Precious Lessons Learned From Hermès' Unregistered Trademark In China

Love for horses, Love for gems
Although Hermès registered its trademark in China since 1977, it had not yet registered its Chinese name 爱马仕 (Ài mǎ shì) as a trademark the Legal Evening News wrote, according to Shanghai Daily, see here.

In 1995 Dafeng Garment Factory registered a trademark 爱玛仕 (Ài mǎ shì), which is, indeed, pronounced exactly the same as the Chinese name of Hermès. 

In that year Hermès filed an objection at the Trademark Review and Adjudication Board (TRAB) of the State Administration for Industry and Commerce (SAIC). However TRAB approved Dafeng Garment Factory's registration in 2001. After that Hermès appealed at a Chinese court. 

In 2009,  Hermès again appealed to the board, saying its Chinese name enjoyed a high reputation around the world and demanding the board cancel the disputed trademark. However,  Hermès' application was rejected for a second time May 2011.

Lessons to be learned:

• Protect your trademark name together with the Chinese version of your trademark, otherwise either the public will come up with a, possibly not so positive Chinese name, or worse a competitor will take unfair advantage of your reputation and/or will confuse the public into believing that your company is the origin of the products of your competitor.
• Unregistered trademarks can be protected only if they are famous/well-known. That is famous in China, not in other countries, and not even in Hong Kong or Macau which are special administrative regions with their own jurisdiction. 
• You have to proof that your trademark is famous, before the trademark dispute. Because otherwise it is hard to proof that the public knows your trademark or that of your competitor who is using an identical or similar trademark.

Unfortunately for Hermès, the luxury good company could not convince the court that the Chinese version of its name 爱马仕 was unregistered but a famous name for some time before Dafeng Garment Factory even started using their registered trademark 爱玛仕. They used evidence that originated from the period after the dispute and they used evidence that showed that their trademark was famous to consumers in Hong Kong instead of the mainland. 

Spot the Difference In The Chinese version of the Hermès Trademark And Its Clone

爱马仕

爱玛仕

Top row: 

Hermès' unregistered trademark: 爱马仕 (Ài mǎ shì = love horse officials = officials who love horses)

Bottom row: 

Dafeng Garment Factory registered trademark: 爱玛仕 (Ài mǎ shì = love agate officials = officials who love agate). The difference is indeed, the second character which is 王 wáng (king) + 马 mǎ (horse)= 玛 mǎ (agate), a kind of gem.

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Chinese Trademarks Visible, But Have By Far Not Met Their Potential

In absolute numbers China might be in almost all aspects a giant. But in relative sense this does not need to be the case. Example: China has 5 million registered trademarks. But only one out of 10 market entities owns a registered trademark and the number is 40 percent for companies, Yuan Qi, an official with the Trademark Department of the State Administration for Industry and Commerce (SAIC), was quoted by Zhang Zhao of the China Daily.
Ms Zhang Yumin, an intellectual property (IP) rights researcher with Southwest University of Political Science and Law (Chongqing municipality) said, according to Zhang Zhao, that every company should have a IP management department, directly under the leadership of the decision makers and that the government should encourage companies to register trademarks, internationally and domestically. Read more here.

Then quantity does not say much about quality (although some say quantity has a quality of its own). Where are the strong Chinese brands. Millward Brown has made a list of the Top 50 of Chinese brands:
1. Chinese Mobile;
2. ICBC;
3. Bank of China;
4. China Construction Bank;
5. China Life;
6. Agricultural Bank of China;
7. PetroChina;
8. Tencent;
9. Baidu;
10. PingAn.

Read the other 40 Chinese brands here.

Of these China Mobile (57,326 million US dollar), ICBC (44,440 million US dollar), China Construction Bank (25,524 million US dollar), Baidu (22,555 million US dollar), China Life (19,542 million US dollar), Bank of China (17,530 million US dollar), Agricultural Bank of China (16,909 million US dollar), Tencent (15,131 million US dollar), PetroChina (11,291 million US dollar), PingAn (10,540 million US dollar), China Telecom (9,587 million US dollar), China Merchants Bank (8,668 million US dollar) are within the Top 100 most valuable brands.

UPDATE: China had 2.3 times the trademark filing activity in the second highest country, the United States. Read a compilation of WIPO statistics here.

