by Tong Tiffany Cheuk Yue
China have always been considered as a counterfeiters’ heaven because of its negligent trademark laws. In 2016, U.S. sportswear manufacturer New Balance has lost its trademark infringement appeal in Guangdong Higher People’s Court and ordered it to pay 5 million yuan in compensation to a Chinese company ‘Xin Bai Lun’ (Jourdan and Goh, 2016). The details of the case and trademark laws in China are as follows.
The process
A man named Zhou Lelun first took New Balance to court in 2013, by claiming that New Balance used his trademark Xin Bai Lun in China (Lin, 2016). Xin Bai Lun is considered as a rough Chinese translation of New Balance. Zhou’s relatives had first applied for the trademark on ‘Bai Lun’ back in the 90s (Lin, 2016). In 2003, as New Balance’s revenues continued to grow in China, it began using Xin Bai Lun as its company name in advertisements (Cendrowski, 2016). This name was slightly different than Bai Lun. However, Zhou applied for the name ‘Xin Bai Lun’ afterwards, and New Balance failed to block Zhou’s registration (Cendrowski, 2016). In July 2011, Zhou successfully applied for Xin Bai Lun (Cendrowski, 2016). With New Balance continued to use Xin Bai Lun in advertisements, Zhou sued New Balance for trademark infringement (Cendrowski, 2016).
Finally, the Guangzhou court ruled for Zhou (Cendrowski, 2016). New Balance China had to pay 98 million yuan, and the amount had been cut to 5 million yuan after appeal (Jourdan and Goh, 2016). 98 million yuan is the amount half of Xin Bai Lun’s profits in China from 2011 to 2013, which from the time Zhou received the trademark till the time of the lawsuit in 2013 (Cendrowski, 2016).
The reason of New Balance losing in the lawsuit
Regardless of Xin Bai Lun’s sales are few and New Balance has been selling shoes out of Boston’s northwest side since the 1960s, Xin Bai Lun won the lawsuit (Cendrowski, 2016). This is shocking because many people around the world treats Xin Bai Lun as counterfeit shoes of New Balance. So why did New Balance lose in the lawsuit?
China is a first-to-file country, and this breaks the Western trademark laws. This means whomever files a trademark first gets it, regardless of whether a company is already making a product with the same name in other countries (Cendrowski, 2016). The law does not recognise or protect a trademark unless it is registered with the Chinese Trademark Office (Bialek and Cheng, 2015). It requires no evidence of prior use or ownership, leaving registration of famous foreign trademarks open to third parties. Therefore, it is common for Chinese entrepreneurs to register foreign company names in the trademark office, and then file lawsuits of trademark infringement when the companies expand to China (Cendrowski, 2016). These Chinese companies may want to improve their sales by relating themselves with famous foreign brands, and suing the foreign brands of trademark infringement to earn even more by receiving compensations.
Reasons for New Balance disagreeing the ruling
New Balance disagreed the ruling for the following reasons. First, New Balance argued that ‘Xin Bai Lun’ is the Chinese phonetic translation name of New Balance (Bialek and Cheng, 2015). However, the judge said that a proper translation for New Balance should be ‘Xin Ping Heng’ (Bialek and Cheng, 2015), which is a combination of Chinese phonetic and literal translation of New Balance, and is also the name of the New Balance affiliate – Xin Ping Heng Athletic Shoe, Inc. (Bialek and Cheng, 2015). Also, the Court pointed out that New Balance previously used another name ‘Niu Ba Lun’, which is the Chinese phonetic translation of New Balance (Bialek and Cheng, 2015).
Another reason is that New Balance claimed that it barely used the Xin Bai Lun name that it hardly constituted a trademark. The name Xin Bai Lun is only used in some advertisements and websites, never on shoes (Cendrowski, 2016).
A similar example – Qiaodan v. Jordan
US basketball superstar Michael Jordan sued the Chinese company Qiaodan Sports Co. for using a similar name and logo to his Nike-produced brand Air Jordan in China, but the case has been dismissed by Chinese authorities and a Beijing court in 2012 and 2015 respectively (AFP, 2015). He accused that Qiaodan misleads consumers that Qiaodan’s products are related to Michael Jordan’s brand (AFP, 2015). Not only does the Chinese company use the Chinese phonetic translation of Jordan as the brand name, but it also uses a silhouette of a leaping basketball player on their products, which resembles the ‘Jumpman’ logo used by Nike to promote Air Jordan (AFP, 2015). However, the Court thought that ‘Jordan’ is not the only possible reference for ‘Qiaodan’ in the trademark (AFP, 2015). Also, the Court thought that ‘Jordan’ is a common surname used by Americans, and the logo was in the shape of a person with no facial features, so that it was difficult for consumers to identify it as Jordan (AFP, 2015). It was concluded that there was insufficient evidence to prove the trademark referred to Michael Jordan (AFP, 2015).
Solution
It seems that many foreign companies have faced the same situation as New Balance and Air Jordan did. For foreign companies who want to enter China market, the simplest but the best solution is prevention. Companies should quickly register their trademarks in China, especially they should register a Chinese language version of the trademark in ‘Greater China’, including mainland China, Hong Kong, Taiwan and Macau (United States Embassy of Beijing, China, 2015). Otherwise, the market will do so, creating a Chinese ‘nickname’ for the companies, otherwise Chinese entrepreneurs may register them in their own names to boost sales by relating themselves with the famous foreign company (United States Embassy of Beijing, China, 2015).
Unluckily, if the trademark has already been infringed, protection is the solution. Investigations, civil litigation and criminal prosecutions are possible tools for foreign companies to protect and enforce their rights (United States Embassy of Beijing, China, 2015).
References
AFP (July 29, 2015). South China Morning Post. Chinese Swoosh-logo ‘Qiodan’ Shoes Don’t Infringe on Michael Jordan’s Famous Brand, Beijing Court Rules. Retrieved from http://www.scmp.com/sport/other-sport/article/1844807/beijing-court-rules-chinese-qiodan-shoes-suspicious-swoosh-and
Bialek, A.R. & Cheng E.G. (June 9, 2015). Wilson Elser. Chinese Court Stuns New Balance with $16 Million Verdict: Lessons on Doing Business in China. Retrieved from http://www.wilsonelser.com/news_and_insights/client_alerts/2329-chinese_court_stuns_new_balance_with_16_million
Cendrowski, S. (May 28, 2016). Fortune. How New Balance Ran into a Wall in China. Retrieved from http://fortune.com/new-balance-chinese-trademark/
Jourdan, A. & Goh, B. (June 23, 2016). Reuters. China Court Rules against New Balance in Trademark Case. Retrieved from http://www.reuters.com/article/us-new-balance-china-trademark-idUSKCN0ZA0D4
Lin, V. (June 24, 2016). South China Morning Post. New Balance Loses Appeal over Copyright Violation in China but Sees Damages Slashed. Retrieved from http://www.scmp.com/news/china/policies-politics/article/1980639/new-balance-loses-appeal-over-copyright-violation-china
United States Embassy of Beijing, China (2015). United States Embassy of Beijing, China. Intellectual Property Rights – Trademark. Retrieved from http://beijing.usembassy-china.org.cn/iprtrade.html
Filed under: Academic Year 2016 - 2017 
