A foreign company signs a Distribution Agreement with a Chinese distributor and enters into Chinese market, should they register their trademarks in China? What types and levels of risk they may encounter under the Distribution Agreement without proper registration?
Registering their brand as a trademark in China remains a beneficial and prudent decision. Here’s why:
Protecting the Brand for Export Markets: By registering the brand as a trademark in China, the foreign company ensures robust protection of its brand’s identity in the manufacturing country. This proactive approach safeguards against any potential unauthorized use or imitation by local manufacturers or suppliers.
Mitigating Future Conflicts: The early trademark registration in China helps the foreign company preemptively address any future conflicts with local manufacturers. It establishes the company’s ownership and control over its brand, reducing the risk of disputes arising later on.
Strategic Preparation for Potential Market Entry: Even if the primary focus is on exporting goods, having a registered trademark in China lays a strong foundation for potential future business expansion. If the foreign company decides to enter the Chinese market, it will already possess the necessary intellectual property protection.
Enhancing Brand Reputation and Trustworthiness: By proactively registering the brand as a trademark in China, the foreign company demonstrates its commitment to protecting its brand globally. This commitment enhances the company’s reputation and image, both among business partners in China and in export markets.
Exploring Licensing Opportunities: If the foreign company’s brand gains popularity worldwide, having a registered trademark in China can present exciting licensing opportunities with local manufacturers or distributors. These partnerships can leverage the brand’s reputation for high-quality products in global markets.
Further more we will showcase the risks that international companies may face in China if they do not register their trademarks in the country by two examples as below.
1: New Balance Trademark Infringement Case (2015)
In 2015, New Balance, a well-known international sportswear brand, faced trademark infringement issues in China. The company had been manufacturing its products in China for years but had not registered its “N” logo as a trademark in the country. Unauthorized manufacturers started producing and selling counterfeit New Balance shoes with the iconic “N” logo, leading to consumer confusion and brand dilution.
The absence of a registered trademark in China made it difficult for New Balance to take immediate legal action against the infringing parties. The company had to undergo a lengthy and costly legal battle to protect its brand rights and reputation in the Chinese market.
2: Apple’s “iPad” Trademark Dispute (2012)
In 2012, Apple faced a trademark dispute in China regarding the “iPad” name. The company had launched its popular tablet device under the “iPad” name globally, but it was later revealed that the trademark for “iPad” in China was owned by a Chinese company that had registered it before Apple entered the market.
As a result, Apple had to negotiate a settlement with the Chinese company to secure the rights to the “iPad” trademark in China. This dispute led to delays in the official launch of the iPad in the country and highlighted the importance of early trademark registration for international brands operating in China.
In conclusion, registering the brand as a trademark in China for a foreign company involved in OEM or ODM activities solely for export is indeed a wise decision. It provides comprehensive protection, mitigates potential conflicts, lays the groundwork for future market entry, enhances brand reputation, and opens up licensing possibilities. By taking this proactive step, the foreign company ensures the long-term security and success of its brand in the Chinese manufacturing landscape.