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Paradox of Strong Brands in China: Cause And Cure of Counterfeiting

If you have a strong brand, chances are that your trademark will be counterfeited in China. The counterfeiter can simply manufacture unauthorised copies of a popular brand: no developing costs, no marketing costs, and certainty about the demand. Then again chances are very slim that a company with a strong brand will counterfeit your trademark. As I have pointed out earlier in China this is not necessarily good news, since these non-infringing companies can be even more apprehensive competitors. In principle this would lead to fair competition, if only there was fair market access for non-Chinese companies. Nevertheless, IP Dragon was happy to read Laurie Burkitt's article 'State of Things: What are China's Top 50 Brands' in the Wall Street Journal (December 15, 2010). It includes a slideshow of China's Top 10 Brands by Value: 4 banks, 2 insurance companies, 2 internet companies, 1 oil company and 1 telecommunication company are most valuable, see here. Hat tip to China Hearsay.

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Geertje Hesseling's thesis about Intellectual Property Rights in Fashion in China

Geertje Hesseling wrote an interesting Master's thesis 'Intellectutal Property rights in fashion in China and the knowledge of young Chinese designers on this topic' for Cultural Economics & Cultural Entrepreneurship at the Erasmus University Rotterdam.

She develops her thesis by testing the following hypotheses:

H1. With stronger intellectual property rights law, China will attract more investments in fashion.

H2. The most useful way to implement stronger intellectual property rights in fashion is to strengthen and adjust in particular the copyright and trademark policies, but next to this also cultural and governmental adjustments are needed.

H3. Intellectual property rights strengthen the fashion cycle instead of damaging it.

H4. Younger designers care and know little about intellectual property rights concerning their designs.

H5. Young designers are in more need of IP rights protection than bigger and already established companies.

Next to do desk research Ms Hesseling did empirical research by interviewing the following people:

• Paul Smidt of Baker & McKenzie in Hong Kong;
• Paul Ranjard, co-chair of the EU China Chamber of Commerce in Beijing and representative of Unifab;
• Queenie Leung, young designer, graduate Fashion and Textile Design of Polytechnic University Hong Kong;
• Ivan Yip, young designer, third year of Textile and Design of Raffles University Shanghai;
• Gerry Ng Yuen Yi, young designer, third year of Accessory Design at Mod' Art International School Beijing;
• Yin Shu, young designer, graduate Textile and Design of International Fashion Academy, Shanghai;
• Sheila Pitigala, young designer, working on her own label in Shanghai;
• Tim Hoar, Business Development Manager Student IP, Central Saint Martins College of Art and Design;
• Dominique Simard, Marketing and Business Development Director, International Fashion Academy Shanghai.
• Yours truly.

Geertje Hesseling interviewed me in June 2009:

Geertje Hesseling: What should be changed in policies in China so that piracy is a issue of less concern?

Danny Friedmann: If you have to evaluate China's intellectual property protection it looks good in the books but on the ground it is not effective. Enforcement is not always taken seriously (massive anti-counterfeiting campaigns are not effective in the long run, and are often announced in advance so the infringers are warned), but the development of China is getting at a point where it is in the interest of China to enforce intellectual property rights. So, in case of fashion, when Chinese fashion creators, such as Shanghai Tang's copyright is infringed, it will start to enforce intellectual property rights in a more effective way, since Chinese companies demands this.

Geertje Hesseling: Is IP rights protection more important for smaller companies or is it equally important for the large companies?

Danny Friedmann: Large companies in general have more famous brands. Therefore, probably in more cases, they will be targeted by trademark counterfeiters and copyright pirates. Then again, large companies can have more budget to protect (via design rights and copyrights) and enforce their intellectual property rights.

Geertje Hesseling: What do you think will be the future of fashion with little IP rights, in countries such as in China?

Danny Friedmann: Fashion trends will change even faster. I can speculate that consumers will start to look more at quality. Trends in fashion infringements: first brands and designs were copied. Now, although this still happens, a new category of infringements is becoming more prominent: only the design is infringed under a Chinese brand name. In other words, the trademark counterfeiters/copyright pirates are becoming only copyright pirates because they start to build their own brand name.

By the way: In the European Union each fashion designer who has created a design obtains (just like copyright) at the moment of creation a European Design Right for three years, which can be enforced in the EU. This is without registration! Just like copyrights.

Geertje Hesseling: What do you think are China’s most influential factors for attracting piracy when it comes to the rampant copying of the fashion industry in this country?

Danny Friedmann: China can manufacture clothes relatively much more cost-effective compared to companies in the West. And the distribution of wealth in China is uneven and much lower than in the West. Even in the West fashion is copied very frequently, or to put it differently: fashion designers are inspired by other fashion designers. And maybe fashion is not so suitable for copyright protection, because by definition fashion designers build upon the designs or remix the designs of others. And fashion trends change so quickly anyway, first mover advantage is probably more important in fashion business than intellectual property protection. Please see chapter 8 'Extra-judicial factors' of my thesis.

