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Changes to trade mark law in China may mean that if you manufacture branded goods in China only for export your Chinese trade mark registration could be vulnerable to cancellation on the grounds of non-use.
In most jurisdictions where a registered trade mark is not used for a certain period of time third parties can cancel the trade mark registration. This prevents indefinite monopolies being held in trade marks that are not being used, and so prevents the holding of merely “defensive” trade mark registrations. In China the non-use cancellation period is three years.
The conventional view in China was that application of a trade mark to goods manufactured solely for export constituted use of the trade mark in China. This mirrors the situation in the UK where the law specifically provides that use of a trade mark sufficient to prevent cancellation of a registration includes affixing the trade mark to goods or their packaging in the UK solely for export purposes. However, recent judgements in China have interpreted the law in a different way.
The background to this interpretation arises from the all too prevalent problem of enterprising Chinese companies and individuals registering Western brands in China, and then being in a position to hold the true owner of the brand to ransom. This is a situation that we have assisted many clients with. And, until the relatively recent change in Chinese trade mark law which made applying to register a trade mark in China in bad faith a ground for opposing a trade mark application, resolving matters has generally meant making a monetary offer to the Chinese brand owner to assign the rights to the true owner.
One way in which the owners of Chinese trade mark registrations can effectively, and economically, hold the true brand owner to ransom is to register their rights with Chinese customs. They can then block export of branded goods from China on the basis that they infringe the Chinese trade mark registration.
But, in a number of recent Chinese judgements Chinese courts have taken the view that manufacture of branded goods for export only does not constitute use of a trade mark in China, and cannot therefore constitute trade mark infringement. These judgements reflect the political and economic reality in China, and its need to support its manufacturing economy, rather more than a strict interpretation of the trade mark law. And, whilst the judgements are relief to businesses manufacturing in China for export whose brands have been “hijacked”, a consequence of not regarding application of a mark to goods for export as use of the mark in China is that, for those businesses which do own a registered trade mark in China, their registration may eventually become vulnerable to cancellation on the grounds of non-use. It is now uncertain whether application of a mark to goods which are solely for export from China is sufficient to maintain validity of a Chinese trade mark registration, with different Chinese authorities reaching different decisions on this point.
Although the value of owning a trade mark registration in China for a mark which is only applied to goods for export is debatable in light of the recent judgments, we are firmly of the view that businesses should still seek registration of their mark in these circumstances. The current interpretation of the law is just that, and could change in the future. Owning your own brand in China is still the best way of ensuring that an export operation runs smoothly as well, of course, as enabling you to prevent unauthorised use of the mark. Whilst the current interpretation of the law holds sway in China it is important to ensure that your registration remains valid. To do so it is advisable to arrange a minimum of genuine use of the mark in China, for example by offering goods for sale there. If this is not possible, or in any event for greater certainty for important trade marks, you should consider filing a new trade mark application every three years to re-validate your protection in China.
The law in China is in a state of flux in this area. You should ask us for advice as to your own circumstances or if you wish to discuss the strength of your brand protection in China more generally.