This is shaping up to be the biggest China IP story of the year, and as such it’s pissing me off so much that the little device I use at home to monitor my blood pressure just emailed me and said, “Dude, you need to chill. Seriously.” I didn’t even know the damn thing was networked.

What’s my problem with this story? Well, you can judge for yourself:

It looks almost exactly like a sleek Apple store. Sales assistants in blue T-shirts with the company’s logo chat with customers. Signs advertising the iPad 2 hang on the white walls. Outside, the famous logo sits next to the words “Apple Store’’ – one of the few clues that the whole thing is a fake.

China, long known for producing counterfeit consumer gadgets, software and brand name clothing, has reached a new piracy milestone – fake Apple stores. (AP)

Since this blog covers China, and in particular intellectual property issues in China, you might be wondering why I didn’t write about this story when it “broke.” Simple answer: this ain’t news.

Sorry to be the buzz kill here, but this isn’t the first fake Apple store in China. It might be the best fake Apple store so far, but I know for example that there has been at least one fake Apple store here in Beijing for many years. It never occurred to me that I should call the New York Times and give them a scoop, though.

Here in China, we have fake Apple stores, fake McDonald’s restaurants, fake Starbucks coffee shops (a close friend of mine even defended one of them in a now famous trademark case in Shanghai), and so on. Good lord, this is an old story. The Supreme Court here even released an entire judicial interpretation on this (i.e. trade dress) a few years back in response to this problem.

So no, I didn’t really think twice about discussing this one, and I have been more and more surprised each day this week as my Inbox has gradually filled with these breathless fake Apple store news flashes.

WTF? Several people have suggested to me that the media attention can be attributed to the high quality nature of the fake. In this instance, even the staff working at the store thought they were employed by Apple.

OK, yeah, that is mildly interesting. But I could come up with a lot of examples of other amazingly good fakes in China. Again, that’s not exactly news.

Although it’s not exactly a thrilling observation, I tend to think that this story has legs mostly because it has to do with Apple. I’d love to do a poll of folks in the media to determine how many of them are Mac fetishists, how many own iPhones or iPads, etc. Pure speculation on my part, but I bet the number is high.

The religion of Mac is a powerful one, and anything to do with Apple or its creepy CEO is an automatic hit with the press and the online commentariat. (Factoid: 87% of all blogs, Tweets, and social media links and status updates are related in some way to rumors about Apple product releases.)

Usually, I try to ignore the cult of Mac. I look the other way, and it doesn’t bother me. When product stories worm their way into my Inbox, I delete them with few complaints, knowing that it’s just the price of having Net access, subscribing to RSS feeds, and using social media. Fine.

But when this shit pushes its way onto the China IP stage? Hell no. That’s my turf, nerds. Keep your stinking monkey paws out of my business.

Enjoy your weekend.

© Stan for China Hearsay, 2011. | Permalink | 25 comments | Add to del.icio.us
Post tags: apple, Mac, shanzhai, trade dress, trademark, unfair competition

China Car Times reports that the new Chevrolet Volt was unveiled at an event in Shanghai today, though it won’t be going on sale until sometime in 2011.

I’m always curious to know how the names of foreign products are Sinicized for sale in the Chinese market. In this case, GM has picked the Chinese name ??? (wo lan da), a name apparently intended to sound somewhat like “volt”. (Incidentally that’s the same ? used in Wal-Mart in China: ???.)

I wondered why they didn’t simply call it “volt” in Chinese. I mean, they do have electricity there, and it’s also measured in volts. So I looked it up.

The word “volt”, meaning a measurement of electricity, is translated as ?? (fu te), which sounds exactly like the Chinese translation of Ford Motors, “??” (fu te).

Excellent example of how product names and trademarks intersect in China. You’d probably be surprised how often that strange brand or product name you see was actually the second, third, or 14th choice of the brand owner. Why settle for the crappy name? All the “good” ones were already taken.

Now consider the complexity of multi-jurisdictional trademark practice, as illustrated in that Volt example. In a perfect world (as envisioned by a trademark lawyer), all product/brand names would be cleared in all jurisdictions, for all languages, prior to any sort of rollout/PR/usage of that name.

Sounds simple, right? Choose a few possible names, farm the searches out to your global trademark counsel, and choose the best one that has been cleared everywhere.

Well, I can think of several reasons why real life doesn’t work that way:

1. Budget — Many firms (not GM, but smaller companies) simply don’t have the budget to obtain global clearances for all product names.¹ They have to prioritize markets, and then they clear the name in additional jurisdictions as they move into those markets. If a conflict arises, they use an alternative name. This end result is what GM is doing with the Volt.

