Last week, Apple lost the exclusive rights to the “iPhone” trademark in China, and will now have to share it with a Beijing-based leather products maker, which sells a number of leather products such as smartphone cases and handbags under the name “IPHONE.”
Although this may seem like a worrying verdict for foreign brands in China, new ones are able to escape the pitfalls of traditional and established trademarks if due diligence has been applied. “Brands who are not fast enough to register their name in China can easily see their trademark registered by a local producer. This was very common years ago but it’s a rare sight these days, since it’s become quite a standard practice for a brand to register a name in China upon inception anywhere else in the world,” said Andrea Fenn, founder of Fireworks, a digital consulting agency based in China.
But the Apple ruling was by no means unique in China, and came only a week after the launch of Uncle Martian. This new Chinese sportswear apparel brand is utilizing a comparable logo and a similar sounding name to that of American activewear brand Under Armour. In an e-mail to the press, a spokesperson for the American brand said at the time that, “Uncle Martian’s uses of Under Armour’s famous logo, name and other intellectual property are a serious concern and blatant infringement. Under Armour will vigorously pursue all business and legal courses of action.”
Whether Under Armour will be successful in its legal action remains to be seen, but some China watchers believe that there has been an improvement in property protection. “The good news is that intellectual property protection is getting much better from a legal standpoint and the courts in China usually rule the right way now. The big problem is actually enforcement and we’ll see that improve as the legal system becomes more robust. Most of the intellectual property claims being made in Chinese courts now are coming from Chinese firms trying to protect their own intellectual property and this is going to go a long way toward cleaning up the market, it will just take time,” said Benjamin Cavender, principal at China Market Research Group.
The issue of plagiarizing logos or brand names is a recurring problem. In 2012, Michael Jordan unsuccessfully asked the State Administration for Industry and Commerce to suspend Chinese sportswear company Qiaodan Sports’ use of multiple trademarks, including Qiaodan, the Chinese transliteration of his surname, the number 23, and logo, which bears a resemblance to the silhouette of a basketball player. After continuing to battle in lower courts, Jordan took the case to China’s highest court, The Supreme People’s Court, at the end of last month in a bid to overturn the ruling. The pending outcome is expected to have a big impact on intellectual property rights in China.
There is a twofold issue for brands when entering the China market and registering a trademark in the country — they must consider both the English brand name and an adapted Mandarin brand name. Companies that are slow off the mark to enter China, or trademark their brand, can expect to run into problems in the short term. “Brands in China often need to have a Chinese name to go together with their original name. It is not unusual that Chinese similar sounding names have been taken by local players already, I can think of Armani, where the name ‘amani’ was taken by a hairdressing chain, or that consumers informally use a Chinese name that is different from the one chosen by the brand. For example, the case of Burberry, who chose ‘bobaili’ but is also known as ‘babali,’” said Fenn.
The advice for brands just commencing operations, or looking to enter the China market, is simple — trademark the company in China first. “The ruling highlights the importance of trademarking brands in China across any relevant categories, even before they are launched in home markets. Trademarking in China is inexpensive, so should be a consideration for all brands globally as soon as possible,” said Mark Tanner, founder and managing director of China Skinny, a marketing, research and online agency.
It may seem like there has already been a precedent set by local companies for taking advantage of reputable foreign brands to their economic benefit, whilst ultimately weakening the brand positioning of the original company. Although, thanks to the savvy of Chinese consumers, who are used to navigating their way through a crowded marketplace of counterfeit products, this is not necessarily the case.
“I think fears over having trademarks or intellectual property ripped off are probably overblown,” adds Cavender. “Looking at consumer purchasing choices over the last few years, what is clear is that, when they have the funds to do so, consumers are preferentially purchasing real products in China. So while there are a lot of fake products on the market as well as companies trying to drive sales by imitating another brand name, consumers generally are not fooled and still want the real thing.”
Apparel companies without stringent controls over their supply chain management are at risk of having intellectual property imitated at some point up the chain. They therefore must clearly communicate the brand message with Mainland Chinese consumers to increase brand awareness.
“The best thing that brands can do is make the effort to file legal claims if they run into an issue, and to make sure that they are pointing consumers towards official stores and websites so they know where to buy safely, and making sure that they have good control over their supply chains. This is especially true for apparel companies as it is relatively easy for a bad distributor or supplier to slip fake products into stores, or rip off a design,” said Cavender.
Controlling official online platforms in China can prove to be another minefield for brands breaking into the market, however, and need to be closely and constantly monitored. “Until a while ago, registration for social media pages was not very strict, so individual or unofficial accounts could have filed for opening a social media page with the name of a big logo brand. I witnessed the case of a massive luxury fashion label who saw an unofficial Weibo page growing bearing its name until it was so big, with more than 100,000 fans, that the management had to buy the account over instead of forcing it to close, which would have probably been complicated. While this is not the case in the big platforms, whenever new social platforms arise there is always a risk that somebody will register accounts with your name, with the risk that unofficial, if not wrong, information is disseminated to large audiences who believe they are hearing from the brand itself,” said Fenn.
Whether the verdict in the case of the Apple “IPHONE” trademark issue will influence Chinese consumers remains to be seen. However, many are sceptical. “Chinese consumers are used to rip-offs, and given the branding is quite different to Apple’s distinctive logo, I think it is more of mild distraction than something that will degrade the brand,” said Tanner.