31 March 2025
In an increasingly competitive global marketplace, intellectual property (IP) is a critical asset for many businesses. At IP Solved, we work closely with companies to help them develop and implement their IP strategies in China—a market full of opportunity, but also significant legal risk if IP isn’t properly protected.
A recent case highlights just how important it is to get your IP strategy right from the start when entering the Chinese market.
Case Snapshot: Losing Control of a Brand
In a recent but all too familiar development, an international company, ended up in a legal dispute with its former local distributor and a third-party company over the rights to its trade mark in China.
The Missed Step: No Trade mark Filing
At the outset, the company partnered with a Chinese distributor to bring its products to market. However, it failed to register its trade mark in China before launching. This was a costly oversight and one which we see regularly. Many Australasian businesses fail to understand that the majority of the world, including China and most of Northern Asia, allocates ownership of trade marks to the 1st party to file an application.
Trademark Hijack
The local distributor, through an affiliated business, registered a trade mark similar to the company’s—essentially blocking the original company from registering its own brand in China. This is also a dangerous situation for companies sourcing their products from China. China is unique globally in having a Customs seizure process that works both against incoming and outgoing branded goods. If you lose control of your brand in China then there is the very real risk of having shipments out of China seized, disrupting your supply chain and forcing you into either unwanted commercial negotiations or finding a new manufacturing country.
Leverage Through Ownership
Armed with the trade mark, the distributor pressured the company into a cooperation agreement. Under the deal, the distributor became the exclusive partner and agreed to transfer the trade mark back once the partnership ended.
Broken Promises and a Legal Dispute
As the agreement was set to expire, the distributor suddenly pulled out, citing false claims. It then transferred the trade mark to a third-party company, leaving the company without the rights to its own brand in China—and kicking off a complex legal battle over the validity of that transfer.
- Register Trade Marks Early—and Broadly
In China, it’s "first to file"—not first to use. If you don’t register your trade mark first, someone else can. Register your trade marks as soon as possible, across all relevant product or service categories. As we say, most of the world operates on this very different basis and it an issue which has tripped up many Australasian companies as they expand globally.
- Don’t Rely Solely on Agreements
Agreements are important, but they don’t replace ownership. If a deal hinges on IP, make sure your company legally owns the trade mark before you start doing business.
- Monitor Your IP Continuously
Trust is not a strategy. Set up systems to regularly monitor your trade marks in China. Watch out for not just direct infringements, but also similar trade mark filings, cancellation attempts, or actions that could weaken your IP position.
Final Thought
China is a complex and fast-moving market. Taking proactive steps to secure and monitor your IP can save your business time, money, and legal headaches. If you’re entering the Chinese market, speak to an IP Solved professional who understands the landscape—before problems arise.
