A brand iconic for its tartan-lined raincoats faces stormy weather in China (at least in a metaphoric sense).  Burberry — like other brands with a strong presence in the People’s Republic— confronts the challenge of protecting its trademark under Chinese law, and there are lessons to absorb from its experience. 

Burberry is currently appealing a November decision by the Chinese national trademark office to cancel the trademark for its beige, black, white, and red tartan pattern known as “Haymarket Check.”  This decision arises from Polo Santa Roberta’s application to have Haymarket Check removed from China’s Register of Trademarks.  Though it relates only to leather goods that use the pattern, it signifies a turning point in an enduring legal fight between the U.K. brand and a Chinese brand, Polo Santa Roberta.  Burberry and Polo Santa Roberta, which is owned by Lubida Production Co., have been engaged in an almost decade-long intellectual property face-off, waging battle in venues on and off the mainland.  Until this past fall, however, Polo Santa Roberta had little success advancing its argument that Burberry’s Haymarket Check is “just a simple geometric pattern.”  The Chinese handbag and apparel maker, whose products also frequently feature tartan, recently lost a dispute with Burberry over intellectual property matters in Hong Kong.  Burberry has also sued the company in Taiwan.  

Burberry’s tribulations in China, which is one of its most profitable markets, underscore global brands’ need to understand the distinctions among trademark laws in all countries where they operate.  For brands focused on U.S. and China markets in particular, two key points of distinction emanate from the battlefield:

(1)  Use it or lose it  . . . Termination through nonuse.  Both U.S. and Chinese trademark law provide that a trademark can be terminated if the owner fails to keep the trademark in regular use.  Under Chinese trademark law, a trademark can be cancelled if the period of nonuse is at least three consecutive years.  Polo Santa Roberta used this provision as grounds for cancelling Burberry’s mark; Burberry is expected to present evidence challenging the claim of nonuse on appeal.  U.S. trademark law, under the Lanham Act, similarly states that nonuse for three consecutive years is prima facie evidence of abandonment.  But, the U.S. has a safeguard that China doesn’t:  In the U.S., nonuse must be accompanied by an “intent not to resume” use of the mark.  Because Chinese trademark law does not address “intent to use,” trademark registrants whose marks are challenged there for nonuse must provide either evidence of use or “proper reasons for nonuse.”  Plans to use a mark in the future will not suffice.  Consequently, brands in China are wise to follow the adage: use it or lose it.  Or there will be some explaining to do.

(2)   . . . or else, get to be well known.  Famous or well-known marks exceptions.  Brand owners are likely aware that in the U.S., trademarks qualifying as so-called “famous marks” are entitled to additional protections.  China has analogous rules regarding “well-known” marks.  These rules state, “where the trademark of an identical or similar kind of goods is a reproduction, imitation, or translation” of another “well-known trademark not registered in China” and the copycat is “liable to cause public confusion,” an application for the copycat’s registration may not be granted, and further, “its use shall be prohibited.”  Thus, even if a trademark registrant cannot show evidence of nonuse or proper reasons for nonuse, if a mark is prominent enough, another brand cannot register or use it in China.  In Burberry’s case, if Burberry can show that Haymarket Check qualifies as “well-known,” that could prevent Polo Santa Roberta from using the pattern.  (Here, the provision is a “Check check,” if you will.) 

Brand owners should be conscious of the distinct requirements for a trademark to be “famous” in the U.S. or “well-known” in China, as the implications of qualifying for either status can be significant. For example, under an important explanation of Chinese trademark law issued by the Supreme People’s Court in 2009, in order to qualify as a “well-known mark,” the mark must be “well-known” to the general public within the territory of China. Consistent with this, and with the general rule that trademark rights are territorial, under the U.S.’s Lanham Act, in order to qualify as a “famous mark,” the mark must be “widely recognized by the general consuming public of the United States . . .” This territorial distinction means, as one’s intuition likely validates, that being “well-known” in China will not necessarily translate to being “famous” in the U.S., and vice versa. Knowing these types of distinctions can help brands weigh their trademark strengths and liabilities abroad. Moreover, it may be possible for brands with marks that do not yet qualify as “famous” or “well-known” to take actions to meet the respective requirements, and thus lock in protections that could come in handy later.

An upcoming change of note regarding “well-known” marks may affect competition dynamics in China.  Under the recently enacted Amendment to China’s Trademark Law, going into effect in May 2014, companies could be disciplined for using the term “well-known mark” on products or their containers or packaging, or in advertisements, exhibition, or other commercial activities.  This change is said to be in response to over-proliferation of the term “well-known mark,” which has transformed the trademark description into an advertising slogan.  Some believe the change will increase foreign brand owners’ chances of obtaining “well-known” trademark status in China, but the results remain to be seen.

To sum up, international brand owners can guard their intellectual property more effectively in the global environment by approaching trademark law distinctions with care.  In particular, brand owners operating in China should be aware that registering their trademark might not be enough — the mark must be used in China within three years or risk being cancelled for nonuse, unless it meets the stringent requirements for a “well-known” mark.