Trademark law: Distribution and trademark protection in international trade especially in China
What happens if I don't have a trademark application abroad?
If the step is successfully taken, in addition to the risk of counterfeiting, there is often another more serious problem that many companies are not even aware of: the so-called "pirate trademark application" (application for "foreign" trademarks). This refers to the situation in which a trademark pirate takes advantage of the fact that a German company fails to have the trademarks it uses protected in the People's Republic of China. The Chinese pirate registers the "foreign" trademarks, which have long been known in China but not protected, for himself. In the next step, the trademark pirate threatens to confiscate goods, issue costly warnings and assert claims for injunctive relief and damages. In other words, any trade with a (Chinese) partner abroad that has been successful for years can come to an immediate standstill. The threat of economic damage is considerable. In addition to claims for damages, there is a risk that your own products can no longer be sold in China under your own brand name for an unforeseeable period of time.
This approach by brand pirates has recently increased with the growing success of "Made in Germany" products.
Experts assume that the brand accounts for 20-94% of the total company value. It is therefore of fundamental importance for a company to protect its brand(s), be it the word mark (the written name) or the figurative mark (such as the representation of a logo). Germany offers a comprehensive protection mechanism for this with the Trademark Act. However, this is not exclusive to Germany. Trademark rights only grant protection within a certain territorial area (so-called territoriality principle). Accordingly, trademarks can be registered as national trademarks (protection within Germany), EU trademarks (protection within the European Union) and IR trademarks, which are registered in over 100 countries (e.g. China, India, etc.) around the world. German companies are therefore by no means unprotected abroad, but the scope of protection only extends to the territory in which the trademark was actually registered. If this territory does not include certain territories, such as the People's Republic of China, there is no protection. It is particularly important to note that registration of the company name is not enough. Important product names are also often targeted. For adequate protection, it is therefore essential to register the product names with trademark character (example: Golf GTI).
Why is China particularly affected?
An entire branch of industry has formed in China, which systematically looks out for products that are already successful on the market in the People's Republic of China and secures the corresponding trademark rights if no trademark protection exists. The aim is to blackmail the German company into buying the Chinese trademark rights. From the point of view of Chinese law, the trademark application is generally not objectionable. The background to this is that in China - unlike in Germany - an unregistered trademark does not exist through use, but only through registration and an application can be made by anyone. Furthermore, similar to Germany, there is a period (3 years) in which a trademark must not be used without the trademark protection suffering as a result. In other words: The Chinese trademark applicant does not even have to worry about selling products under the "stolen" trademark for a period of 3 years (no defense of so-called "proof of use").
The pirate applicant is then entitled to assert far-reaching claims against the German company, in particular claims for injunctive relief and damages. Any further activity with the actual own trademark is prohibited and would result in further claims. In many cases, the trademark pirate can also completely prohibit the distribution of the products and also the import within a short period of time by means of urgent legal protection. In such a case, the German company's business on the Chinese market can come to an immediate standstill. Even the return of its own products is extremely difficult. The resulting damage can therefore take on considerable proportions within a very short time. The German company is thus effectively forced to buy the trademark from the pirate applicant or to refrain from selling it and to conduct a costly and time-consuming process before a Chinese court.
What should I consider as a German company when trading abroad?
In order to avoid such situations, it is recommended that German companies - whether within Europe or to China - only sell goods or services under their trademark where their own trademark protection exists. Protection can be obtained by registering a trademark with the German Patent and Trademark Office (DPMA) or the European Union Intellectual Property Office (EUIPO). The national or European trademark protection of the trademark can then be extended to the other countries required. With such a registration, a so-called "pirate trademark application" is then no longer possible.
How can a German company protect itself against claims arising from pirate trademark applications?
If it is already too late and a pirate application exists, it is advisable to seek the help of a specialized (Chinese) colleague immediately and defend yourself against any claims. The Chinese legislator has already reacted to the situation, so that there is at least a certain degree of protection against such pirate applicants. For example, if it is proven that the intended registration is only intended to unduly hinder a third party, the trademark application can be rejected in opposition proceedings. However, such proceedings offer no guaranteed protection for the German company. On the contrary: in practice, such proof entails considerable difficulties in providing evidence. Pirate applicants have also started to distribute trademark applications among a large number of natural and legal persons as well as dummy companies in order to make proof more difficult.
It is therefore advisable to act proactively at an early stage. German companies should be aware of the territorial scope of their existing trademarks even before their first market appearance in the PRC (or abroad). Furthermore, the company must think about which products should be placed on the Chinese market. This is because not only the company name should be protected, but also the product names with brand character. As a final step, a trademark application should then be filed, as described above. We will be happy to assist you with the trademark application.
Conclusion
A German company should never enter a foreign market, especially the Chinese market, without first legally protecting its own trademark. This prevents unpleasant surprises later on. Once this has been done successfully, the distribution of the German trademark owner is comprehensively protected by the foreign (e.g. Chinese trademark law).