11 Dec
2019

Trademark sales, infringement through food apps and a spotlight on WeChat: Brand Strategy China takeaways

  • The fourth annual Brand Strategy China event took place in Shanghai last week
  • Participants highlighted shifting tactics of infringers, even food delivery apps utilised
  • Concern raised over consequences of brokered sales market for trademarks

Last week, WTR hosted the fourth annual Brand Strategy China in Shanghai. The event saw domestic and international brand owners, as well as representatives from associations, online platforms and government agencies. In this article Jacob Schindler (JS) and Bing Zhao (BZ) present some of the key takeaways from a busy day of discussions. 

Cheap trademarks fuel brokered markets –  The official fee to register a trademark in China is just 300 RMB (around $42), and the office has recently cut renewal fees in what it probably views as a user-friendly gesture. But Frank Liu, senior China IP manager at Emerson, said that from a rights holder’s point of view, Chinese trademarks are probably too cheap. Making rights so readily obtainable in a first-to-file jurisdiction actually makes the business environment more difficult by facilitating the hoarding of marks, Liu argued. “Many people file for 5-6,000 trademarks, and these are actually bad-faith filings with the intent to sell the rights in the future,” Liu explained. The result is that many business owners must turn to a brokered market and pay much more than 300 RMB for their preferred brand names. Liu stated that brokered deals accounted for about three quarters of the 400,000 or so trademark transfers that occurred last year. An estimated 3 million rights are available for sale, with normal prices ranging from 5,000 to 20,000 RMB. Given the secondary market price for rights, Liu suggested that brand owners might be in a better position if a trademark cost a few thousand RMB rather than a few hundred. (JS)

Detail is king – China’s administrative enforcement system can be tricky for foreign brands to navigate. Charles Hoskin, regional brand enforcement director at LVMH, shared some best practices and pitfalls for rightsholders looking to conduct raids:

  • The willingness of enforcement authorities to conduct raids is important, but the willingness and attitude of the brand owner and its representing entity are also very important. It’s helpful for investors, brand owners and service providers to come along with the enforcement authority.
  • When a raid happens, it’s all situational and things happens fast. It’s therefore crucial to know all of the key locations and who the key individual figures are. Be aware of the possibility that there are likely secondary sites nearby that are assisting the target in producing fake products.
  • A key task is helping the enforcement authority locate the counterfeit products. Sometimes, you may find other products that are not imitating your brand. In such cases, it provides a potential opportunity to make the case bigger and invite other brand owners whose products are found to participate. Don’t miss the opportunity to do so!
  • Make sure you don’t miss any evidence on the spot, such as waybills, logistic documents. Also pay attention to digital evidence, such as links to online platforms/markets like Alibaba, JD, etc. (BZ)

Enforcing judgments – Often the biggest challenges for IP owners of all kinds in China is not winning a civil litigation judgment but enforcing it against a losing defendant. The Whac-A-Mole game is well known to brand owners like Eaton, so IP attorney Peter Yang offered several tips based on his own company’s experiences – both successful and unsuccessful:

  • Start early: “It’s a little bit late for lawyers to start thinking about enforcement once they have gotten the decision,” Yang said. The improved mechanisms for evidence preservation mean that litigants should be trying to use the power of the courts to identify key assets and financial details during the case itself, and investigative and due diligence efforts by the IP owner should have started well before a case was filed.
  • Choose the right partners: Many in-house counsel tend to instruct their original outside law firms to enforce the judgements they have won. But Yang says that decision should not be automatic: “Not all firms know the specific local resources” available to judgement holders, Yang said, and sometimes a local specialist may need to be brought in.
  • Check blind spots: Chinese courts are getting good at finding and freezing not just bank accounts of defendants but also e-payment accounts from the likes of AliPay and WeChat pay. But so-called ‘wealth management products’, a term for a popular class of financial instruments that forms a key part of China’s ‘shadow banking’ system, are evidently an exception to this – they can be much harder to spot.
  • Leverage the blacklist: Yang also mentioned China’s credit blacklist and restrictions on high-end consumption as tools that can give rights holders leverage in enforcing judgments. He added that it can be expanded to pressure compliance with settlements or mediated deals – IP owners can seek to make agreements binding by having them witnessed by the court. (JS)

Praise for Alibaba as focus shifts to social – Online enforcement is all-important in China, and the terrain changes very quickly. Representatives from brands Richemont and MCM agreed with Louisa Xu, North Asia IP manager from Treasury Wine Estates, who observed that broadly speaking the infringement threat is shifting from e-commerce platforms to social platforms and from B2C contexts to C2C ones. New channels for infringement, Xu added, have come from unexpected places like food takeout ordering apps. The shift may have to do with the fact that China’s dominant e-commerce player is earning plaudits from brand owners for its anticounterfeiting efforts. MCM’s Miller Wang said Alibaba is doing “a tremendous job”, not just on takedowns but by sharing big data with brands. Niklas Fu, senior digital enforcement manager at Richemont, and a former Alibaba staffer, explained why that data is so welcome to brands: “After years of cracking down, we need deeper analysis.” (JS)

WeChat in the spotlight – With online commerce in China increasingly migrating to social, the WeChat platform operated by Tencent is increasingly important to brand owners. Hansen Huang, deputy director of legal at the company, was very keen to get in front of rights holders and explain what the platform is doing. Undeterred by a delayed flight from Shenzhen, where the company is located, Huang closed the day with a presentation about the company’s anti-counterfeiting efforts. Huang acknowledged that the IP challenges are mounting. Citing China’s Consumer Protection Association, Huang stated that 70% of respondents in China have purchased counterfeit products, but 46% say e-commerce protection needs to be improved, suggesting that many buyers are deceived by vendors. Huang insists that WeChat is taking a hard line on policing fakes. If an account is shut down for counterfeiting, he said, the associated mobile number will be prevented from registering another WeChat account. Anyone who has spent time in China knows that a mobile account which can’t be linked to WeChat has lost a serious amount of its value. (BZ)

Bing Zhao

Author | China editor

[email protected]

Bing Zhao

Jacob Schindler

Author | Asia editor

[email protected]

Jacob Schindler