9 Dec
2016

Lessons from the front line: brand protection strategies for Greater China

This week, high-level brand protection professionals, investigators, industry specialists and enforcement officials gathered in Shanghai for World Trademark Review's Brand Protection Greater China summit. Across the packed agenda there were a number of critical practical takeaways for those tasked with protecting the integrity of their brands in the region. A few selected highlights follow.

Selling brand protection to the business: be a profit generator, not a cost centre

A persistent challenge for trademark and brand protection professionals the world over is to ensure that their efforts are suitably funded by the business. The key to achieving this is to demonstrate return on investment. Yet quantifying the financial payback of brand protection is difficult as you need to know how big the financial threat posed by illicit trade actually is - and the methodology to do this will vary from industry to industry, and company to company. Sam Zhou, general manager and brand protection, Greater China, Procter & Gamble noted: "From automotive, to telecoms to pharmaceuticals to consumer goods, it is hard to find a common methodology to quantify how big the threat is. At P&G we run market surveys and engage in sampling, so we have an idea how big the issue is and where. By having a number, you get a sense of how big the loss is. You really need to be able to articulate the story to management and without a number or good data points, you just have an argument." Key metrics include the number of seizures and cases, recovered damages, product removed from the market and - as a counterpoint - the expense of achieving these results. An important point to make is that, by removing infringing goods from the market, you are creating a sales opportunity for the company. Succeed in this endeavor and the results can be powerful. Angela Chen, brand protection manager, Asia-Pacific, at Ford Motor Company noted that the value that her team creates each year represents a 250-300% ROI.

It's all about finding the right partners - but challenge them

Obtaining the results that provide the necessary data to lobby for continued department budget relies on success in the field and, because brand protection professionals can't do everything alone, much of the day’s discussion focused on how to source trusted partners. From reliable investigators to online surveillance specialists to law firm experts, brand protection teams need to build a formidable team in the face of infringement. Asked what are the top three qualities to consider when selecting outside counsel, Simon Jim, managing director of Brand M O, suggested: "Firstly a proven track record. Most lawyers have a lot of experience and it is easy to see what they have done in the past. Second, that they are not afraid of challenges and can cope with the element of surprise. One issue in China is that you are never quite sure what is going to occur. Finally, you need a lawyer who understands what your business is about. Not just the IP issues in the case in hand but to truly understand how a case may impact your business." Procter & Gamble's Zhou added that you also want partners that will help supply the data that will assist with internal reporting, emphasising that - in addition to agreeing on deliverables and price - "work with measurable KPIs, whether the quantity of seizures, market share of fakes versus genuine products or damages recovered". Elsewhere, Jerry Xia, deputy general counsel and chief IP counsel, Asia-Pacific, Honeywell, observed that the personal dimension is important, with Ford's Angela Chen adding that brand protection partners are like hairdressers – you are often loyal to the individuals you know rather than the company they work for. Finally, when sourcing new partners, be sure to challenge them. Chen revealed that she always asks prospective partners to talk about their weaknesses as well as wins - and if they are not willing to transparently talk about past failures and areas of weakness, they may not be the right partner. After all, trust and openness is everything.

A call for engagement from the AIC

Staying with the theme of partnership, another important ally in the fight against infringement are AIC officials. Providing an insight into the scale of the work undertaken by authorities, Huirong Gu, deputy director, trademark supervision division, Shanghai AIC, noted that, in 2015, it dealt with 1,340 trademark infringement and infringement cases, with 170 transferred to policing authorities for criminal liabilities. These efforts were undertaken on behalf of both domestic and international brands, with 735 of the 1,340 cases related to the protection of foreign trademark rights. However, she urged brand owners to ensure that they are collaborating effectively, in a bid to maximize the effectiveness of actions, In particular, she noted that the trademark registrant has to provide proper proof of their legal rights, detailed information and evidence on the alleged infringement and - importantly - to clarify whether there has been previous disputes over the ownership of the mark. Finally, there needs to be proactive co-operation with on-site inspections. The over-riding message? We are here to help you - but we also need your help.

