CHINE : LA MENACE PLANE SUR VOS MARQUES

At the time of the Football World Cup 2002, Guus Hiddink the Dutch manager of the South Korean football team revealed he was fond of “4ème grand cru classé du médoc”.

Few months later, South Korea became the first world market for this wine.

At the beginning of the 90’s, in Japan, a press article put forward the beneficial effects on health of Cognac’s consumption.  Few months later, Japan became the first world market of the famous wine spirit.

Those two examples draw perfectly how quickly Asian markets can be done and undone. China i.e. the main country of Asia (the issue area) is not an exception, quite the contrary. Nowadays, it can reasonably be held everybody can succeed in the Chinese market.

Some countries, such as USA, confer property rights to the person who is actually using the trademark in the marketplace. China, only recognize property rights on a trademark through its registration in the trademark’s office. Somehow it refers to the rule “First come, first served”.

Yet, recently a serious phenomenon arose to a large extent: French wineries (châteaux), famous or not, are registered by Chinese individuals as soon as the legitimate owner did not take care of registering his trademark in China.

The unexpected consequence of this situation is that the fraudulent trademark applicant (or its translation in Chinese characters) could bring a legal action for counterfeiting against the legitimate owner of the brand and potentially exclude him out of the Chinese market!

This situation rises several issues. Firstly, demonstrating a fraudulent registration can take a long time and involve important expenses. Then, the outcome of such procedure is pretty unpredictable.

Indeed in order to prove the applicant could not ignore the trademark’s exploitation in China by his legitimate owner, most of the procedures require either to prove a previous commercial relationship between them, either to prove the wine is very famous for Chinese consumers.

And here is the problem: the average Chinese consumer’s knowledge of wine is very limited: only very experienced consumers will know the Châteaux classified in 1855.

Also, to avoid years of costly and unpredictable procedure, legitimate owners often find themselves in the ridiculous situation of having to buy back their own trademark in China! Although it is frustrating, nowadays this solution seems to be the most administratively efficient and the least complicated one.

Actually the main problem is that fraudulent applicant seems to be protected by the Chinese legal system. They know how complex it is to gather evidences of their bad faith so that finally the legitimate owner will always prefer negotiate a buyback rather than getting bogged down in the Chinese administrative procedure’s twists and turns.

The European Commission has been warned of this issue and is now taking care of it. Then changes should be expected soon. However it will surely involve several years of negotiations.

In the mean time, it is necessary for producers who don’t want to be prevented from moving into the most important world market to check whether or not their Château’s name has been already registered into Chinese Trademark Office.

If not, producers should apply to a preventive registration of trademarks ideally in Latin and Chinese characters, in order to obtain the more extended protection granted to registered name.

On the contrary if the trademark has already been registered identically… then it will be necessary to figure out the best strategy to get the trademark back at the lowest price possible.

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