News & Insights

A Chinese trade mark case handed down last week in favour of New Balance provides a timely reminder to register your trade marks before you expand into the Chinese market. Chinese trade mark rights are given to the first-to-register applicant, rather than the creator or first user of the trade mark. Consequently China is rife with trade mark squatters who register an overseas trade mark before the brand has entered the Chinese market.

The New Balance case concerned a Chinese trade mark squatter registering New Balance’s slanted ‘N’ and using it for New Boom counterfeit shoes. By the time New Balance entered the Chinese market in 2003, New Boom counterfeit shoes were flourishing with the help of the recognisable international mark and copycat designs.

New Balance is not the first brand burned by trade mark squatters. Trade mark squatters have affected names such as Starbucks, Asda, and iPad when entering a first-to-register market. Recently in China, Michael Jordan succeeded in a lengthy court battle to remove the Chinese translation of his name registered by a Chinese sporting goods seller.

The New Balance Decision

Last week the Supreme People’s Court of China (the highest court in China) ruled in favour of New Balance. While this win against copycats may not seem ground-breaking, the decision is a significant success in international traders’ trade mark protection in China.

The court awarded damages of 10 million RMB, the equivalent of $18.8 million AUD, which well exceeds the statutory damages cap of 3 million RMB. It is rare for Chinese courts to award damages exceeding the statutory cap, though this decision may lead the trend.

Moreover, New Balance’s success came after a long history of litigation and persistent infringement. Earlier this year, New Balance was granted damages and an injunction against five Chinese companies for breaching an interim injunction order preventing them from using New Balance’s ‘N’. However, infringement from copycats persisted, and New Balance took further action. Years of litigation and reputation damage may not be feasible for all businesses falling victim to trade mark squatters.

Lastly, to secure this damages award, New Balance filed sensitive financial data to the court which some businesses are unwilling to disclose. This disclosure and the persistent infringement likely influenced the large award.

Protecting Your Trade Mark

The best way to defend your trade mark is by registering the mark as soon as you are contemplating expansion into China. The recent Michael Jordan trade mark case has also indicated you should register the trade mark’s translation in characters and pinyin (pronunciation).

It is much easier to beat trade mark squatters before the fight begins by registering your trade marks as early as possible. A trade mark squatter’s existing trade mark may be defeated by proving infringement. Infringement may be proven in a Chinese court on a case by case basis. The court may award damages or may transfer the rights to you, though this may require disclosure of sensitive business information. Additionally, this enforcement process can cost hundreds of thousands of dollars in legal fees and lost revenue.

If we can help you with trade mark protection and your business expansion, please do not hesitate to contact us.