keep an eye on the China National Intellectual Property Administration’s (CNIPA) latest update of the Classification Book and publication of list of acceptable goods and services from time to time, where new goods and services previously unavailable will be introduced.
Uniform brand communication and guidelines
It is important to create brand guidelines, which serve as rulebooks to explain the expected proper use of the brand’s trademarks and other brand elements when being displayed in communications, documents and electronic messages.
This can ensure consistent use of brand elements and help develop a sole corresponding relationship between the brand elements and the brands, facilitating the development of brand awareness and hence reputation. Brand owners should also conduct regular trainings and workshops with employees and business partners to ensure they understand and comply with the brand guidelines.
Proper docketing of use evidence
Brand owners should also set up a document retention policy for retention of original documents of no less than five years. For proceedings before the Chinese courts, original or at least notarised documents shall be produced. Moreover, under the local practice, a complete evidence chain should be established. That is to say, one should provide evidence to prove the actual performance of agreements. The mere provision of an agreement is insufficient, and the relevant purchase orders, VAT invoices, shipping documents, and customs documents should be produced to complete the evidence chain.
In addition, as more and more promotions are done online, brand owners should also preserve evidence of online promotion. Most online promotional materials are available during a specific period of time and difficult to be retrieved afterwards. It is thus important to preserve the online promotional materials when they are still available with clear indications of the date of generation.
Official recognitions of brand reputation
Decisions of the CNIPA and administrative authorities can help persuade the Chinese Courts to confirm brand reputation in court proceedings. Brand owners may strategically identify suitable targets for lodging opposition/invalidations and administrative actions in order to obtain favourable decisions confirming brand reputation.
All in all, a good branding strategy should not merely focus on the creation of different brand elements but also include strategies to protect those brand elements. Brand owners should always involve their IP counsels when developing new products and services so that they can identify areas for protection at an early stage and secure such protection prior to the official launch.
While the anti-unfair competition law may serve as a fallback position if no other IP rights are available, it is important to note that an important prerequisite is that such brand elements have acquired a certain level of influence in mainland China. Brand owners should take strategic steps to build up and evidence its reputation for future unfair competition lawsuits.
Anna Mae Koo
Vivien Chan & Co
T: +852 2522 9183
Anna Mae Koo is a partner at Vivien Chan & Co and leads all areas of the IP practice including non-contentious, contentious and transactional IP law in China and Hong Kong SAR. She regularly advises on all areas of IP including licensing, franchising, IP due diligence, prosecution and unfair competition law in China and Hong Kong SAR.
Anna Mae is a Techstars mentor and is actively involved in the Litigation Committee of the International Bar Association (IBA) and the China Bulletin Committee of the International Trademark Association (INTA). Anna Mae was a Prince Philip scholar at the University of Cambridge, where she graduated with a master’s degree in law.
Head of Beijing Office
Vivien Chan & Co
T: +852 2522 9183
Ann Xu is a trademark attorney and heads the Beijing office at Vivien Chan & Co. She has more than 20 years’ experience in IP cases in mainland China. Ann has trademark, copyright and designs expertise. She regularly advises on prosecution and portfolio management.