Chinese trademark law is notoriously complicated for Western companies to understand. And even mighty players have found themselves battling for – and sometimes losing – the rights to brand names they assume are rightfully theirs.
Take Michael Jordan. A Chinese company constructed its entire brand around the former Chicago Bull's Chinese name, "Qiaodan," which has a pronunciation similar to "Jordan." The company filed for trademarks using Mr. Jordan's jersey number, "23," and even the names of his sons, Jeffrey and Marcus, in Chinese. Its logo looks awfully similar to Air Jordan's "jumpman" logo.
Michael Jordan sued; the Beijing Higher People's Court in May upheld a decision in favor of the Chinese company, Qiaodan Sports. The battle continues. Mr. Jordan's legal counsel confirmed last week that they plan to file for retrial by November. A separate but similar case is still pending in a court in Shanghai.
Brands from luxury leader Burberry to Pfizer and its erectile dysfunction drug Viagra have been caught up in trademark battles in China. Even Apple had to pay $60 million to a company called Proview International in 2012 for the right to use the iPad trademark in China.
Here's a few takeaways on what Western brands have been getting wrong.
Filing first is important. With a few exceptions, China's trademark system generally gives priority to whoever filed for the trademark first. In the U.S., by contrast, the system favors the person who uses the mark in business first. It's basic, but it's proved a headache for brands that assume they should have the rights in China because they're famous elsewhere.
"Look at some of the sums involved – we're talking about $1,000 to file an application in China, more or less -- it's an obvious thing to do when you look at the potential downside risk," said Edward Chatterton, a partner in the DLA Piper China practice.
If you launch a legal challenge, don't delay. Other celebs, including past NBA stars Allen Iverson and Yao Ming, have successfully fought cases involving naming rights in China. So why not Mr. Jordan? They logged their legal challenges relatively quickly; he didn't. Qiaodan Sports was established in 2000. Mr. Jordan filed his case in 2012.
"It gave the opponent time to establish a brand, to invest heavily in advertising, to establish a large network of about 6,000 retail stores," Mr. Chatterton said. "Courts generally do not like to disrupt the existing market order." And today, he added, "when you say 'Qiaodan' people will think of the sports store as much as they think of the basketball star."
You need a Chinese brand name, and don't forget to register it. Pfizer's Viagra didn't register a Chinese name early enough. It wound up losing a long legal standoff with a local company that had laid claim to the Chinese name that everybody was already using for Viagra. A delay in registering a Chinese name also led to troubles for Hermes, which tried unsuccessfully in court to tackle a local brand with a similar moniker in Chinese.
"If you are selling products in China, or planning to do so, there's almost certainly going to be a Chinese version of your name, and if you don't come up with it, someone else will," said Matthew Dresden, an attorney at China-focused firm Harris Moure. "The question is, A, do you want to pick your name or want someone else to pick it? And B, do you want to own it or do you want someone else to own it?"
Ignore the rules at your own risk In April, a court in Guangzhou ordered New Balance's affiliate in China to pay nearly $16 million in compensation to a Chinese shoe manufacturer who had registered a trademark for the Chinese brand name it was using, "Xin Bai Lun."
New Balance had unsuccessfully challenged the Xin Bai Lun mark before, and it "knew very well that others had registered it previously, but it kept on operating under that particular mark," said Alan Chiu, a partner at Hogan Lovells who specializes in IP litigation and enforcement in Greater China. "That's why the court concluded that New Balance committed malicious trademark infringement and ordered such a high amount of damages, taking into account the extensive sales of New Balance shoes in China."
It's another reminder, he said, of why brands need a comprehensive China IP strategy before even entering the country.