South Africa: Muddy Puddles! A Trade Mark Lesson From Peppa Pig

Last Updated: 30 May 2019
Article by Amina Suliman

Peppa Pig's lessons for avoiding trade mark hijacking

My 3-year-old daughter simply adores Peppa Pig. She can watch Peppa Pig, her little brother George, Mummy Pig, Daddy Pig and the other assortment of characters for hours on end and has even begun laughing and talking like Peppa! As I only recently discovered, Peppa Pig is nothing new in the world of kid's entertainment. Here in South Africa, I have been to a few live shows and my daughter has been keenly eyeing the Peppa Pig toys. Due to over-exposure, I now know the Bing Bong song by heart and often find myself unconsciously singing it!

There is no doubt about it, Peppa Pig has become a worldwide phenomenon. I recently read about the difficulties that Entertainment One, the owner of the Peppa Pig brand, has encountered in China since entering that market in 2015. This comes as no surprise, given the notoriety China has when it comes to trade mark squatting. Trade mark squatting or hijacking, simply put, is where someone other than the brand-holder registers its trade mark.

There are many motivations for trade mark squatting. One of the more obvious motivations is to make money. The trade mark squatter registers the trade mark with the intention of selling it to the brand holder or any other willing third party, often at an exorbitant price. When the brand holder eventually decides to enter the market, it quickly realises that its trade mark does not belong to it and that it cannot use the trade mark lest be faced with civil and criminal proceedings. Apparently, there are many, rather savvy, squatters making a living doing this. The legal route involves instituting invalidation proceedings, but this is an arduous process, often involving many appeals that could take many years to finalise and cost a fortune, with no guarantee of success. The other route is to wait and when possible, institute cancellation proceedings based on non-use. Often the simplest route is to simply pay the squatter and take assignment of the trade mark. This is the situation Tesla faced a couple years ago when it decided to enter the Chinese market.

The second type of squatter registers the trade mark and actually manufactures goods bearing the trade mark for sale in the country and possibly other countries where the brand holder has not registered its trade mark (that is, the counterfeiter). These types of squatters are difficult to deal with as they are actually using the trade mark in commerce (thus negating the option of instituting proceeding for cancellation based on non-use) and the trade mark is usually also worth a lot more to them, which makes it difficult to buy the trade mark back. By far, this is the scariest type.

A third motivation is to prevent competition. It is not unheard of for a competitor to register a trade mark simply to impede the brand holder from entering the market or manufacturing its products in and exporting them from China. A dirty trick but effective nonetheless.

And last, but not least, is the good Samaritan supplier or distributor that registers the trade mark in order to "protect" the brand holder from squatters.

Of course, trade mark squatting is not a phenomenon exclusive to China and many other countries, particularly so called first-to-file countries, are plagued by it; however, China's trade mark filing system has certain characteristics that enable and aid it. Firstly, like the many other countries, China follows a "first-to-file" system and affords almost no recognition to unregistered trade marks/ prior use. The only recourse a brand-holder has in this instance would be to prove that its trade mark is well-known; although this can be difficult to prove in a country that sets a high threshold to obtain well-known recognition. There is also a lack of explicit legislative provisions prohibiting bad faith filings. Secondly, although China does use the NICE classification, it follows a stringent sub-classification system. Strictly speaking, it is possible to obtain registration of an identical mark in the same class but under a different sub-class within that class. Thirdly, in a country like China, linguistic differences must be taken into account as Chinese consumers tend to identify and recognise brands primarily through the Chinese version of the mark. Trade mark squatters can thus capitalise on the situation by registering the Chinese version if the brand-holder has not done so. This is exactly the type of situation that sportswear company, New Balance, pharmaceutical company, Pfizer, and famous basketball player, Michael Jordan, faced when the Chinese versions of their trade marks were registered by other parties. Unfortunately, in the case of New Balance, it was forced to cease using the popular Chinese version of its NEW BALANCE trade mark and to boot, pay a massive monetary amount to the Chinese company. Similarly, Pfizer could not register or use the highly popular Chinese version of VIAGRA trade mark ("WIEGE"). On the other hand, Michael Jordan achieved a certain measure of success in having the registration of the Chinese version of JORDAN (QIAO DAN) withdrawn but this was after many appeals and presumably, incurring huge costs.

Over the years, there have been efforts to improve the situation and the situation now is much different than a decade ago, but China still has a long way to go. As the adage goes, prevention is better than cure and an early planned brand strategy can go a long way to preventing, or at least limiting, trade mark squatting and the attendant sleepless nights and costs that go with it.

Firstly, the early bird catches the worm. Brand holders should search and if possible, register their trade marks as early as possible. They should not neglect to register all trade marks to be used including names, logos, acronyms, slogans, labels, devices, etc as trade mark squatters are quick to capitalise on deficiencies. For example, back in the 1990s, Versace neglected to file for the VJC mark that it had been using in China for some time (VJC being an acronym for VERSACE JEANS COUTURE), and to its detriment, the trade mark was registered and enforced by a Chinese company that eventually compelled it to re-brand an entire product line for the Chinese market. In the Peppa Pig situation, Entertainment One could consider registering not only the PEPPA PIG trade mark, logos, etc but also other character names such as GEORGE PIG, DADDY PIG, MUMMY PIG, MISS RABBIT, SUZY SHEEP, etc and images.

Secondly, brand holders should, if possible, register the Chinese version of their trade marks, that is, the version which Chinese consumers identify, recognise and refer to. There may be a number of Chinese versions, depending on the trade mark in question and the brand holder should ensure that all versions and importantly, the most popular version, are registered.

Thirdly, brand holders should file for their trade marks in all classes that are of interest or that may be in future, with specific attention being paid to sub-classes and to include as many as possible. In the case of Peppa Pig, class 41 would be the primary class of interest but if you consider all the Peppa Pig merchandise out there (DVDs, books, bags, textiles, clothing, toys, etc), there are a number of classes to consider (including classes 09, 16, 18, 24, 25 and 28).

Lastly, brand holders should always ensure that they have properly drafted contracts in place with their suppliers and distributors.

Businesses large and small, old and new, can be affected by trade mark squatting. Trade mark squatters are usually way ahead of the curve – they are savvy internet users, they visit trade shows, etc in order to find new opportunities. While protecting one's IP can be quite a costly exercise, it is nothing compared to the cost of trying to get it back.

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.

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