Get your marketing hat on to engage with customs officials

Another important partner are those that truly operate on the front line: customs officials.Wai B Zee, general counsel at WeWork Asia-Pacific, was quick to sing the praises of Chinese customs, proclaiming them "the most efficient weapon in our armoury. We often blame customs for problems but we need to point fingers at ourselves as we don't always do a good job assisting them". And assistance essentially means interaction and regular touchpoints. As to how to approach the relationship, he recommended that brand protection professionals become marketers, seeking to increase top-of-mind awareness through the development of personal relationships and using creative ways to present information. As an example, he cited an entertainment studio which, rather than produce an unwieldy trademark manual to help customs identify infringing goods, created a pocket-sized fan that, when opened, featured key characters and properties, as well as the brand protection team's contact details. The result is that officials often had key information to hand while they went about their duties. Finally he stressed that you need to start the relationship off on the right foot: "Never talk about problems you have in the first three to four meetings - you need to get to know officials first. Also, the two traits I encourage you to have are humbleness and gratefulness. If you show gratitude, they will go to work for you every day."

Embrace open standard software

Of course, it is difficult for customs to engage on a personal level with all domestic and international brand owners. Given the scale of the job they face, systems that enable them to streamline their workflows are essential, and Herman Cheung, manager, illicit trade strategies and prevention, Asia, at Philip Morris International, called for rights holders and service providers to collaborate and embrace and utilise open standard tools: "When it comes to tracking and tracing it is important that an open standard is adopted by authorities and industry. You can't expect officials to use different systems. An open standard, if adopted by all, would be interoperable and cost effective. Lastly, it is easy to implement as open standards are being published so any vendor that wants to publish tools to the standard can."

Litigation isn't always the end of the battle

As Xiaobing Wang, partner at Lung Tin Intellectual Property Agent, noted: "Litigation is not an end, it is a means to an end. Litigation should not be the ultimate goal." Sometimes it is unavoidable though, and even when successfully concluded, the real work starts in ensuring that any damages awarded are actually recovered. Christy Chen, senior IP counsel at AkzoNobel, observed: "Following the money can be a headache. You may get an encouraging verdict but the other party will often disappear, so it is not guaranteed that you will get reimbursement." Of course, the recovery of damages is a key element in demonstrating the profit centre potential of the brand protection team. Therefore, she notes that pre-trial property preservation is key, as well as investigations into the defending company's bank accounts and assets. Iris Chao, senior trademark counsel at Johnson & Johnson, added: "During preliminary investigations I would ask investigators to look into the nature of the target's business and their property. I wouldn’t target individuals as they will just transfer their property elsewhere - instead look at the company, then do property preservation."

Do your sums

Whichever types of action you pursue, effective budgeting is a must. But forecasting to enable the business case for funding likely needs is difficult, as you don't know what threats will emerge and when. One participant explained that scenarios have arisen where infringement is spotted, but they had run out of budget so couldn’t act. James Luo, managing partner at Lawjay Partners, suggested that, "when budgeting try consider how many criminal cases, and how many civil cases based on criminal judgement, you may want to pursue". He then presented a useful example of a potential budget breakdown, with up to 30% allocated for administrative enforcement (such as AIC raids and customs seizures) and between 30-40% for civil actions (including actions based on criminal judgements/customs penalty decisions). Another 30-40% is then forecast for criminal enforcement (such as targeting factories). The remainder can then be earmarked for emergencies or other matters. And emergency funding is important – as Jim noted earlier, in China you are never quite sure what is going to occur.

Further insights from the conference are available via the live updates posted on World Trademark Review's Twitter account. For more on upcoming events, visit www.wtr-events.com.

Trevor Little

Author | Editor

[email protected]

Trevor Little