Many companies and their in-house counsel comment on China’s inability and unwillingness to protect foreign companies’ trademark rights. This is, in some ways, a misunderstanding. In most cases, companies fail to ask the most important and basic question: Do they really have a trademark in China ?
First-to-File Principle
Unlike the United States, China adopts a first-to-file principle, which means the first company or individual who files the application for trademark registration gets the exclusive right, not the first who uses it. The advantage of this principle is that by providing a fully developed registration-before-protection system, the first-to-file principle encourages earlier registration and published ownership. The disadvantage of this method is obvious: it is unfair.
There is a large group of people in China who make their living on unauthorized registrations. Usually they research famous foreign companies who intend to or have begun to do business in China but may have failed to register trademarks there. Once a target emerges, these “trademark trolls” immediately file an application for trademark registration so that they can then offer the trademark for sale to the true user at an inflated price. This practice happens all the time and ends up with the true user paying the malicious registrant money to get the trademark back. Unfair, but true.
Professional registrants are not the real trouble (not compared with real competitors, anyway). Trademark trolls always just take the money and go away, but competitors do not. A famous example took place in June 1998, two months after Pfizer launched Viagra. At the time, a Chinese medicine company filed an application for registration of “Wei Ge,” a Chinese nickname for Viagra and one more widely accepted in China than its official name. Following the first-to-file principle, the Trademark Office granted the registration and rejected the application filed by Pfizer two months later. As a result, Pfizer cannot use the trademark in China because they don’t own it.
This is the way things are in China. The first to register it gets to keep it. There is, however, an exception for certain well-known trademarks. As a member of the Paris Convention for the Protection of Industrial Property, China provides extra protection to well-known trademarks, including unregistered ones. This means that if a foreign company can prove its logo or brand is a well-known unregistered trademark, it will be able to prevent another applicant’s registration. This, however, almost never happens.
Doing business in China and have a well-known trademark to protect? You’ll find that it takes a great deal of effort to prove that even your most famous trademarks are recognized in China. Sony Ericsson filed. So did Heineken, with tons of TV advertisements, sponsorship of the Shanghai Tennis Open, and considerable market share, all of which the court still found insufficient.
Successful cases, however, do exist. A Chinese name for Ferrero Rocher—”Jinsha”—was found by a court to be a well-known, though unregistered, trademark in 2006. Five years passed, but no similar cases followed. So it is unwise for anyone to rely on this refuge—except Coca-Cola and McDonald’s of course, but they registered their trademarks decades ago.
Besides, in China, whether a trademark is well known or not depends on the facts in different cases. This means that the very same well-known trademark can be recognized in one case and denied in another. This also makes it difficult to rely on the reputation of a trademark in China.
source: http://www.law.com/jsp/cc/PubArticleCC.jsp?id=1202512833232
