Revisiting strategies for IP protection in China

By Frank Liu, Jincheng Tongda & Neal
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The author finds that cases in which companies expended vast amounts of time and energy in dealing with disputes and controversies after their IP protection strategy had sprung a leak continue to arise. Many companies do not attach great importance to an IP strategy. What follows will mainly take trademark protection as an example to again discuss the importance of a strategy for protecting IP in China in light of cases the author has encountered recently.

刘建强 FRANK LIU 金诚同达律师事务所合伙人 Partner Jincheng Tongda & Neal
刘建强
FRANK LIU
金诚同达律师事务所合伙人
Partner
Jincheng Tongda & Neal

First is a little story. Bian Que is a famous doctor of ancient times in China, widely known for his superlative medical skills. However, Bian Que commented on his medical skill, “my eldest brother is the best, my middle brother is second to him, and I am far behind them.” Bian Que stated that his eldest brother started treating a patient before its onset, but the average person was unaware that he could eradicate the cause of an illness in advance, so his repute failed to spread.

His middle brother treated an illness at its very onset, such that the average person thought that he could only treat minor ailments. Whereas he, Bian Que, treated an illness when the patient’s condition was serious, so everyone believed that Bian Que had superlative medical skills and his repute spread far and wide. In fact, what Bian Que was talking about is the principle of “one ounce of prevention is worth one pound of cure”, i.e., preventing a disease is more important than treating it after its onset.

The same principle applies in the field of trademark protection. If, at the outset of trademark planning, thought is given to the rights conflicts that could arise in future, and the prevention measures to be taken, and a back-up plan is duly prepared to respond to adverse situations, the great majority of disputes can be prevented or avoided. Even from a purely economic standpoint, the money, time and energy saved by a company by timely preventing subsequent disputes far exceeds the expenses incurred in the initial trademark planning. Not to mention that the losses incurred from neglecting, or the failure of, a trademark strategy go far beyond economic losses; in serious cases, what the company loses in China is a brand, or even the entire market.

In practice, even some companies doing significant business in China will, when applying for a trademark, and in order to save a little on application or search expenses, strictly limit their application to its current existing scope of business. If a company is too conservative in its trademark planning, the following could arise: (1) when applying, it does not have any plan and fails to carry out a trademark search. When it revises its plan and reapplies after the rejection of its application, it has already missed the priority date and its trademark is ultimately preemptively applied for and registered by another; (2) when handling a trademark dispute, it does not have a backup application plan. After the conclusion of the dispute case, even if it prevails in the dispute and has the other party’s trademark cancelled/invalidated, a similar trademark has nonetheless been preemptively applied for a by a third party and it still has lost priority; (3) the applicant is not aware of the accurate classes of goods/services corresponding to its own business and does not consult with a lawyer, so it overlooks relevant classes when making its application; (4) it overlooks the impact of business internet platforms and neglects to carry out registration in the relevant classes necessary to carry out business development on internet platforms; (5) it fails to take into consideration the company’s future development, Once business has developed to a certain scale and scope, it discovers that trademarks in the relevant classes have already been registered by another, following which it is required to expend large amounts of time and energy to respond to these registrations and may even be required to rename its brand; and (6) when acquiring multiple trademarks from a trademark rights holder, it fails to carry out a comprehensive review, and only acquires a portion of the trademarks, overlooking the transfer of trademarks in relevant classes and meaning that, in future, it will be required to expend large amounts of time and energy to deal with subsequent trademark coexistence, transfer or dispute cases.

With respect to the above issues, the strategy for trademark planning needs to be comprehensively considered in advance, and reference should be made, at minimum, to the following: (1) except that where a company is extremely well known or its business types are extremely complete, when applying for a trademark there is no need to apply for all classes, but the scope of application should nonetheless be expanded to the greatest extent possible in the core class and related classes; (2) a search before a trademark application and an analysis of the search results are also extremely important, as forewarned is forearmed. It is best, at the time of the application for a trademark, to duly consider future potential impediments to the grant of rights, disputes that could arise, the corresponding solutions and the backup plan; (3) in light of the developments in the current age, when applying for a trademark, it is necessary to determine the classes to be applied for by considering the business involved both online and offline; (4) when applying for a trademark, it is necessary to consider future business development and plan in advance for the sectors that may be involved; (5) apply for relevant defensive trademarks to guard against others free-riding on the back of similar trademarks; and (6) when acquiring another’s trademarks, consider business needs, future development and trademark defence-related trademark matters to the greatest extent possible, and endeavour to achieve a total transfer so as not to leave room for others to free-ride.

It is also necessary to consider adopting a comprehensive response plan when a dispute arises. When determining a response plan, it is necessary to simultaneously consider infringement and rights confirmation, the support that different IP rights offer each other, and pay equal attention to the legal plan and business plan. Only by designing a comprehensive IP strategy, simultaneously considering potential future problems when carrying out IP planning, designing an advance contingency plan, and actively adopting a comprehensive response plan when a dispute is encountered, can IP be effectively protected in China.

Frank Liu is a partner at Jincheng Tongda & Neal

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