Registering your trademark in China. Is it always good advice ?

What people are saying about Mulberry Fields
“I have read through quite a few of your blog posts and have enjoyed them very very much. We do business in China and face many of the challenges you describe. Much of what you write resonates with me and there are some very helpful tips” – a children’s apparel company.

I was involved in a somewhat animated discussion last week with another China blogger regarding registering trademarks in China and the expense and efficacy of doing so. My position has always been that protecting one’s IP in China, although advisable, is complicated, time-consuming and expensive and therefore not for all companies when they first start doing business in China. The cost to register a trademark in one product class will probably cost you 3 to 5 K ( assuming you are having a western legal firm do the filing for you ), and it can take 2-3 years to get the ownership certificate. And even this may not be sufficient to protect you from “trademark squatters” who can be very savvy. Please note that when you register your trademark in one class it will cost you about $600.00 and this will give you protection in 10 sub-classes, or “goods and services” only. If you want protection in more sub-classes you have to pay per sub-class and the charge is $ 25.00 per sub-class. That sounds reasonable until you figure that in some classes there are hundreds of sub-classes. To take an example, Clothing is Product Class 25 and there are over 300 sub-classes everything from shirt pockets to collars. Therefore, if you wanted air-tight coverage on your apparel trademark in Class 25 and all sub-classes you are looking at upwards of $ 7500.00 ( not including legal fees). This is an extreme case of course but it gives you an idea of how expensive it can get. And make no mistake about it big companies do register their trademarks across all 45 product classes.

One reason companies should register their trademarks, the blogger pointed out, is if for no other reason than to allow their goods timely and safe export from China. Chinese trademark squatters can prevent your goods from leaving China if they show Customs that they own the trademark. China is a “first to file” country meaning that anyone can file your trademark there and be considered the legal owner if you have not done that first. The squatter will then ask you to pay a hefty “licensing” fee to use your own trademark. The fee may be so high that you have no choice but to refuse – and lose your shipment. It is a scary scenario and one you want to be aware of when you source in China. It does happen but to say it happens with any frequency to small importers might be stretching it. Most of the targets are name brands or big companies where the “licensing fee” can be exorbitant. The blogger himself said in a post in Dec of 2011 that his law firm gets a call every few months ( hardly an indication that his phone is ringing off the hook about this). There are a lot of small companies that source in China under their own label without trademark protection and they do just fine. Another China specialized IP lawyer I talked to agreed with me saying that trademark squatters are probably not interested in you if you are a “small fish” and he added that trademark protection is probably not worth the expense if you have a tight budget.

My bone of contention with the blogger was not with his advice that companies should take this “defensive” measure and register their trademark ASAP. I basically think this is very sound advice for a company in China that has the means to protect its exports there. Trademark registration is basically an insurance policy and a good one I think for companies, once again, that can afford it. But is this good advice for a small company on a shoestring budget in the absence of strong evidence that cases of trademark squatting are anything more than isolated incidents ? I am not so sure it is. 5 K would be a lot of money for me to spend on a “defensive” measure and I think it would be a lot of money for my clients as well. And that was my only point all along, namely that small companies on small budgets should NOT be led into believing that they are putting their businesses at tremendous risk if they don’t register their trademark in China immediately . But he would not back down and he made very clear how he feels: if companies do not have the money to register their trademark in China, he argued, they have no place doing business in China in the first place. Needless to say, I find that attitude extreme, a little condescending and just flat-out wrong.

Things got a little heated and we went back and forth for a couple of days. In my last reply to him I said I thought the best thing people could do if they were concerned would be to talk to as many people as possible – including several lawyers and US consular officials – and then make their own decision based on what they heard and their budget. There is also a lot of very useful information online about this subject. Buyers should educate themselves as well. Period.

Finally, small companies should keep in mind that according to the 2012 US China Business council survey on IP in China. 49% of American businesses who do business in China are only “somewhat concerned” about IP enforcement, as opposed to 49% who are “very concerned.” In other words whether you are worrying about your IP all the time or just sometimes, then you are no different than half the Americans ( and probably half the people from any country) doing business in China. So if you can’t register your trademark now, don’t worry too much about it. But get it done when you have the means.

Intellectual Property (IP) is of course a concern for any business with a proprietary design or unique product. Not just in China but in any country. Yet, China poses some real risks because it is a “First to File” country meaning that your patent or trademark is protected in China only if you file it there before anyone else does. If you are doing business in China and are worried about your IP then talk to several lawyers and/or your local Dept of Commerce officials and then make the best decision for your company and product. I have several blog posts about IP. Here they are

Non Disclosure Agreements NDAs
Protecting your IP
The cost to register a patent in China

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