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Thursday, July 24, 2014

Trademark Squatters Take Over from Domain Hostage Takers

Because of China's former first-to-file trademark registration law, many famous brands were registered in China only and then used to identify competing domestic goods or sold back to the original owner at a stiff price.  In theory this should not be possible, since trademark rights under the Madrid Protocol would rest with the original owner of the famous name.  However, countries like China and Japan, which use a non-Arabic alphabet, often register phonetic equivalents of the brand to be registered, either in place of, or in addition to, the original name.  As explained in the CNN article regarding the Australian wine brand, Penfolds:
But companies do have opportunities to challenge trademarks already registered in China. One option is to prove the individual deliberately claimed ownership of the brand with the intention of blackmailing a foreign brand entering the market. Another is to show that the brand was already well-known when the trademark was registered.
In practice, convincing a court on these points has proved difficult for many companies, but legal experts believe recent amendments to China's trademark laws, among other factors, could improve trademark protection for foreign brands.
Similar cases related to companies such as Tesla, Pfizer and even the names of sports stars have encountered similar squatter issues.  While the best approach is to comprehensively protect your company's brand, including in  possible important markets like China, many small to mid-size companies do not have the financial means to do so, or they may find that the brand has already been appropriated.

A softer, and potentially more successful, long term approach would be to protect the brand in a company's core markets and then expand outward, even adopting a possible alternate brand for use in different countries.