2. Preference — Let’s say that the U.S. is by far your number one market, and the name “Volt” can be used there. Even if you find out that the name is not available in China, it might be worth it to go ahead anyway, knowing that an alternative will have to be used in China, and perhaps in other countries. Your preference for “Volt” in the U.S. is so strong that it trumps trademark conflicts in less important markets.

3. Timing — Some industries have very short product development cycles. Getting something on the market fast is key to success, and waiting for several years (potentially) to clean up a trademark conflict is simply impossible. If a conflict arises, a quick decision to either abandon the name, or pay to license/assign the mark, must be taken.

These are only a few reasons. Remember that we are talking about multiple jurisdictions, each with their own local rules. Moreover, each industry has its own quirks related to product lifecycles, advertising restrictions, and name preferences.

The number of factors is quite intimidating, and companies must also make sure that all the right people are “in the loop” when such decisions are being made. This can be quite challenging when it’s a multinational, with individuals responsible for branding stationed worldwide, many of them speaking different languages.

So the next time you see a bizarre brand name, keep in mind that there’s a good chance it’s the fault of some trademark lawyer.
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1. By the way, searches can get really expensive. Not only are they performed based on the product/service in question, or related items, but separate searches should be done for alternative languages. The different permutations can add up quickly.

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© Stan for China Hearsay, 2010. | Permalink | One comment | Add to del.icio.us
Post tags: brand name, branding, trademark

I was certainly not in a good mood after reading this introduction:

The truth is that China is not working hard to protect IP, but the conventional wisdom in the west is that, once China’s own economy begins to create intellectual property with global value — patents, drug formulations, movies for the world market — its government will see more gain than pain in a stringent IP regime.

But is that right to assume?

China has big problems with its IP enforcement, but to say that it is simply not trying tells me right off the top that the authors don’t really understand what’s going on in China. Fair enough, let’s just hope that they at least understand intellectual property.

Perhaps not. The second point there regards the conventional wisdom that once Chinese companies start having big problems with IP infringement, they will push the government on enforcement measures. Unfortunately, I don’t think the authors understand this either.

We are talking about China IP law, not the global system. It doesn’t matter if Chinese companies become multinationals; we already know that their trademarks and patents will be enforced in the U.S. and EU. What’s important is the effect of increasing infringement of Chinese IPRs in China.

Well, that was just the introduction, and I’m already in a bad mood. But actually, the rest of the article isn’t so bad, it’s just irrelevant to the premise. After throwing out the idea that China may not enforce IP in the future, the authors spend the rest of the article on the well-tread subject of how the world, and business models, have changed because of the Internet.

This is a big topic that would take a long time to deal with. To cut it short, yes of course the Net has made some traditional business models obsolete. Yes, we could probably do better with a system that cuts back on the scope/time of patent protection. I wouldn’t argue with any of that, and I also agree that some sectors (music, publishing) are desperately in need of some new thinking.

All that being said, the authors somehow forgot their original thesis, which was that China in particular may choose not to enforce IP rights in the future. I think that the structure of the argument here was supposed to be:

1. China currently does not enforce IP rights.

2. Things are changing in the “Information Age” such that protecting IP rights doesn’t make as much sense as it used to.

3. China may therefore just decide to chuck it all and never enforce IP rights.

Hopefully that’s an accurate summary. Well, as I said above, #1 is just a false statement. China’s IP laws are at international standards and it does enforce them. Granted, enforcement is problematic, spotty, and downright awful depending on a number of factors — but the government has made a lot of progress over the years. If a decision has been made at the highest levels of government about the direction that China will go with respect to enforcing IP rights, it is emphatically that IPRs will be taken seriously.

Therefore, even if the “Information Age” has had dramatic effects on how we look at IP rights, the premise here fails. China’s IP regime is not some tabula rasa, it has been around for quite a few years and is headed in the right direction.

Now, if the authors wanted to make the claim that the entire world may end up scrapping copyright, patent or trademark, that would have at least been something worth arguing. I personally favor a slightly less muscular global IP system but believe that a world without copyright or patent is a Cory Doctorow pipe dream.

© Stan for China Hearsay, 2010. | Permalink | 4 comments | Add to del.icio.us
Post tags: copyright, intellectual property rights, patent, trademark

A Chinese commerce official on Monday called for creating indigenous brands to reduce China’s alarming trade deficit in intellectual property.

At the Intellectual Property Rights (IPR) Forum in Beijing, Ministry of Commerce official Wu Guohua noted China spends a large amount of funds on foreign intellectual property every year, adding that to create indigenous brands is imperative to China.

Wu said despite China’s surplus in commodity trade, the nation suffers a huge deficit in services trade, with royalties and license fees being the second largest cause of the services trade deficit in 2009.

