September 21, 2018

What should SME's consider when exporting goods to China

Introduction

When SME’s are considering exporting their products in China, whether in physical stores or via web shops, one of the key issues they shall consider is how to protect the exclusive rights to their products – their intellectual property rights. The sound advise is to register your trademark even before starting up.

 

Without an exclusive right to produce and/or market one’s products everyone is in principle allowed to copy a product. This can result in cheap counterfeit products and bad reputation, which can result in loss of market value for the enterprise who originally put the product on the market. In China, you have a “first to register” principle which means that anyone who register your trademark will likely own it, whether or not they actually operate a business. So, you will have to buy it from them.

 

Furthermore, it is important to consider if your products may infringe on other enterprises’ products; otherwise you may risk the being liable for damages due to infringement on another enterprise’s intellectual property rights.

 

Therefore, before entering a new market it is important to:

  • Secure one’s own intellectual property rights, and
  • thoroughly examine whether one’s products are infringing on other enterprises products.

 

How to protect a trademark in China

One of the most common intellectual property rights is the trademark.

 

Most products – if not all – are branded via a name or a logo. A trademark shall be registered to gain any protection in China. Such protection can be obtained through a national Chinese trademark registration or an international trademark registration.

 

A national trademark registration in China must be filed at the Chinese Trademark office (CTMO) via a national representative (usually lawyer).The process can be drawn out due to a very long administration time, but the price range for the registration and the local representative is moderate.

 

An international registration is obtained through the World Intellectual Property Office (WIPO). To file an application with WIPO one must have a national trademark in one’s own country or an EU trademark (registered at the European Union Intellectual Property Office (EUIPO)). The national or EU trademark is used as basic trademark for the international application. In the international application one must designate the countries in which the international trademark shall be filed for registration. The process is very bureaucratic, drawn out and can be rather expensive, however it is possible to submit the application yourself or through your national representative.

 

It is very important that the trademark application – whether it is a national Chinese application or an international application – is filed before entering one’s products on the Chinese market. In many countries it is possible to gain protection for a trademark merely by using it. However, in China the only way to get your trademark protected is to register it.

 

If the Chinese market is entered without a trademark application is filed, you risk that someone else will register the trademark and exclude the original trademark owner from using the mark in the Chinese market. The person/enterprise who registered the trademark will then try to sell it to the real owner of the trademark. This is called “trademark hijacking”.

 

The only way to get back one’s trademark is by filing a law suit which can be expensive and be drawn out for many months, or by purchasing the trademark registration back from the person/enterprise who had registered it.

 

We normally recommend to register both the European and Chinese name of your company and product in China.

 

You also need to make sure that you register the trademark(s) within the correct classes, as your protection only extends to the classes you are registered in.

 

When you have a registered trademark in China, you can get the help of the customs authorities to look for and seize counterfeit products.

 

How to avoid infringement on other enterprise’s intellectual property rights

One piece of sound advice – which applies to all IP rights – is to perform a prior examination before entering a new market. A pre-examination exercise consists of having investigated the market for older rights in the said market.

 

A pre-examination is also relevant even if one decides that one does not have any invention, design or trademark which meet the conditions for registration. By investigating the market for registered rights, you ensure that there are no registered rights which are close to one’s product, name or logo. This way you can avoid infringing on another enterprise’s IP right, thus avoiding being liable for damages due to infringement.

 

Written by Nikolaj Juhl Hansen, Attorney-at-law & Partner at Magnusson