• Kate Chang

FAQ #5

FREQUENTLY ASKED QUESTION

#5 - Q: Why must I register the brand in China immediately, and why not do it after I have already started to sell in China and make money, and use that money to register the brand then? A: This is a really good question, and recently, some designers have asked us this question. It is important to first register before entering the market, because without this step, your brand is open to risk of being pre-emptively registered by a third party, blocking you from being able to use your own name in this market. If it has been pre-emptively registered, your intellectual property can be misused even lawfully by these third parties, they would be able to use your name and mark freely, and put it on designs not corresponding to your real brand, or steal your existing designs, produce them, and flood the market with these products that are in fact, not approved of by you. There are a lot of Italian, French, and other European brands, who go over to China presenting with a showroom, for instance, and even in those situations they get copied or infringed upon, and they are then upset that these showrooms do not have the legal capacity to institute a challenge against this behavior. These are small brands, and they are paying a very large cost to enter the market, but at the same time, they do not understand China, and they do not speak the language. So many smaller brands do not have the ability to sue their infringers in China to obtain redress. As a result, a lot of infringers simply are not afraid - and they believe that a smaller brand will never have the ability to fight against them in court, so they often sell products using your brand without any care at all, even using your picture and portrait, and your marketing materials, which they copy from other websites, and copy openly and freely. You can see this often in the big e-commerce websites in China. So if a brand rushes to market without registering, this opens up the risk of being preemptively registered by these third parties, and the other side may even sue us, that you, and that we are violating their IP rights, and this kind of situation is happening constantly in China, every single day. The risk presented by this lack of registration is also evidenced by recent developments with big brands in the China market. A very famous, Japan-based but global brand, MUJI, has recently lost a nearly 2-year battle with a local Chinese company over their trademark: AsiaOne: MUJI Ordered to Pay Chinese Firm $120,700 After Losing Trademark Appeal


The Beijing Supreme Court ruled that MUJI was in fact the one at fault, and had to pay the China company a penalty and issue a formal apology publicly, since the Chinese company had already registered the trademark in 2 of the relevant product categories that MUJI was selling in. This news did in fact, create a big surprise to see such a big company lose. Many other news outlets are already starting to report on this, and we are quite certain that there will be more reports soon, which you can find with a Google search. This news announces to the world that when any brand wants to enter the China market, to promote and sell their products, they must make a prior registration in their relevant classes, including in categories that the brand wants to sell in eventually. This judgment deals a significant blow to MUJI; the company has already been slipping in China since 2018, and we believe that having their trademark pre-emptively registered by these local companies, and then having similar products produced and sold under that trademark, would cause MUJI’s sales to go down. This other company can now use this trademark to slice out a piece of their pie in this market, and at the same time it will cause consumers to feel confused too, about which is actually the MUJI brand and which is not. This will impact their market share without a doubt, and will contribute to a further decline of the brand value in China. Once consumers get confused, or feel uncertain, this really shakes their loyalty to the brand. We can foresee that the next move for MUJI, will be that they will have no other option but to buy back the trademark from these companies, at what we can only predict to be considerable, considerable expense. Because they were a big brand, they thought they could enter China without making a thorough registration — and this pridefulness has created these problems for them so many years down the line. They did not move as fast as possible, to register their trademark, and this is the aftermath. Returning the focus then to our business, it is clear that we cannot ignore the huge potential that our market in China and the Far East represents. China has already surpassed the USA in terms of its scale as the largest consumer market in the world for fashion in the world: QZ: China Set to Overtake the US as the World's Largest Fashion Market


So for any brand, unless you deeply believe, that you will not have success in this part of the world, that your brand has no future here, if you want to enter the market in China or are preparing to do so, it is important to treat this issue with seriousness and register your trademark before entering. But I would like to say that even if, somehow you felt that you would not be able to be successful in China, you should not believe that the trademark issue has nothing to do with your business in Europe. In fact, it has plenty to do with it, and can impact its health greatly. The copycat issue mentioned above is one key concern - even if you are not operating in China, this will cause your customers in Europe to get confused too, they will not understand what is the difference between your products in Europe versus in China, because even though you are not entering the China market, but those companies who might have pre-emptively registered your brand, they can produce products that are really similar to yours, sell publicly through the internet, causing confusion for your brand in the market, and causing damage also to your European business. Please understand, that China is not a market that you can just not pay attention to - the market is far too big, and even if you do not go to China, any kind of copycat behavior done toward your brand here is going to impact you and cause it to suffer real damage. This is our point of view. Once your trademark is stolen in this market, you will not have any more chances in the future to get it back, except, at great financial and sometimes even legal cost. In the past, there were some designers who did not seem to understand why we kept insisting on this; but I trust that after reading this news, I feel that any lack of understanding toward this process, will now become agreement with our point of view. Some of our partner brands have received interest from buyers in Japan, Hong Kong, Taiwan and China already; and for these designers, I have always maintained a very strong attitude that they should not pursue these orders, just to make a small amount of 1,000 euros or 2,000 euros in revenue for a small sale, and as a result, risk exposing themselves pre-maturely, without being properly registered and protected yet, and in the future, potentially have to deal with these much larger problems once the brand grows. So again, we have strongly disagreed with the thinking that you should take a few smaller orders or sales from our region, without being protected fully; the reason is that when your products are exposed briefly, you open yourself up to pre-emptive registration risk, then when you are really actually ready to sell in China, if you have been pre-emptively registered, that company would turn around, and actually be able to sue you for infringement of their trademark instead. You would then have to deal with heavy penalties, and have to issue formal apologies, as in the case above. If you refuse to pay the penalty or apologize, the court will have the right to place a further punishment on you, and this will not only impact the brand in our region, it will impact all related efforts - for instance - with marketing and promotion. Global magazines with real industry weight, International media and television, and important fashion shows and events, they would no longer feel comfortable working with you, because they do not want to offend any in China, such a big market. They also would be scared to incur any legal problems of their own as a result. The same would be true for showrooms and buyers too. China, after all, is now the biggest market in the world for fashion, and no business would take actions to jeopardize their business or image, or create any potential legal problems for themselves in this market; so they would not work with your brand if it means exposing them to that risk by extension. This news about MUJI, further proves that our thinking and our insistence on this point, has always been the correct one.

Best,

Kate Chang

CEO

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