Trademark squatters: Big trouble in little China

An article on CNNMoney.com really caught my attention today. The article, entitled China: Your company name may not be yours, is interesting for several reasons. First and foremost, yours truly was interviewed for this article, and I am quoted in the article. Second of all, it points out how important it is to protect your brand in markets you may not have considered.

Up until recently, China was not a popular country for trademark protection. China was outside of the WTO (World Trade Organization), and infringement of patents, trademarks and copyrights was rampant. There were weak and ineffective laws to enforce IP rights. China had to revamp it laws, and promise more protection to IP holders, as a condition of joining the WTO. While IP violations are rampant still, more avenues are available to holders of legitimate IP rights.

Savvy individuals in China (and elsewhere) have been snapping up the big names, and obtaining registered marks in their country. This effectively blocks the legitimate trademark holder from using their own mark in that country. A notable recent example is the troubles encountered by Starbucks in Russia. These individuals will identify popular brands outside of China, often brands that are just getting started and gaining traction in other markets. They may still belong to small entities without a large budget for trademarks. The individual registers the mark in their country, and then can basically sell it for a nice profit when and if the business wants to expand into China (or the respective country).

I've noticed a trend over the past few years: more people are interested in filing trademarks in China. In some cases the business is already in China, and often the business plans on going into China. I tell people that if they are considering to enter the Chinese market, the cost to file now is much cheaper than going after a trademark squatter later. For around $1000 a trademark application that has the same filing date as your U.S. application can be prepared and filed. I have good contacts with multiple law firms in China and Hong Kong, so we can find the right match for you. We can also help you setup distribution and other agreements for your business interests in China.

Here is what I said in the article:

Owen Smigelski, an intellectual property attorney with San Diego-based Achtel Law firm, recommends U.S. brandholders immediately file their trademark particularly in those countries where trademark squatting is springing up more frequently.

"Over the past couple of years we've certainly have had more clients pursuing trademark issues in southeast Asia versus earlier," Smigelski said. "I think with the Olympics coming up, China is also looking very attractive for lots of international brands and they should be aware of trademark issues."

It's relatively inexpensive to register the trademark, typically under $1,000, he said, while trademark litigation can run into thousands of dollars.

Very true indeed, if I do say so myself. I guess I already did...