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Brands need to think ahead to avoid trademark issues in China

News that Penfolds owner, Treasury Wine Estates, has succeeded in their court proceedings against a 'trademark squatter' is a stark reminder of the need for brand owners to ensure they have sufficient intellectual property protection in multiple jurisdictions.

An individual called Li Chen was stripped of the right to use the ‘Ben Fu’ trademark, a translation of the Penfolds name, by Beijing's High People's Court. It was the latest stage of a dispute that has lasted for a number of years and highlights the approach taken by entities wishing to trade off the success of a well-established brand.

Trademark squatting has become quite common within the wine industry and can be difficult to detect if brand owners are not diligent about enforcing their IP rights. It has affected French wine producers in China, such as Castel, but is also nothing new beyond this sector: Hermès, Pfizer, Tesla, Apple and Facebook have all faced this challenge.

At the centre of these disputes lies China's "first to file" trade mark registration system. It means that the first person to file a trademark has the right to use it in China, regardless of the genuine prior rights of existing companies or individuals. So an individual can legitimately apply for an iPhone trademark in China despite the rights of Apple so long as it beats them to registration. In this case, therefore, the court ruling only means that the ‘Ben Fu’ trademark has been re-opened for registration. Treasury Wine Estates will now have to apply for the right to use this and success is by no means guaranteed.

Naturally, the time and expense that several years of litigation has taken could have been put to much better use. Furthermore, the fact that the situation remains unresolved acts as a glaring example of how dangerous failure to register can be.

For brand owners, therefore, it is better to avoid the time, expense and uncertainty of court proceedings by ensuring that protection is sought for both the Chinese character version of a brand as well as the Latin script sign as soon as possible. Delay can be extremely costly, as Penfolds can testify to. It is vital that extending trade mark registration in this way becomes a core milestone of developing a brand or product.

Kate Swaine is partner at the international law firm Gowling WLG

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