New lower trademark fees in China mean you need to protect your trademark, or someone else will
Protection of intellectual property in China is problematic. Trademark and domain name squatters may grab your brand. Online copyright infringement is rampant. Enforcement is challenging. But the truth is that the Chinese market is too important to ignore. And despite some bad actors, more Chinese businesses are maturing in their approach to international IP issues, to the benefit of both themselves and others.
For all these reasons, we recommend that our clients who export—or might possibly decide to export someday—must protect their brand in China.
Now that recommendation has taken on a new urgency.
Last month, the Chinese trademark office reduced the government fees for most trademark matters by 50%. The most important result is that the government fee to file a new trademark application (in one class of goods or services) is now about $ 50.
Because there is no “use” requirement to register a trademark in China, hundreds of entrepreneurs have made a practice of registering foreign brands in China in the hope that when the foreign company enters the Chinese market, the entrepreneur will reap a windfall by selling the Chinese trademark to the foreign owner. The size of the windfall—that is, the size of the check you will be writing—depends on the importance of the trademark and the potential revenue stream that the Chinese entrepreneur thinks you stand to lose by not owning your own trademark in China.
If you think you can just sue the respective entrepreneur for bad faith and avoid an extortionate payment, you may regret that assumption. Apple did.
This same practice occurred regularly with domain names, which can be registered for a few dollars each. Even Google had to pay up for their Chinese domain name ($ 1 million, as I recall).
The limiting factor for trademark squatting—as opposed to domain names—is the relatively high cost of obtaining a trademark registration.
Now that has changed.
With the government fee for a Chinese trademark at about $ 50, we expect to see a new flood of Chinese entrepreneurs searching out foreign trademarks that they anticipate may eventually enter the Chinese market. At the new, lower price, they will register these brands—your brands—and lock you out of the Chinese market unless you buy the trademark from them, at a price to be negotiated. And you will not be in a strong negotiating position.
Unfortunately, the financial picture is tilted against foreign businesses.
While a Chinese citizen may use one of hundreds of trademark “agents” who provide services at a very low cost and are not licensed attorneys, foreign companies are much better served by a full service law firm that can advise on strategy, manage Chinese trademark applications and licenses, and speak English well enough to communicate effectively.
The upshot is that the reduced trademark fees in China won’t be as important to foreign companies because of the overall cost of using a qualified attorney; the reduced fees in China will be much more important to Chinese nationals.
And so my message is twofold:
- The cost of protecting your trademark in China has just dropped. Now is a good time to invest in securing our brand in this important market.
- If you don’t, the odds are now even higher that someone else soon will.