Aspiring fashion designers and start-up companies do not always have the time or resources to consider protecting their brands in overseas markets. However, they might do so earlier if they knew the risks.
Once a brand has become established, it can be devastating for a company to discover it cannot extend its brand internationally because someone else has got there first. If significant territories have to be carved out, the commercial value of the brand can be diminished.
As a first step, aspiring designers should protect their trade marks in their home market. At the same early stage, they should already be thinking about registering their trade marks abroad.
There are people in some countries, China being at the top of the list, who make a living out of hijacking other people’s trade marks. The problem is also widespread in Turkey and is seen in places such as South Korea. These individuals spot new designers and brands early and apply to register their names as trade marks for themselves. Then they play a waiting game.
When the designer decides to apply for a trade mark in China or Turkey, he finds the way is blocked by an earlier registration. Even worse, when he moves into these markets, the designer can find himself at the receiving end of a cease and desist letter or a lawsuit. It may be alleged that the hijacker’s trade mark registration is being infringed. Having snared his prey, the hijacker hopes that the brand owner will pay handsomely to buy his way out of the problem.
Chinese trade mark owners know the value of western brands. In 2012, it was reported that the technology company Apple paid a Chinese company US$60 million to settle a dispute in China over the iPad trade mark. Last November, a Guangong based company was reported to be seeking an eye-watering US$80 million from Burberry as compensation in a trade mark dispute involving the Burberry check. Chinese trade mark disputes can involve high stakes.
Both China and Turkey have “first to file” trade mark systems. This can put a western brand owner, coming late onto the scene, in an awkward position.
To challenge a Chinese application in such circumstances, it is usually necessary for the western brand owner to prove a reputation in the Chinese market or “bad faith” on the part of the Chinese applicant. In the right circumstances this can be achievable, but it is often an uphill struggle. Owning a UK trade mark registration, or being recognised in London as a sensational new designer, will cut no ice. Sometimes negotiation can be the only realistic way to gain ownership of the trade mark.
The problem of brand hijacking is by no means confined to the fashion industry. The producers of Downtown Abbey may have been surprised to learn that Chinese applicants had applied to register the name of this series for several different categories of goods. However, the problem is particularly acute in the world of fashion, because of the importance of branding within the fashion industry, and because of close manufacturing ties with China and Turkey.
Having secured a Chinese trade mark registration, an unscrupulous brand hijacker can create mischief. If a western designer sells his products in China he may be sued for trade mark infringement. Local shops may be unwilling to take the risk of stocking the brand.
Chinese trade mark law provides both judicial and administrative routes for challenging trade mark infringers. Western companies have found themselves challenged under straightforward administrative procedures which can result in seizure of the infringing goods and a fine. A Chinese distributor of the Italian label Dsquared2 is reported to have been fined after a complaint by a Chinese trade mark owner, although it seems that after early skirmishes, the Italian company got the better of that case.
Even if a western brand owner does not sell in China, he may be sued if he manufactures his products there. The Chinese Customs Authorities may assist the owner of a Chinese trade mark registration to block export of those products.
European designers and brand owners can help themselves by seeking registration of their trade marks in China at as early a stage as possible. If a designer is exhibiting at fashion shows or has a presence on the internet, then his brand is out there and Chinese entrepreneurs may be looking.
Fashion brand owners should consider protecting their trade marks for a broad range of goods. A favourite trick of brand hijackers is to register western clothing brands for related categories of goods such as bags, jewellery and perfumes.
They should also be sure to register in appropriate sub-classes of the Chinese register. For example, a trade mark which is registered for “clothing” in China may not actually be protected for all different types of clothing unless it is registered in appropriate sub-classes as well.
Those responsible for brands should consider putting in place a trade mark watch so that they are notified if someone tries to register a similar mark. It is easier to challenge a trade mark application before it becomes registered. There is also then less scope for the applicant to cause a nuisance.
Once a trade mark has been registered legitimately in China it should be used within 3 years to maintain the validity of the registration. If that is not feasible, consider refreshing your portfolio from time to time with newer versions of your marks.
Registering a trade mark in China is generally not expensive and there are many positive benefits as well as deflecting hijackers. Because of its importance as a manufacturing base, China is also an important market in which British designers should consider registering their product designs.
Alison Hague, Partner
First published in Fashion Capital, March 2014