China’s trademark activity continues to soar

By Catherine Jewell, Communications Division, WIPO

China’s Commissioner of the State Administration for Industry and Commerce (SAIC), Minister Zhang Mao, is responsible for overseeing the world’s largest trademark office. Mr. Zhang explains why Chinese trademark activity has shot up in recent years and is set for further growth.

What is the status of trademark activity in China?

Trademark applications filed in China over the last decade have soared from 766,319 in 2006 to 2,876,048 in 2015. This trend is continuing despite sluggish global economic growth.

Five factors account for this rapid growth. First, the Chinese Government’s drive to boost “mass entrepreneurship and innovation”. This has helped maintain strong economic growth, promoted market development and lowered market entry barriers. It has also resulted in the formation of many new companies which are boosting entrepreneurship, innovation and trademark activity.

Second, the implementation of the 2014 Trademark Law has helped create a sound legal environment for trademarks to thrive. Intellectual property (IP) laws and regulations are constantly improving.

Third, the industry and commerce authorities and market regulators at all levels are working to create a level playing field for the protection and use of trademark rights.

Fourth, SAIC is actively improving its trademark registration procedures to ensure applicants have access to efficient, high-quality services. At present about 70 percent of all trademark applications are filed online and that number is growing every month.

Fifth, extensive IP outreach efforts have boosted public and business awareness of the value of trademarks.

Are foreign applicants protecting their trademarks in China?

In 2015, there were 176,893 trademark applications filed by foreign applicants, including those filed under the Madrid System for the International Registration of Marks, that is, 6.15 percent of all applications received by the Chinese Trademark Office (CTMO). By April 2016, valid foreign trademark registrations accounted for 10.68 percent of all valid CMTO trademark registrations.

Are Chinese applicants using WIPO’s Madrid System?

China joined the Madrid System in October 1989 and became its seventh-largest user in 2015, when Chinese applicants filed 2,321 international applications. This is less than 0.1 percent of all applications filed with the CTMO, so there is huge potential to expand use of the System by Chinese enterprises.

The Madrid System is a convenient way for Chinese enterprises to register and protect their trademarks abroad, and for foreign companies to do so in China. It can support the long-term business goals of Chinese companies and help strengthen international recognition of Chinese brands, which is our long-term goal.

For over 25 years, the Madrid System has underpinned China’s impressive record in foreign trade and is an integral part of China’s “Go Global” Strategy.

How would you like the Madrid System to evolve?  

We would like the System to expand its membership and to become the preferred option for companies seeking international trademark protection. We would like to see it further simplified and automated to better serve users, including national IP offices, and to boost use. Measures to strengthen cooperation between the national offices and WIPO would also be welcome, along with more support in processing work relating to the System.

What are the main challenges facing the CTMO?

There are four. First, we need to increase the average number of trademarks owned by Chinese enterprises. In 2011, 1,074 registered trademarks were owned for every 10,000 enterprises in China. That compares with 2,167 and 3,024 respectively for the Republic of Korea and the United States. While progress has been made – by 2015 the figure had increased to 1,335 – the gap remains large.

Second, although it is the world’s second-largest economy, China has relatively few well-known international brands. According to World Brand Lab’s World’s 500 Most Influential Brands, China is ranked third with just 31 influential brands compared to the top-ranking US with 228 and the UK with 44.

Third, we need to boost international trademark filing activity by Chinese companies. In developed countries, such applications account for between 35 and 75 percent of all trademark applications. In China, the figure is just 4 percent. Most trademark applications are filed domestically.

Fourth, we need to make more effective use of our trademarks to drive economic growth. In 2015, the total value of Interbrand’s 100 Best Global Brands equaled 14 percent of China’s GDP, yet only two Chinese brands – Huawei (ranked 88) and Lenovo (100) – made the list, so there is clearly scope to do more.

You mentioned the 2014 Trademark Law. What impact has that had?

It has significantly improved the trademark landscape in China in favor of enterprise development. For example, companies can now trademark sounds, register one trademark under multiple classes of goods and file applications online. A legally binding time limit of nine months has been introduced for the examination and adjudication of trademark cases along with an improved opposition procedure.

To further promote market order and fair competition, the law also introduces new categories of trademark infringement, including for well-known trademarks, and stronger punitive damages to crack down on trademark “free-riding”, “squatting” and “hogging”. It also eases the burden of proof on rights holders.

And SAIC is implementing a range of complementary regulations to further enhance the quality and delivery of its trademark-related services.

We will further automate trademark registration and examination procedures, making best use of information technologies to increase efficiency. We are also establishing a cross-departmental collaborative governance mechanism to crack down on infringements more effectively. An integrated online platform for trademark-related law enforcement is under development to help boost transparency and consumer confidence in this area, and we will continue to build IP awareness at all levels and in all sectors.

