How to Protect Your IP When Selling on Chinese E-Commerce Platforms

1. Selling Your Products on Chinese E-Commerce Sites

With China accounting for half of the e-commerce transactions in the world, non-Chinese companies are enjoying some of the spoils. According to Alibaba, U.S. companies sold $5.4 billion in goods on its sites during the recent Singles’ Day shopathon. This success is partly due to Alibaba’s own efforts to attract foreign brands, such as the creation of an English-language Tmall Global page.

Recently, the U.S. Commercial Service presented a webinar on selling products on Chinese e-commerce sites, where lots of good advice was dispensed. I highly recommend this webinar to any company interested in tapping into China’s e-commerce market.

The purpose of this post is to elaborate on a couple of points made during the webinar, which if not placed in context could lead foreign businesses to make potentially costly mistakes.

2. Register China Trademarks

During the webinar, a Tmall Global representative explained that brands do not need to register their trademarks in China and can rely on foreign registrations. To be clear, this refers to Tmall Global’s own requirements, as opposed to the standard Tmall platform’s requirement of a Chinese trademark. It is not meant to suggest it is okay to enter the China market relying only on foreign IP protection. As Tmall itself has warned,

Although it is not compulsory to have a Chinese trademark certificate, trademarks that are not effectively registered in China are not protected by Chinese laws according to the principles of regional protections of trademarks. Because China’s trademark law applies the principle of prior application, and in practice there are many infringement risk cases, it is recommended that the sellers … conduct pre-search on brand intellectual property risks in advance, and formulate targeted prevention programs to ensure normal operation in the Chinese market. In addition, the sellers should apply for Chinese trademark as far in advance as possible.

Stated differently, having a U.S. or EU trademark registration will be enough to satisfy Tmall Global’s requirements to open a flagship store. Moreover, it will be enough to get Alibaba to take action if you report an infringement on the Tmall Global platform. But it will not protect you outside that ecosystem.

Brands that succeed with a product on Chinese e-commerce platforms are almost guaranteed to catch the attention of counterfeiters in China, if they have not done so already. This means there will be factories in China making fake versions of the product and vendors trying to sell it both online and in brick-and-mortar stores. To work with Chinese law enforcement to coordinate raids and stop exports, brands need a Chinese trademark. Moreover, if you do not register your marks in China, you run the risk of counterfeiters or other bad actors registering them instead.

3. Register Your Trademarks in China not Madrid

Back in 2014, we had this to say about Madrid trademark registrations when seeking trademark protections in China:

The Chinese trademark system is complicated: at once idiosyncratic and highly regimented, and overseen by capricious examiners. But the one-size-fits-all Madrid application elides all of this and makes registering a trademark in China seem easy. Really easy: all you have to do is check a box marked ‘China.’ As a result, Madrid applicants are lulled into a sense of complacency, and all too often the result is a rejection that could have been avoided with a national application in China. Madrid applications are supposed to be cheap and quick, but fixing Madrid problems after the fact is neither.

Six years later, we feel the same way, for the same reasons. Madrid applications do not allow applicants to choose the specific subclasses they wish to protect, leaving it in the hands of Chinese examiners. In addition, Madrid applications generally take longer (China’s Trademark Law are stricter than Madrid’s in this regard) and require the additional step of asking for a Chinese trademark certificate.

Meanwhile, in the intervening years, the importance of registering Chinese-language trademarks has increased, and that is much easier to accomplish in China than in jurisdictions where Chinese is not an official language.

4. Proceed with Caution

All indicators are that China’s e-commerce sector will continue to grow. Hopefully that will happen in an environment in which an increasing number of foreign companies are able to compete for market share. But before such companies embark on their China adventure, they must ensure their IP is sufficiently protected.

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.