Do Not Trust the Madrid System When You Register a Trademark in China

Trademark protection has been an issue of international trade ever since Industrialization and its corollary, the emergence of a consumer market, originated in Britain in the 19th century. It was no accident that tags, such as “Made in Germany”, were originally considered as a warning to British consumers against cheap counterfeits from the then emerging German Reich.

But as other countries followed in Britain’s footsteps and developed their own consumer brands, they too become aware of the problem, and consequently, demanded an international treaty governing this issue. As a consequence, in 1883, the Paris Convention for the Protection of Industrial Property was signed. Eight years later, in 1891, four countries (Spain, Belgium, France, and Switzerland) concluded the Madrid Agreement Concerning the International Registration of Marks.

Although this regulation (subsequently called the Madrid System) had many flaws, most notably the initial absence of major trading nations such as Great Britain, Germany, and the U.S., it evolved, over the last 125 years, into a major regime providing a single, international registry for trademarks. The treaty was amended several times and in 1989, an additional protocol was signed.Currently, the “Madrid Union”, which includes all signatories of either the treaty or the protocol, counts 97 members, 55 of which have signed the treaty.

The main purpose of the agreement and the protocol is to provide a centralized organ for trademark registration, relieving the applicants of the requirement to register their brand in each country separately. In principle, a company registering their trademark with the World Intellectual Property Organization (WIPO) in Geneva does not need to register again in any of the signatory states.

China has joined the treaty in 1989 and the protocol in 1995. And indeed, applicants for a WIPO trademark registration can easily include China in the ‘Designated Contracting Parties’-section of the application form. This has led many foreign firms to believe that a trademark registration under the Madrid system would make their brand safe within the lucrative Chinese market.

Alas, Chinese authorities have repeatedly ignored registrations filed in Geneva. What counts, however, is the time and scope of the registration with the Chinese Trademark Office (CTMO).

Timing matters!

First, time matters. China uses the ‘first-to-file’ rule. In other words, if anybody has registered your trademark before you, it will be extremely difficult to get your brand protected. We therefore recommend to everyone, who even remotely thinks about entering the Chinese market, to register their brand as soon as possible. The registration process with the CTMO usually takes up to 18 months and only if your application is successful, you can use your brand in China.

If your trademark has already been registered by somebody else, we would advise you to register your brand under another name. If you believe this to be an absurd suggestion, since your brand has existed for decades and is world-famous, let us remind you that in China, what matters is your Chinese name, not your Latinized one! 

Ever heard of Baoma (宝马), Dazhong (大众), or Weiruan (微软)? Well, you might be driving one or using it on your computer, since these brands are nothing else than BMW, Volkswagen, and Microsoft. The only difference is that the majority of Chinese has never heard of the original names, but will immediately recognize the Chinese ones.

Vanity is therefore not only misplaced, it may also be costly. One foreign company, which had to learn it the hard way is New Balance or Xin Bai Lun (新百伦) in Chinese. In 2015, the American shoe maker was sentenced to pay 16 million to the Chinese trademark owner, who had registered the name back in 2004. Curiously, New Balance could have easily picked another name, but insisted on using Xin Bai Lun out of principle.

It is important to note here that neither in the case against New Balance, nor in the recent IPHONE lawsuit were the Chinese judges convinced by the foreign companies’ ‘famous brand’ status. This, once more, only underlines the importance of registering your trademark as early as possible as well as choosing the right name!

European businesses should also keep in mind that they should apply their trademark in China within 6 months after they applied in the EU in order to remain within the ‘priority date’ period. 

Choosing the right scope!

Besides being quick, choosing the right product classes is as equally important.

China follows the classification system of the Nice Agreement, but has its own subclasses. These subclasses can only be applied for in China, since the Madrid System only includes the main ones. Once the CTMO checks your Madrid application, they might simply pick the subclasses they deem suitable, regardless of whether you agree with it or not. 

This also means that the subclasses not included by you or the CTMO can be occupied by other companies with the same trademark name. What is more, if the CTMO thinks that your Madrid application covers subclasses, which have already been taken, it can just as easily reject your application altogether!

Enforcing your rights under the Madrid System!

