China grapples with trademark infringement—of its own brands

PEPPA PIG was the target of China’s online censors earlier this year when the pink porcine character for toddlers was co-opted by unruly Chinese teenagers as a subversive symbol. But the popular piglet is also the object of another sort of unwanted attention: the registration of trademarks related to the brand by foreign “squatters”, who hope to benefit as counterfeiters or competitors, or to extract a hefty fee when its true owners lay claim to it. The cartoon character’s British owners said last month that more than 100 Chinese firms have put in applications for Peppa Pig trademarks, some made years ago, thus in effect blocking its own.

China’s “first-to-file” trademark law (as opposed to the “first-to-use” rule in America and Britain, based on the sale of the good or service in question) means that speedy filings by locals can stop original brand-owners selling in China. Because registrations are cheap, trademark “trolls” file by the hundred. Dozens of foreign firms have been stung, from Apple (which paid $60m in 2012 to retrieve the right to use its iPad trademark in China) to Viagra, for which Pfizer, its American manufacturer, still does not own the Chinese-character mark by which it is best known to Chinese.

Now Chinese brands are finding that they too are increasingly targets of foreign squatters. An investigation commissioned by the China Trademark Association (CTA), a lobby group, into around 300 of its best-known members found that the trademarks of around a third had been squatted, each in around four countries on average. The 98 brands owned by Vivo, a smartphone-maker, were the most widely affected, in 53 countries and regions including America, Brazil, and the EU. Another victim was Hunan China Tobacco Industry, a cigarette brand squatted in 21 places, from Panama to Indonesia.

The practice is not entirely new: the trademark for the biggest brand of traditional Chinese medicine, Tong Ren Tang, has been owned by others in Japan, South Korea, America and Europe since the 1980s. But the CTA claims that malicious squatting of Chinese brands, which are increasingly valuable, has become “professional and large-scale”.

In one case last year dozens of toymakers, chiefly from the Chenghai district of Shantou, in southern Guangdong province, learned that an Indian-Chilean toy merchant in Chile had registered over 300 of their trademarks there, resulting in the blocking of some of their products at customs. Tianjin Wanda Tyre Group, a tyre firm, had refused to give exclusive distribution rights to a Finnish reseller, then discovered that its partner had registered Wanda’s trademark for its own use in the EU in 2011. Since 2014, a Chinese food-and-beverage giant has fought to invalidate the registration of its trademark in Britain by a British citizen of Chinese descent.

Like their Western counterparts, however, Chinese firms are finding registrations by others hard to overturn. Jani Kaulo of Kolster, a Finnish intellectual-property firm that represented Wanda, says that is partly because they have been slipshod in storing files to prove a first-to-use right. This should have been easy: Wanda had been selling its tyres in Europe since 2006. But it failed in its appeal at the European Union Intellectual Property Office, thus losing its main brand in the EU market.

Trademark offices approach complaints from Chinese brands with an attitude shaped by the relentless squatting by Chinese trolls on European ones, adds Mr Kaulo. Compounding this is the weak position of Chinese-character trademarks abroad. In the EU only their visual component is recognised in trademark law, not their pronunciation or their conceptual meaning. That makes them easy to copy, for example with homonyms that could fool Chinese-speaking buyers abroad.

China is stepping up efforts to defend its brands. After the CTA set up a committee to protect trademarks abroad in April, Nantong, a coastal city, established its own office and nearby Shanghai announced that it would, too. The Chilean toy case was among the first set of brand-infringement warnings released by the Chinese government in 2017. Ning Lizhi, a legal expert who worked on the dispute in Chile, terms the case an “unusual and significant” one, which was resolved when the Indian-Chilean businessman agreed to become a reseller for the Shantou toymakers in Chile. Given the ease and speed of the settlement, Mr Kaulo reckons that China’s government must have intervened.

Might greater concern for its own brands prod China into playing fairer with those of others? Its leaders have already been threatening tougher intellectual-property protections. Last year three Chinese shoemakers were told to pay 10m yuan ($1.5m) to New Balance, an American footwear company, for copying its logo. In August the Lego Group won a case against Lepin, a Chinese toy manufacturer and copycat of its colourful brick sets, which was made to pay damages of 15m yuan to the Danish firm. It was one of the largest trademark-related awards ever made by a Chinese court. And in the same month two Chinese firms were ordered to stop making products using the image of Peppa Pig, in what the court called a landmark case. Swine beats swindler, then.