Don’t be fooled into thinking that trademark protection practices are the same in China as in Europe.
China has once again proved a challenge to European companies. Most recently, German car manufacturer Volkswagen Aktiengesellschafts (VW) has run into trouble in China with its application for registration of the trademark TAYRON, which is the name of one of VW’s SUV car models.
In short, VW filed a trademark application in China back in 2018, which was rejected due to so-called “citation” for an earlier trademark, TYRON, which protects similar subclasses of goods as VW sought to protect with TAYRON. Tyron Runflat Limited owns the earlier trademark.
In most of the world, and in Europe in particular, this issue would be solved by obtaining a letter of consent for co-existence from the right’s owner. Because in most of the world, authorities and courts assume that companies are capable of mitigating that risk themselves.
Until recently, the practice of consent for co-existence was also possible in China. All it required was that the letter of consent had to be signed before a notary and subsequently authenticated at a Chinese embassy, if the entity that gave the consent did not have a Chinese address.
Landmark decision and change in pratice
In August of 2021, however, the Beijing High People’s Court made a landmark decision in the case of VW. Here, the court established that consent is not sufficient if the goods protected by the trademark application are very similar to or identical to those protected by the earlier trademark; or similar to or identical to the trademark itself.
The grounds cited for this decision were that Chinese consumers and authorities are less able to distinguish between marginally different Latin words. Further, on the more principal side of things, the court has taken it upon itself to ensure that consumers are not left confused.
The court from VW’s trademark case confirms this change in practice, which consequently means stricter rules on granting consent for co-existence in China in general.
Not that obtaining consent from a Chinese company in China was an easy task in the first place.
Chinese culture and thus Chinese business culture is deeply rooted in Confucianism, which is highly characterized by an aversion to conflict, acting in a certain, correct manner and saving “face”. Another subtle manifestation of Confucianism, which strongly affects how one does business in China, is that personal relations often play an important role when entering agreements in China. For this reason, building rapport and trustworthy relationship with a Chinese business partner is often necessary to even conduct business relations and gaining loyalty and goodwill – but this isn’t always easy, when the first thing you hope to achieve is consent.
Another important fact to keep in mind when it comes to trademark protection in China is the fact that the number of registered trademarks surpassed 20 million in the country at the end of 2020. The risk of encountering an earlier and similar trademark thus is relatively high.
What can be done?
So, what can you do if your application for trademark protection is denied with reference to earlier, already established rights (citation)?
- Appeal the ruling – Often, the appeals body of the Chinese Trademark Office is more willing to grant protection.
- Utilize the non-use cancellation system.
- If possible, have the company that owns the blocking trademark registration delete the items that are most relevant to your application.
- Act quickly if “citation” is subject to a use requirement, because the Chinese trademark authority and Chinese IP Courts are not willing to pause cases.
- Re-register the application locally – doing so could pay off as national application are often subject to a subclass system that can help avoid citation.
All this is not to say that consent is completely out of the picture in China following the ruling. But, to achieve consent, one must now be able to prove to the authorities and the courts that there is no risk of confusion. This could, for example, be done by showing that the products will never end up being sold side-by-side in the same store.
Reach out to ourif you are thinking of filing a trademark application in China and need advice.