If you decide to proceed with your Madrid System trademark in China, be wary of the complications you may have to face when enforcing your rights. In order to obtain a formal certificate for Madrid System trademarks, you will need one issued by the WIPO.  This is due to the fact that separate trademark certificates are not issued in China, but a WIPO certificate will enforce your trademark rights under Chinese law. Although the process of registering for a WIPO certificate is easy, do bear in mind that it will take another three to five months to actually receive it.

Furthermore, the WIPO system does not circumvent local trademark laws, which could potentially land you in a situation where third parties can raise objections. In other words, even if a trademark has been accepted in the home jurisdiction, this does not necessarily mean that it will be accepted in China.

Important: The application should be filed in English, Spanish or French and if within 18 months no objection is made, your trade mark has been successfully registered! However, in the worst case scenario that an objection does occur, you will have to mandate a local Chinese trade mark agent to handle the case. 

The ‘trade-mark supermarket’

We hope this won’t be the case for you, however, if it so happens that your company finds its trademark on a ‘trade-mark supermarket’ website in China, fear not, action can be taken.

Although it is entirely legal to sell a registered trademark if you are the owner of it on the officially approved internet-based platform, sometimes the case arises that a ‘hijacked’ trademark is put up for sale. Usually this involves a Chinese company first registering the trademark of a foreign company in China with the explicit intention of re-selling it to the foreign company at an inflated price to gain a profit.

The Trade Mark Law of China specifies what action to take concerning the withdrawal of disputed trade-marks. Clauses are included in trademark laws which entail different means to defend oneself against the selling of trademarks registered in bad faith. Thus with the evidence at hand of the trade mark on the website to be sold in violation of the law, you can invalidate it. What is more, a registered trademark must be used within 3 years of its registration in China or it will be revoked.

In this way, the lesson you should take away from this is that if your trademark is not registered in China it will have no protection and it will not be an easy task to object to an already registered trademark due to the legalities involved in the process.

Concluding Remarks

To make life that little bit easier for yourself and your application, avoid opting for the Madrid System in China. Yes, the CTMO isn’t exactly a walk in the park, however, it will ensure that you avoid a potentially complicated and pricey situation. Thus, what counts the most is the work you put into a Chinese trademark application before actually filing it.

Below you will find some important guidelines on the necessary precautions to take in order to protect your trademark: 

  1. Ensure you register your trade-marks as soon as possible in China!
  2. Check the specific sub-classes of the CTMO! Consider whether the same trade-mark could be used on related merchandising and think about registering several related categories.
  3. Pre-empt unwanted Chinese registrations!
  4. Register for a WIPO certificate! Trademarks registered in European countries are not protected unless they have also been registered in China.
  5. To avoid trademark hijacking, timing is of the essence! See point 1)

For further information about the topic read articles with similiar information like Apple loses trademark name to Xintong Xiandi Technology or Someone else registered my trademark in China.

ECOVIS Beijing would carefully advise you to register any trademark in China as soon as possible and even before thinking about entering the market. Adequate protection should be ensured broadly in china and with a long-term thinking regarding the immediate class for the product. For any further questions please do not hesitate to contact us at:richard.hoffmann@ecovis-beijing.com

 Richard2017 150x225   Richard Hoffmann

Richard Hoffmann is a partner at ECOVIS Beijing China. Richard obtained an honors degree in law and worked in Germany, the United States, and China for various prestigious law firms prior to joining ECOVIS. In addition to being a member of the board of ECOVIS International, he is Supervisor for the China business of a respected German company and shares his extensive knowledge to students by teaching commercial law in China at SRH Hochschule Heidelberg. He has published more than fifty articles in international magazines, frequently speaks at high profile events in China and abroad and is often invited as a legal expert by international TV stations. Contact: richard.hoffmann@ecovis-beijing.com

 

Ecovis Beijing is the trusted tax and legal advisor to several embassies and official institutions in China. It specializes in mid-sized international companies and is focused on tax & legal advisory, accounting and auditing. If you’re interested in finding out more about tax and legal, don’t hesitate to sign up for our Newsletter, give us a call +86 (10) 6561 6609 or contact us directly via service@ecovis-beijing.com