Trademark lawsuits in China and the mixed outcomes

December 13, 2019 11:39
MUJI has lost out in a trademark infringement case in China, prompting concerns among foreign firms operating in the country. Photo: Bloomberg

Japanese retailer MUJI recently lost a drawn-out trademark battle with a local company in China.

MUJI, founded in 1980, entered China market in 2005. It opened its first store in Shanghai, and later found out that a company named Beijing Cottonfield Textile had registered the trademark “Wuyinliangpin" in Putonghua, which means "brandless quality goods."

Beijing Cottonfield Textile filed a lawsuit against MUJI when the Japanese company began selling Muji-branded bedcovers and towels in China. The legal battle had dragged on for more than a decade before the intellectual property court in Beijing ruled in the plaintiff's favor on Wednesday.

The ruling has sparked public outcry in the international community. Some believe the verdict is ridiculous, and said China’s trademark law is outdated and does not protect intellectual property rights.

China is a member of the United Nations’ World Intellectual Property Organization, or WIPO. Under WIPO rules, companies can easily register trademarks in their own nation, and maintain these property rights in all of the 90-plus member nations.

So why did MUJI lose?

The Japanese company argued its case principally on the grounds of “malicious trademark registration”. But Beijing Cottonfield Textile is not a shell company. Instead, it does manufacture and sell bedcovers and towels under the trademark. The company now has several dozen stores in China, mostly in third and fourth-tier Chinese cities.

Moreover, MUJI’s trademark used in China, written in Japanese Kanji character, is slightly different from the Chinese characters registered by Beijing Cottonfield Textile.

Therefore, it’s hard to say whether the Chinese firm is guilty of trademark infringement.

American basketball star Michael Jordan also had a trademark tussle with a Chinese firm, Qiaodan Sports. (Qiaodan is the Chinese translation of Jordan) The court ruling last year allows the Chinese company to use the Chinese name, again reasoning that Qiaodan is Chinese word and the Chinese firm has been using the brand to do business.

Although China recognizes those who file first, which leaves some loopholes for trademark squatting, the key for such trademark lawsuits is often whether the trademark has been used for actual business operations.

US electric carmaker Tesla, for instance, has resolved a long-running trademark dispute in China to its satisfaction.

A Chinese company had registered the trademark Tesla years before the California firm entered the China market, but the company did not use the brand to do any real business. The court thus ruled in favor of Telsa and awarded the US automaker the right to use the brand in China.

This article appeared in the Hong Kong Economic Journal on Dec 12

Translation by Julie Zhu

[Chinese version 中文版]

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Hong Kong Economic Journal columnist