Key Points

  • The Australia China Free Trade Agreement was signed 17 June 2015 and signals for the next phase of Australia's economic relationship with China. Intellectual Property (IP) owners looking to pursue significant opportunities in China need to be mindful of the nuances of Chinese IP law to ensure they are best positioned for success.
  • The rights to a trade mark in China belong to the first part to register the trade mark. This makes it particularly important to proactively secure registered trade mark rights in China.
  • Use of a trade mark in China without registration can have adverse consequences - particularly if you are held to infringe the registered trade mark of a third party.
  • When only an English version of a trade mark is used in China, it is likely that the Chinese will create and use a Chinese version of the trade mark that you may not be satisfied with. It is therefore best to develop and use your own Chinese version.
  • When creating a Chinese version of your trade mark ensure it reflects your corporate brand and image and is otherwise desirable. This may best be achieved by consulting a competent English/Chinese (Mandarin) speaker.
  • The estimated cost (in a straight forward case) to conduct a search and then register a trade mark in China for goods or services in a single class for 10 years is $2500AUD).

Australia China Free Trade Agreement Signed 17 June 2015

China is Australia's largest export market for both goods and services, accounting for nearly a third of total exports, and a growing source of foreign investment.

The China-Australia Free Trade Agreement was signed in Canberra on 17 June 2015 and both parties will now commence domestic processes to bring the FTA into force as soon as possible.

The agreement signals the next phase of Australia's economic relationship with China and will unlock significant opportunities for Australian business in China.

Be proactive with securing your registered trade mark rights in China

Unlike Australia, China takes a 'first-to-file' approach to trade mark registration. This means the first party to seek registration of a trade mark will generally acquire the registered rights, regardless of who is the first user of the trade mark in China.

This approach makes it easier for trade mark "squatters" to register a trade mark in China with a view to securing payment from the legitimate trade mark owner in exchange for transfer of the trade mark registration.

With the above in mind, businesses should protect their intellectual property rights in China as early as possible provide such action is aligned with your overall commercial/business strategy.

Adverse consequences from trade mark use in China without registration.

A 2015 decision of the Guangzhou Intermediate People's Court demonstrates the risks of using unregistered Chinese character marks.

The parties were Chinese trade mark owner Mr Zhou Yuelun and New Balance Shoe Inc together with its Chinese distributor.

New Balance used 新百倫 pronounced Xin Bai Lun and 紐巴倫 pronounced Niu Ba Lun, as Chinese character versions of its New Balance mark in respect of shoes, but had not secured registrations in China. Mr Zhou held registrations for 百倫 pronounced Bai Lun, and 新百倫 pronounced Xin Bai Lun in respect of clothing, shoes and hats.

Mr Zhou brought infringement proceedings against New Balance for sale of footwear, was successful and was awarded ~16 million (USD) in damages.

What trade mark should be registered?

When English versions of trade marks are used in China, it is common for Chinese customers to coin a Chinese version of the trade mark. Leaving this to the local market can be problematic so it's best for a trade mark owner to be proactive and develop and use their own Chinese version trade mark.

Two notable examples of outcomes from the use of English trade marks in China hat were less than ideal include:

  1. Quaker (oats) that used the following brand in China:

  3. was widely referred to in China as 'Lao Ren Pai' (老人牌) which literally translates to 'old man brand'; and

  1. Ralph Lauren that used the following brand in China:

  3. was widely referred to in China as 'San Jiao Ma' (三脚马), which translates as 'three legged horse'.

With the above in mind, the options for protecting a trade mark in China include the following

  1. Register the English version of the trade mark

It is estimated that there are already over 200 million English speakers in China. Furthermore, English is being taught in all Chinese secondary schools and is likely to be increasingly prevalent as China's role as a global super power continues to grow. These trends ensure the importance of English version trade marks in China.

  1. (ii) Register the Chinese character (Mandarin) translation of (i) i.e. a literal translation

A literal translation is desired when the trade mark has a distinctive meaning. Examples include:

  • Apple Computers chose the brand name 'Ping Guo' (苹果), which is Chinese for 'apple'; and
  • Palmolive is known as 'Zong Lan' (棕榄), a combination of the exact translation of 'palm' and 'olive'.

The disadvantage of this is that the Chinese characters will sound different from the original trade mark. This means that steps will need to be taken to build the association between the Roman character (English) trade mark and the Chinese character trade mark.

  1. Register the transcription/phonetic equivalent of (i) i.e. the Chinese characters that combine to sound like the English version of the trade mark.

This is most common/important when the English version of the trade mark cannot be literally translated into Chinese and/or when the English version of the trade mark already has a reputation amongst Chinese speaking consumers.

Pinyin is the official Chinese phonetic alphabet that uses Roman characters, which can be used to create these Chinese language trade marks. Examples include:

  • McDonald's is known as 'Mai Dang Lao' (麦当劳)'
  • Audi' is known as 'Ao Di' (奥迪).

Note that care must be taken when choosing a phonetic version of an English mark, because the Chinese characters may have an undesirable meaning in one or more of the six major Chinese dialects. This may best be achieved by consulting a competent English/Chinese (Mandarin) speaker.

When choosing a Chinese character phonetic equivalent, where possible, it should not only sound the same as the English version of the trade mark but also make reference to a defining characteristic of the brand and/or have a positive meaning in Chinese culture. One example of this is:

  • Coca-Cola is known as (可口可乐) (pronounced 'Ke Kou Ke Le'), which (roughly translated) means 'taste and be happy'.
  1. Register the important graphic component(s) of your branding.

When your branding includes a prominent graphic it is also recommended to register that graphic component in China.

The above options are notionally prioritised from most to least important but each situation is different so you should seek advice before finalising your branding and IP strategy for China.

Estimated costs for Chinese trade mark protection.

Given the costs (in a straight forward case, the estimated cost to conduct a search and then register a trade mark in China for goods or services in a single class for 10 years is $2500AUD) it is also important to ensure that there is a strong business case for whatever action is taken with respect to trade mark protection in China.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.