In 2009, China’s services trade deficit stood at $29.6 billion — 1.6 times the 2008 level — of which $10.6 billion was royalties and licensing fees payments to foreign companies. (Xinhua)

The rest of that particular article is a discussion of the link between innovation and the protection of IP rights. There is no question about the need for a strong IP protection regime in developing countries. If the return on invention and branding is too low (due to piracy), then investments simply won’t be made.

Additionally, we all understand that China wishes to “move up the value chain” and produce high ticket items with larger profit margins. This is the motivation behind the “innovation society” reforms.

But to posit that lack of IP protection is the main reason why Chinese brands and technology are weak is quite a stretch. Many have written on this subject before, and I don’t want to reinvent the wheel. Suffice it to say that when folks write about this issue, IP protection may make the list of reasons why tech companies are not at a higher level of development in China, but other factors are even more important. For non-tech “big brand” enterprises, IP protection may be way down the list in terms of expansion difficulties.

These factors include a lack of relevant business experience (i.e. Chinese companies are not that old), product quality problems, difficulties obtaining expansion financing (SMEs), and alarming corporate governance practices.

If IP protection was immediately ratcheted up in China in a huge way, would firms here all of sudden make huge breakthroughs in technology, become marketing geniuses overnight, and greenlight financing that was previously unthinkable? Probably not going to happen.

Faced with all these challenges, many of which have no public sector solution, it is somewhat comforting to think that everything will be better as long as the IP system is tightened up a bit more. Sounds nice, but IP protection is no panacea for what ails Chinese enterprises.
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1. Attributed to Abraham Maslow, although the exact wording varies considerably.

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© Stan for China Hearsay, 2010. | Permalink | No comment | Add to del.icio.us
Post tags: branding, innovation society, patent, trademark

The players:

• Apple – large multinational corporation that makes cool stuff and relies heavily on its brand name and product design
• Proview Technology – Shenzhen electronics manufacturer
• Unnamed third parties — shanzhai manufacturers, makers of your favorite iPad knockoffs

The venue:

• Shenzhen eBook Forum – top venue for touting shanzhai ebook readers, including iPad clones

The announcement:

• The China iPad trademark will be auctioned off at the Shenzhen eBook Forum on April 10.
• The iPad mark starting price will be US $3.65 million, based on what Apple reportedly paid to Hanwang for the iPhone mark.
• The ipad.cn domain name will also be part of the auction, with the starting price set at US $30,000.

Oh boy, is this going to be good or what!?! Yeah, not so much. The auction was canceled.

Could have been epic, but it wasn’t. The company that holds the iPad mark, Shenzhen Proview Technology, doesn’t seem to have a good IP strategy. They registered “IPAD” in 2000 in Class 9 (includes computers — see pic left and below), so in a head-to-head fight with Apple over ownership rights, Proview would doubtless emerge as the victor. No evidence of a bad faith registration.

But wait. There is another pesky rule in the Trademark Law that comes up from time to time when someone wants to challenge a registered trademark: non-use. The trademark system recognizes that there are only so many possible word/letter combinations out there. No one should be allowed to monopolize a trademark unless they actually use it.

China’s Trademark Law covers this eventuality in Article 44(4), which provides that a registered trademark may be canceled if use of the mark has “ceased for three consecutive years.”

And in the case of Proview and the “IPAD” mark, you guessed it, they screwed the pooch and didn’t use the mark, opening themselves up to a non-use cancellation action. This would have been easily avoided – “use” is a very broad concept that even encompasses things like newspaper advertisements. Put an ad in a paper that uses the mark once every three years and you’re all set.

Apparently the non-use cancellation, presumably filed by Apple or a related third party (legally can be anyone), is pending. These things can take some time, and I’m not sure when the action was filed.

So here’s what happened, as idealized in my caffeine and sugar-soaked brain:

Proview Employee: You know, we own the “IPAD” trademark.

Proview Boss: No shit?

Employee: I wouldn’t lie to you.

Boss: No shit. What are we doing with it?

Employee: Absolutely nothing. We’ve had it since 2000.

Boss: You got any ideas?

Employee: Well, sure. You know the iPad was just released by Apple?

Boss: Yeah. In fact, I was just reading about all the shanzhai clones on China Hearsay.

Employee: I have a feeling a lot of people will want that trademark. So why should we waste our time negotiating with everyone? Let’s just auction it off!

Boss: Sell it to the highest bidder? Damn fine idea, lackey. So what if some shanzhai company gets the mark? Screw Apple anyway. If I can’t have Flash on my iPhone, they can’t have that trademark.

Employee: Well put, sir. We can throw in the domain name as well.

Boss: Nice touch. You sure we own that trademark?

Employee: Absolutely, sir. There is one thing, but, uh, it’s such a small matter that I hesitate to bring it up in the first place.

Boss: Tell me now, or tell me after I’ve slapped you and made you cry. Either way is fine with me.

