In April 2015, the Guangdong Intermediate People's Court delivered a judgment against New Balance, an American footwear manufacturer, for trademark infringement. New Balance was found to have used, knowingly and without prior authorization from the trademark owner, the mark "新百伦" (pronounced Xin Ba Lun, a Chinese transliteration from the English word "New Balance") in connection with offers for the sale of New Balance shoes on Chinese online platforms.
The US company argued that it was not liable for infringement because Xin Bai Lun is simply a direct transliteration of "New Balance". However, the Court rejected that argument, mainly because other transliterations of that term would have been available. The Court found that New Balance's continual use of the mark "新百伦", despite having knowledge of its registered status, constituted bad faith
The most commented aspect of the New Balance case is perhaps the fact that it resulted in the largest damages award in the history of trademark infringement in China (USD 15.8 million), which illustrates the importance of the "first to file" principle in China. Unlike other jurisdictions where the registration of a trademark depends on and must be coupled with evidence of use, the trademark registration system in China is a "first to file" system. Whoever is the first to obtain trademark approval in China, owns the rights in the trademark, even if the successful registrant turns out not to be the official trader of the branded products or services.
Unfortunately, the majority of Chinese consumers do not speak a foreign language. By necessity, Chinese consumers will, sooner or later, devise their own Chinese version of a foreign brand instead of referring to the original Latin script. The failure to register a Chinese character trademark in time can, thus, have severe consequences on the marketing of global brands. One Latin script mark can yield different versions of Chinese character marks, all with the same pronunciation, so consumers will inevitably be confused by the existence of multiple Chinese versions of one's brand.
Lessons learned
The New Balance case serves as an important reminder for any foreign brand owners with plans to trade in China to act early, and the sooner the better. Where no official Chinese version of a mark has been devised, in order to retain control of one's brand within the Chinese market, companies should adopt and register an official Chinese mark that appropriately reflects their brand before the Chinese public creates its own version. To avoid confusion between an official Chinese mark and the multiple renditions that inevitably already exist in the market, foreign brand owners should adopt consistent and distinctive marketing strategies of their registered Chinese mark. Use of any trademark without registration can result in undesirable consequences.
Originally published July 9, 2015Visit us at www.mayerbrown.com
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