Read Ms Hesseling's thesis here.

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Zhongnanhai Cigarettes? White House Cigars? Kremlin Wodka?

Xin Dingding and Wang Huazhong report on an anti-tobacco non-governmental organisation (NGO) called Think Tank Research Center for Health Development, that submitted a petition on April 14, 2009 to the Beijing Trademark Office to stop the use of Zhongnanhai, the complex of buildings in Beijing which serves as the central headquarters of the Communist Party of China, as a trademark for ... cigarettes, because it would mislead consumers.

Zhongnanhai cigarettes have an interesting history, because they used to be specially made for Chairman Mao in the Sixties, read here. The question is do they have an interesting future?

Article 10 (1) Trademark Law: Those identical with or similar to the State name, national flag, national emblem, military flag, or decorations, of the People's Republic of China, with names of the places where the Central and State organs are located, or with the names and designs of landmark buildings." The NGO has definitively a point.

Read Xin and Wang's article for China Daily here.

Hat tip to Mikołaj Rogowski, a law student of Jagiellonian University, Krakow, Poland, who pointed me to this article. Mikołaj is going to write a guest article on IP Dragon in the near future.

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Trademarks in China: Nomen Est Omen

Stan Abrams of China Hearsay fame blogged about why the car manufacturer SAIC choose for the name Roewe and how to pronounce that name. He contemplates that: "As a Chinese brand, the English name is of secondary importance. However, if you’re going to use the English brand prominently (and they do), you gotta give it some thought, especially if you want to be a major exporter."

Stan continues that it is peculiar that Roewe 荣威 is pronounced in Mandarin "rong wei", which sounds like the English words "wrong way". Read the China Hearsay article here.

Of course if you have a non-Chinese name and you want to sell your product to the Chinese market it is wise a translation/transliteration of your brand in at least Mandarin and/or Cantonese. Translation is possible if your name has a meaning too, for example Shell (the energy giant) means the external skeleton of a mollusc.

Let's say you are Shell Oil and you wants to sell your products in China, then you can do three things:

• Register only your non-Chinese name, this is unwise, because it invites Chinese counterfeiters to jump into the vacuum;
• Register also a translation of the meaning of the mark into Chinese, a so called conceptual translation. Shell, the energy provider, choose to translate the meaning of the external skeleton of a mollusc: 壳 shell you pronounce ke2 in Mandarin and hok3 in Cantonese; 牌 brand you pronounce pai2 in Mandarin and paai4 in Cantonese;
• Another option is to register a transliterated or phonetic translated mark. This can be a great route, if you choose characters that correspond to the characteristics of the brand. Coca-cola transliterated its brand into "ke kou ke le", but then you have to find Chinese characters that fit to your brand: if you do not pay attention you can find Chinese characters that are pronounced in Mandarin as "ke kou ke le", but which mean: "female horse fastened with wax". However, the Coca-Cola company paid attention and came with the splendid result: 可 ke3 (approve) 口 kou3 (mouth) together means tasty, 可 ke3 (approve) 乐 le4 (joy) or in the words of Marc Garnaut "permitting the mouth to rejoice".

After you choose between these options or a combination thereof, you have to decide whether you want to register traditional Chinese characters (used in Hong Kong, Macau and Taiwan) or simplified Chinese characters (used in People's Republic of China and Singapore).

More about the trademarks and the special challenges in translation/transliteration of non-Chinese words into Chinese characters can be found in the powerpoint presentation of Paul Jones, of Toronto-based law firm Jones & Co., pages 18-31. The white paper of Marc Garnaut of Spark Media Lab is also about translating logos and brands into Chinese for the Chinese market, here.

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Thesis and Publications About IPR in China

Thesis: 'Paper Tiger or Roaring Dragon, China's TRIPs Implementations and Enforcement'
BMM Bulletin Paper: 'How to work within China's IPR enforcement system for trademark and design rights'
Article: 'How to prevent and act upon intellectual property rights infringements in China'
Article: China's National IP Strategy 2008: Feasible Commitments or Road to Nowhere Paved With Good Intentions
Article: 'How do the People's Republic of China and Hong Kong relate to each other regarding IPRs'
Netherlands Hong Kong Society article: 'Intellectual Property Rights in HK and China'
Guest blog for BIZZ: 'China and intellectual property' (Dutch)

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