Both useful and interesting to read from a Chinese professional perspective.. The article was published via Lexology
In 1873, Jules Verne famously wrote of circumnavigating the world “in 80 days”. Today, a brand goes around the world with the click of a mouse. Globalisation has brought exciting opportunities for businesses expanding into overseas markets, but it has also caused a multitude of challenges to brand protection. Whereas goods used to be separated by geographical barriers and had to be browsed in a store, today they sit barely a “window” apart – in a browser.
This article highlights some key issues for brand owners to consider as they venture into the global marketplace.
(1) Trade mark rights are territorial
Brand owners need to know that there is no “global trade mark” that can be brandished in every country around the world. Trade mark protection is typically territorial in nature. This means trade mark protection in one country does not usually confer rights overseas. Although international treaties like the Madrid Protocol, or regional protection mechanisms like the European Union Trade Mark, have made it easier for brand owners to extend protection of their brands overseas, trade mark systems still largely depend on protection within each local jurisdiction. Therefore, it is prudent for brand owners seeking to expand their business overseas to obtain trade mark registrations in each country of interest. This becomes particularly challenging as retailers and consumers alike embrace the opportunities afforded by the virtual world, given the borderless nature of the internet.
(2) “First-to-file” countries: File early
An effective brand protection strategy is influenced by how trade mark rights are determined in a country. In “first-to-use” countries, such as the United States, trade mark rights are granted to the first user of the trade mark in commerce. In contrast, “first-to-file” countries, such as China and Indonesia, enshrine trade mark rights acquired by filing an application for registration. In these countries, trade mark rights are generally given to the first applicant regardless of the applicant’s commercial use of the mark. This means that as long as brand owners do not file for trade mark registrations early enough, a third party can lawfully own their trade mark in these countries. To avoid such problems, filing early is critical. Conversely, the fact that a brand owner has registered its mark in a particular jurisdiction does not necessarily mean that it has a shield against infringement. It is important to be alive to the differences between the trade mark legal systems around the world in moulding a protection strategy.
(3) Seek trade mark protection in countries where there is use or intent to use
Global brand protection strategies are largely motivated by business decisions, commercial opportunities and, to a large extent, budgetary constraints. Oftentimes, trade mark registration and protection tends to be eschewed, or at best, grudgingly accepted, as a business cost; its potential as a vital investment is under-appreciated and unrealised. Well-protected and strategically-nurtured brands can be formidable tools to enhance a company’s competitive edge; they can be leveraged to heighten barriers to entry or to manage the risks of new market entry. They can add tremendous value as intangible assets of a company. In today’s digital economy, the enterprise value of many companies lies increasingly in their intangible assets rather than brick and mortar assets.
Brand protection is a worthwhile strategic investment as well leveraged brands do often enhance the valuation of companies. A well-considered strategy takes holistic account of a brand owner’s territorial footprint in terms of its current and projected business operations; franchising or licensing arrangements and opportunities; upstream and downstream supply chain and logistics considerations, including the locations of manufacturing facilities, counterfeit manufacturing centres, counterfeit markets, as well as import and export gateways.
At the same time, to ensure that trade mark owners do not unfairly hog or clutter the register with marks that they are not using, as a counterbalance, the laws in many jurisdictions require that marks are used in order to maintain the registrations. There are mechanisms to cancel or challenge trade mark registrations that remain unused for a prescribed period of time. Brand protection strategies need to calibrate the breadth of protection with potential non-use vulnerability by incorporating pro-active measures wherever, and to the extent, possible in order to address such vulnerabilities.
(4) Translation and transliteration issues
Local language customs and colloquialisms is another consideration which is vitally important but often overlooked when entering a new market. Does a trade mark have a negative connotation in a native dialect unknown to the brand owner?
A related consideration is the possible advantage of having a trade mark “localised” for a particular market. There are various ways to do this, for example, by adopting a phonetic equivalent in the local language (regardless of what the resultant local language term actually means); or, if the trade mark has a term with a defined meaning, by adopting the local language term with that identical meaning.
The “localisation” of a trade mark may render it more convenient for the broadcast or publicity in the local media, which in turn facilitates the advertising of the trade mark among the local public. Furthermore, the “local” versions of a trade mark make it easier for the local consumers to relate to the mark. An effective brand strategy will consider the need for such localisation while ensuring that such initiatives, if implemented, are appropriate, accurate, meaningful and conducive towards nurturing a local flavour yet retaining a strong and unified global identity.
Interesting issues sometimes arise concerning the practice of adopting phonetic equivalents of a brand name, in a local language. For example, “Warsteiner”, the largest privately owned brewery in Germany, adopted the (approximate) Chinese phonetic equivalent “沃斯乐” (pronounced in Chinese as “Wo Si Le“), in its sale of beers in China. However, these characters sound very similar to another Chinese phrase , “我死了”, which is also pronounced as “wo si le” (albeit with slightly different Chinese intonations), and which means “I am dead” in English.
Sometimes the same foreign characters may also have different pronunciations in different languages. Chinese characters, for example, may have different pronunciations in Chinese, Cantonese, or Japanese. For example, McDonald’s, the American fast food company, uses the Chinese words “麦当劳”, pronounced in Chinese as “mai dang lao“, a phonetic equivalent of “McDonalds”. The same Chinese words would, in Cantonese, be pronounced as “Ma Dong Lou“. Different pronunciations and local language meanings may influence and impact advertising and branding strategies in the local market. Brand owners should be aware of such issues and consider engaging professional linguistics services, if necessary, from both a translation and transliteration perspective.
(5) Availability and freedom to use issues
Brand owners entering a new market need to ensure that they are able to operate legally without contravening existing third party rights (whether by way of registration, or at common law or such equivalent rights) in that market.
Appropriate clearance searches, while by no means infallible, can be a helpful and important tool towards flagging potential obstacles not merely to registration of a trade mark but also to the use of that mark in the new marketplace for the intended goods or services.
Being blind-sided and unaware of a serious conflicting right could entail commercial repercussions: disruption to business operations (where use is enjoined by a court order); exposure to financial damages; re-branding; negative publicity; or loss of goodwill. Better insight as regards the landscape of the new market enables a brand owner to assess potential risks and to calibrate operations so as to manage such risks appropriately.
Initiating and executing an effective brand registration portfolio is an important and crucial first step towards an overall brand protection strategy. However, a holistic and commercially viable strategy is much more. As a business develops and expands, so its brand strategy must be aligned and alive to the requirements as well as the potential of the organisation. Brand strategy must be an integral part of the overall business strategy of the enterprise.
Ultimately, an effective brand strategy enhances the asset pool of the organisation and sharpens competitive edge; it creates commercialisation opportunities and potential revenue streams; it provides an effective ballast against risk exposure in the marketplace; and, if necessary, it serves as a weapon against infringers. A badly managed strategy can potentially cripple a business and result in significant losses.
There are many factors which businesses and retailers alike should consider as they launch their brand overseas. Understanding and applying these factors and considerations is key to developing and maintaining an effective brand strategy which will reap a benefit far exceeding its cost, resulting in the creation of valuable long term assets.