Is your Brand at Risk of Hijacking?
If you have a presence on the British fashion scene, but have not yet registered your trade marks in China, then you could be taking an expensive risk.
Up and coming designers who are trying to make themselves known in Europe are succeeding in making themselves visible to Chinese entrepreneurs.
As a first step, aspiring designers and brand owners should protect their trade marks in their home market. Even at an early stage, they should also be thinking about registering their trade marks abroad.
There are some countries, particularly China and also Turkey, where people make money out of hijacking other people’s brands. These individuals spot new western designers and brands early on and apply to register their names as trade marks for themselves. Then they play a waiting game.
Eventually, when the original brand owner decides to apply for a trade mark in China or Turkey, he finds the way is blocked. Even worse, when he moves into these markets, the original brand owner can find himself at the receiving end of a cease and desist letter or a lawsuit. It may be alleged that by using the mark in China or Turkey, the designer is infringing the hijacker’s trade mark registration.
Chinese stores may be unwilling to stock the western brand because the designer cannot produce a trade mark registration certificate to show he owns the mark.
Even if the designer does not sell in China, the owner of the Chinese trade mark registration may be able to sue him for manufacturing his products in China. If manufacturing goes ahead, the Chinese Customs Authorities may co-operate with the Chinese trade mark owner to block exports.
The hijacker hopes that the brand owner will pay handsomely to buy his way out of the problem.
Both China and Turkey have “first to file” trade mark systems, which can put a western designer coming late onto the scene in an awkward position.
To challenge a Chinese trade mark registration 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. Owning a UK trade mark registration, or being recognised as a top designer in London, will not help. In such circumstances, negotiation may be the only realistic way to obtain ownership of the trade mark.
The problem of brand hijacking is by no means confined to the fashion industry. The producers of Downton Abbey may have been surprised to learn that Chinese applicants had sought registration of the name of that series as a trade mark in China for various goods. David Beckham and Steve Jobs have both been targeted in Turkey.
But the problem is particularly acute in the world of fashion because of the importance of branding and because of manufacturing ties with China and Turkey.
Chinese trade mark disputes can involve high stakes. It was reported in 2012 that the technology company Apple paid a Chinese company US$60 million to settle a dispute in China over the iPad trade mark.
European designers and brand owners can help themselves by seeking registration of their trade marks in China and Turkey early in the development of their business. This usually does not cost more than a couple of thousand pounds.
Also, designers 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.
Make sure you register in appropriate sub-classes of the Chinese register. Believe it or not, 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.
If a western brand becomes known by a Chinese name then the brand owner will also need to ensure they register the Chinese name. If they do not, then as Hermes discovered lately, there is a risk that someone else will.
A watch can be put in place to flag up to legitimate trade mark owners that someone is trying to register their mark, so that appropriate steps can be taken.
Western designers may also wish to register important product designs in China, given the importance of China as a manufacturing hub. It is worth noting that western companies who obtain input into their designs from local manufacturers need to be aware of where those ideas are coming from.
Alison Hague, Partner
First published in Director of Finance, March 2014