Issue of the Day: Trademark Squatting in China

February 27, 2012

Since I’ve heard the term “trademark squatting” from five different people/sources today, it makes me think that I should write something about it before the interest dies down. Seems like I’m turning into an attention whore.

I think the interest here relates to the Michael Jordan dispute and, indirectly, to Apple-Proview.

OK, so what’s a trademark squatter? We get the term “squatter” from those folks who occupy land or buildings without permission from the owner. In Common Law, these people can actually end up with property rights if they “squat” for a sufficient period of time. It’s called “adverse possession,” and this has been another edition of Fun Facts From First Year Property Law.

When it comes to trademarks (or other forms of IP, such as domain names — aka cybersquatters), squatters are the dodgy bastards who register as trademarks the brand, product or company name of others. The motivations for doing so can vary and can include the intent to resell the mark, hold it hostage for certain business concessions, or to benefit from the product or brand’s established goodwill by using the mark on counterfeits or other products.

To put it another way: “Hey, that company stole my trademark!”

Right. Lots of examples of this. Last week we had the Michael Jordan dispute, which involved a company that registered a long list of Jordan-related trademarks.

I just found out today that the alleged infringer in that case also registered, among others, a mark and a business designation of another well-known name in the basketball community. The company name was: 福建湖人队体育用品有限公司.

The three bold characters in the name are “hu – ren – dui” or literally “lake – people – team.” Sound familiar? If you’re not an NBA fan, I’ll pause for a moment so you can do some quick Googling.

Got it? Good for you. Note that this was an example of a past incident of trademark squatting (in 2000) by these guys and, apparently, the mark was not renewed in 2010. I assume all rights now belong to the LA Lakers or the NBA or whatever special purpose company owns team names and logos.

So in addition to the Michael Jordan situation and Jeremy Lin, and the earlier cases of Yao Ming and Yi Jianlian, we’ve got Laker squatting, which sounds like a perverted B-ball groupie custom practiced in Inglewood. But no, it’s just a trademark thing, and another reason why the NBA has some top notch IP lawyers on staff.

Also in today’s news was luxury goods maker Hermes, which just lost an administrative appeal that goes back to 1995. This case involved a Chinese trademark registered by a Guangdong company. The mark associated with the French company is “爱马仕” and the one challenged is “爱玛仕” — same pronunciation, same pinyin, and obviously very similar in terms of characters used.

From a distance, this looks like an example of “Hey, those guys stole my trademark!” Indeed. So why did Hermes lose this case?

Actually, it lost the case back in 1997, and its second attempt has now also failed. I don’t know the specific details of either proceeding, so I can’t comment on the facts beyond what I’ve seen in the press. Apparently one issue involved the insufficiency of the evidence Hermes presented to prove that its mark was well known at the time the mark was filed.

Here’s the thing with many of these trademark squatting cases. If the argument is that the mark was registered in bad faith, evidenced by the mark’s well-known status prior to the application, then it all comes down to the evidence submitted to either the court or administrative body.

This evidence can include trademark registrations, examples of use of the mark, marketing and PR materials, consumer surveys, records of money spent on brand awareness — basically anything that supports the claim of well-known status.

Even for a world famous brand like Hermes, this is by no means a slam dunk (and this is why the Jeremy Lin case will be tougher than Michael Jordan’s). Not only does the brand owner have to dredge up information that is years old, but depending on the nature and origin of the evidence, it might also need to be notarized. The whole thing can be a huge pain in the ass, and for multinationals who do not keep very good records of their China operations, they might simply be unable to support their claim.

I don’t know what happened in the Hermes case, but I’ve had clients over the years who were unable to win on a well-known trademark argument simply because of poor record keeping. This is not as easy as it looks.

Finally, if you want another article on trademark squatting, Malcolm Riddell has a nice post on China Debate about the topic and Facebook’s brand problems in China. Good stuff as usual, and Malcolm gets special kudos for noting that the iPad trademark dispute is not an instance of trademark squatting.

Why not? As Malcolm correctly points out, Proview’s “IPAD” product dates back to 1998, and they registered the mark in 2001, long before Apple’s tablet was rolled out. Remember, the iPad case is all about a failed trademark assignment (a commercial dispute) and not an example of one company registering someone else’s famous mark.

Just to make this long post worth it for you, I feel obligated to end here with Trademark Squatting — (Obvious) Best Practices for Brand Owners:

1. Register first. There’s no substitute for this.

2. Monitor the trademark register.

3. Keep decent records, even {gasp} in your overseas offices.

4. If faced with a squatter, be prepared for a lengthy battle.

5. If you make a deal to buy the mark from a squatter (or anyone else), don’t screw up the transaction.