The ultimate goal is to provide businesses at home and abroad with more convenient and effective public services, and to create a more competitive and orderly market for business growth.

Do you think people in China are becoming more aware of IP?

Yes, significantly. A recent study by China Intellectual Property News showed that public IP literacy rates increased by nearly 25 per cent between 2008 and 2015. Over 78 percent of respondents agreed that it is important to “respect knowledge, advocate innovation, and honor good faith and law”, while 54.5 percent recognized the close link between IP, work and social well-being.

The same study found that over 83 percent of Chinese enterprises believe IP is a strategic resource for improving economic growth and technological development, and around 59 per cent of them recognize IP as a property right. When confronted with IP infringement, more than 95 percent would take some action – be it negotiation, administrative proceedings or litigation – rather than give up their rights.

There is also strong evidence that increased IP awareness is driving greater use of trademarks. For the last 14 years, China has filed the largest number of trademark applications in the world, and that is set to continue.

What are the priorities for SAIC in 2016?

Our first objective is to further enhance trademark registration procedures and strengthen our trademark service capability. This will involve greater automation to standardize and improve examination quality and efficiency. Further refinement of our trademark examination quality control system and deployment of trademark databases at local levels will support this goal and better serve applicants.

We will continue to reform China’s business landscape so that the use of trademarks continues to support the country’s development goals. That means, among other things, cracking down on trademark infringement by increasing the effectiveness of law enforcement teams and ensuring greater coordination between administrative and judicial systems and market regulators.

And we will continue to guide and support businesses in developing their own trademark and branding strategies through extensive IP awareness initiatives and training courses. Brand guidance organizations are being set up at local levels to help enterprises, including farmers, boost competitiveness through better use, protection and management of their trademarks at home and abroad.

China now has specialized IP courts. What impact have these had on trademark abuse?

In 2014, China established IP courts in Beijing, Shanghai and Guangzhou. Administrative rulings on trademark rights by the CTMO fall under the jurisdiction of the Beijing IPR court, which handles many cases and is playing a key role in clamping down on abuse of trademarks.

More generally, significant progress has been made by local industry and commerce administrations (AICs) across the country in tackling trademark infringement. With SAIC’s guidance, AICs have investigated around 65,000 trademark cases involving infringements worth 860 million yuan (around USD131 million), and fines and confiscations worth 720 million yuan (around USD110 million). Over 460 cases have been transferred to judicial authorities.

In addition, the national IP training programs offered by SAIC’s Administrative Academy are improving the effectiveness of local law enforcement teams, enabling them to solve real-world trademark issues.

What advice would you give to Chinese small and medium-sized enterprises (SMEs)?

Build your brand. SMEs need to develop their core competitiveness to thrive in today’s rapidly evolving and fiercely competitive market. Branding must become a strategic priority if they are to translate productivity into profits and expand market share.

Building a brand is a step-wise process that involves a sound understanding of the market and an emphasis on developing quality products and services. Quality is the basis of any brand: no quality, no market share. A comprehensive brand strategy supports business competitiveness and profitability.

And what advice do you have for Chinese companies seeking to protect their trademarks abroad?

Companies with international aspirations need to recognize the importance of protecting their trademarks in global markets. A forward-looking, comprehensive branding strategy helps avoid pitfalls as a company expands into new markets.

Chinese companies need to develop the confidence and strategic vision to build and manage their own brands. Effective management of their trademark assets will enable them to enter and compete in global markets more rapidly and effectively. This will help boost international recognition of Chinese brands and add value to Chinese businesses.

Finally, when faced with trademark-related disputes, companies need to use the legal systems available to defend their rights.

How about foreign companies seeking entry to the Chinese market?

The most effective way for foreign companies entering the Chinese market to protect their trademarks, especially those with significant commercial potential, is to register them with the CTMO. To avoid any pitfalls, companies should think about this even before entering the Chinese market. It is the cheapest and most effective way to avoid trademark squatting. If their trademark rights are infringed, we would urge them to work with the relevant Chinese authorities to bring offenders to justice.

Lastly, how do you see China’s trademark landscape changing over the next decade?

China’s economic development strategy has entered a new normal – innovation lies at its heart. Brands represent a link between innovation and the market and play an important role in stimulating innovation, boosting quality, efficiency and competitiveness. So trademark and brand strategies will be an increasingly important driver of economic development in China.

Because of its huge size and potential, the Chinese market will continue to attract foreign investors, and an increasing number of Chinese enterprises will go global, fueling demand for international trademark rights.