Employee: I’ll tell you now. We haven’t used that mark for several years, and our lawyer says that it could be canceled because of something called non use. In fact, someone has already filed an action against us on those grounds.

Boss: You think if we held an auction, the bidders would know about this?

Employee: Hard to say, sir. Some of them might be stupid enough to buy it anyway.

Boss: Hmm. I say let’s move forward with this! How about we do it at the Shenzhen eBook show? Get it over with quickly before this non use thing becomes public.

Employee: Very good, sir.

Boss: We’ll start the bidding at 3.5 million dollars. If we get the money, there will be a sizable bonus for you, say RMB 500?

Employee: You really shouldn’t, sir.

Boss: I know, you don’t deserve it. However, since you are my son, I might as well.

The rest, as they say, is history.

One last issue. Presumably the non-use cancellation will go through and the mark will be stricken from the books. Then the question is who will get the “IPAD” mark next?

If Apple did this the normal way, they filed an application for “IPAD” in Class 9 at the same time that the non-use cancellation went forward.

If all goes well, the Proview mark will be cancelled and the Apple application will lead to a registration.

All of this may take a long time, though. In the meantime, Apple does not own the “IPAD” trademark in China. Will they cut an interim deal with Proview?

The suspense is killing me.

Sources

Not a lot out there, but you can go here for some additional information:

Article on Sina Tech News on original announcement. (??)

Article on Sina Tech News on cancellation of auction. (??)

Article in Jakarta Globe that includes discussion of global trademark problems of Apple, including iPad and Proview. Focuses on Indonesia and is quite critical of Apple’s IP team, but has a lot of good info.

Notice on Chinesestock about termination of auction.

© Stan for China Hearsay, 2010. | Permalink | No comment | Add to del.icio.us
Post tags: apple, ipad, iphone, proview, shanzhai, trademark, trademark auction, trademark cancellation, trademark infringement, trademark registration

Nanjing MG Automobile Co Ltd, which produces the MG brand passenger cars in China, has been sued by a Chinese citizen for alleged copyright infringement.

The Zhejiang Province native surnamed Xu has filed a law suit against Nanjing MG, claiming the Chinese car maker illegally used the MG trademark on cars without his permission.

The MG brand was registered for use on vehicles in 2003. The name was later transferred to Xu in 2005.

Nanjing MG applied to register the MG brand in 2007 after it took over the manufacturing facility of MG-branded models from the failed MG Rover Corp in 2006.

People close to the issue say the State Trademark Office has canceled Xu’s ownership of the MG brand. According to Chinese law, a trademark has to be put into use within three years after the registration otherwise it can be canceled. The case has been accepted by the court and a decision is expected soon. [Shanghai Daily]

First off, we probably have a misunderstanding of what is a trademark and what is a copyright. To clear that up, note that the case is/should be about trademark, the "MG" logo. The reference to "copyright infringement" may be incorrect. However, it is possible that Xu has filed a copyright case on use of the logo because the trademark argument has already fallen apart. If this is true, Xu is not too bright – bad case. I don’t see how Xu can prove that he/she has any copyrights to that particular logo.

Second, we’ll probably never know how this interesting case would have gone if this person Xu had simply used the mark once in the past three years. Doesn’t take much – an advertisement in a newspaper would have done it. But no, sadly Xu didn’t bother, and Nanjing MG was able to petition the China Trademark Office to cancel Xu’s mark due to non use, referred to as a three-year non-use cancellation. Easy win for Nanjing MG.

Third, if Xu’s mark had not been cancelled, you would have had Nanjing MG trying to come up with another reason why they should get the rights to the mark as opposed to Xu, the registered owner. Probably the best bet would be some sort of bad faith or famous mark argument. Not only would this have taken years but who knows what the result would be?

Fourth, I assume that the lawsuit will be dismissed soon, particularly if it is a trademark suit. If Xu is not the trademark owner any more, there is no standing to sue Nanjing MG under a trademark theory. If it is really a copyright case, I would love to see how ownership is aserted – that would be amusing.

Five, just because Xu’s mark has been cancelled does not mean that Nanjing MG is now the lawful owner. All it means is that the mark is up for grabs. If Nanjing MG pursued a smart strategy, they filed the mark at the same time they filed the non-use cancellation action. That way, when the mark was cancelled, they were probably "first in line" to get the new mark registered. As this can take over two years these days, however, it’s probably still pending.

If you have read this entire post and find this interesting: you are an IP geek and should seek professional (mental health) assistance.

If you’ve read this and understand it all: you are a China IP geek, and most likely I already know you — hey, how’s it going? how’s business? haven’t heard from you in a while; whatcha doin’ for the Olympics?

© Stan for China Hearsay, 2008. | Permalink | 5 comments | Add to del.icio.us
Post tags: copyright infringement, mg automobile, trademark