China’s Trademark Laws vs. the Biggest Company in the World, or Apple’s Cruelest Month

After the month it just had, Apple is probably sick of hearing T.S. Eliot references. First China cut off access to iTunes movies and books. Then Apple reported a 26% drop in quarterly sales in China, Hong Kong, and Taiwan, after which Apple’s stock price took a header. Topping it all off, last week China’s Legal Daily reported Apple’s defeat in a trademark-infringement case, in which the Beijing Municipal High People’s Court upheld the validity of Xintong Tiandi Technology (Beijing) Co., Ltd.’s trademark application for “IPHONE” covering leather goods such as handbags, belts, and yes, cellphone cases. This decision was an affirmation of a Dec. 16, 2013 decision by the Trademark Review and Adjudication Board (TRAB).

Apple’s chief argument in the trademark case was that “IPHONE” is a well-known trademark in China, and therefore any third-party registration – regardless of the product or service – should be invalidated. The TRAB and the Chinese court both rejected this argument, and if you look at the timeline, it was a fairly easy call.

Apple had submitted a trademark application for “IPHONE” on October 18, 2002, and received a registration on November 21, 2003. This trademark registration was in Trademark Class 9 only, covering computer hardware and computer software. Apple first announced the iPhone in public on January 9, 2007 at the Macworld Expo in San Francisco. The first iPhones were available later that year in the U.S., but did not arrive in China until October 30, 2009, after Apple signed a deal with China Unicom.

Meanwhile, on September 29, 2007, Xintong Tiandi Technology (Beijing) Co., Ltd. submitted a trademark application for IPHONE in Class 18 for leather goods.

The only question before the TRAB, and the Beijing Municipal High People’s Court, was this: was “IPHONE” a well-known trademark at the time that Xintong Tiandi filed its application? As we have discussed numerous times (see here, here, and here), it is extremely difficult to prove you have a well-known trademark in China. Generally speaking, to succeed at this, the mark needs to be widely known to the general public in China. And in October 2007 — two years before the first iPhone was sold in China — the mark “iPhone” was not well-known to China’s general public. Accordingly, Apple was held to have had no basis to invalidate Xintong Tiandi’s trademark application.

We can take a few simple lessons from this case:

1. If you really don’t want to see your trademark on some random products in China, submit a trademark application to cover more products than what you will be selling. Starbucks has done a great job with this “offensive” strategy in China, filing trademark applications in all 45 classes of goods and services. For brand-conscious companies, this is just the cost of doing business. Would you rather see “your” brand on a line of diapers or lawn furniture? And it almost always makes sense to file for China trademarks in China, not in Madrid. See China Trademarks. Register Them In China Not Madrid.

2. Regardless of what you might think, your trademark is almost certainly not well known in China. There are only a handful of non-Chinese brands that would qualify as well known trademarks, and they already have trademark registrations in China. You might have the most famous natural foods store in America, but in China, you might as well be a guy from Inner Mongolia with a backyard chicken coop. You think I just made that up, but I just checked the CTMO website out of curiosity and someone from Hohhot has in fact registered a trademark for “Whole Foods Market” to cover eggs. Just eggs! There’s got to be a story there. See Think You Have A Well Known China Trademark. Think Again.

3. If you’re going to file trademark applications in China, do it before you make a big public announcement. The general public in China may not follow all the latest press releases, but you can bet someone in China does, and that someone could very easily file an application for “your” trademark before you ever come to market in China. This applies to movie studios announcing their summer tentpoles just as much as it does to tech companies debuting their new gadget. We’ve said it before and we will say it again. China is a first to file country and this means (with very few exceptions) that whoever files for a trademark first gets it. See Register Your Trademark In China: Now. Just Ask Mike.

4. If you’re going to file a China trademark application early, don’t file too early. By filing in 2002 but not announcing its product until 2007, Apple exposed itself to a non-use cancellation action. If one of their competitors had bothered to check the CTMO database, they could have filed a non-use cancellation on “IPHONE” the day after Apple’s announcement in 2007, and then Apple would have been in deep, deep trouble. See China IP Protection: The Force Is Strong With This Blog Post.

Xintong Tiandi’s trademark application will proceed to registration on May 14, 2016, so in about a week you can buy an IPHONE cellphone case from Xintong Tiandi to protect your iPhone. Actually, you can buy one right now, but next week Xintong Tiandi can start legally using the ® symbol on its goods. The Quartz piece on this topic has some nice pictures of those goods, taken from Xintong Tiandi’s website. You might notice that Xintong Tiandi is already using the ® symbol. I guess they were optimistic.

China trademark problems. Don’t let them happen to you.

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We will be discussing the practical aspects of Chinese law and how it impacts business there. We will be telling you what works and what does not and what you as a businessperson can do to use the law to your advantage. Our aim is to assist businesses already in China or planning to go into China, not to break new ground in legal theory or policy.