Trademark Squatting or Extortion?

You’ve probably heard stories of fake Apple stores in China. These stores completely copy the Apple store from the all-white decor to the blue shirt wearing salespeople. With all stories, I wonder: how can these storeowners get away with this? No store in United States could even get away with copying the blue shirt styles let alone the all white décor. However, “Trademark squatting in China doesn’t sit well with U.S. retailers” by David Pierson of LAtimes.com explains the fake Apple stores, along with the fake Kardashian, Justin Bieber, J. Crew, Jordan, and Eminem brands in the Chinese market.

The article reports, in China “trademarks generally are awarded to those who are first to register them with government authorities. If these and other U.S. companies want to use their own names, they probably will have to pay the Chinese holder for the rights”. In the U.S., trademarks are awarded to those that use them first. So, if an established U.S. brand tries to move into China and the name is trademarked, under Chinese law, the trademarked user could charge the U.S. brand to use their name. Example in article, “In northeastern Liaoning province, someone owns the trademark to make clothing under the Oprah Winfrey brand.”

The exception to the law is to prove that the trademark holder in China registered in bad faith. Although, Stan Abrams a law professor in Beijing is quoted saying “The system here on the whole is geared towards first to file, and it takes a lot of time and effort to rebut the presumption that the registrant filed in bad faith” Hermes International, Chivas Bros, and Pfizer Inc. have tried to file suits and have failed.  Apple and Michael Jordan are currently involved in suits against companies making revenue from their names.

Throughout the article, many of the trademark users in China gave no comment, with the exception of Xu Junwu and Zhen Yongyu. Xu Junwu owns the trademark for J. Crew. His “good faith” defense of using the brand name: “said he’s never heard of the U.S. clothing chain and explained that his sales team came up with the name”.  In his own words “They just picked something easy to remember without a lot of letters… we’ve put a lot of effort into building this brand, we’re recognized in China” The last part of that quote is his response to whether he would charge J. Crew to use their own name in China.

Zhen Yongyu owns the name Eminem and claims, “I’ve never heard of Eminem… If this Eminem turns out to be a famous singer, we’re willing to cooperate as a potential partner to release this brand in China. We’re also open to selling it.”

There’s no other word to describe this “trademark squatting” other than bull#hit. I apologize for the word but I truly honestly, in good faith, can’t think of any other word that truly embodies this entire scheme. Oprah, Eminem, Apple, Michael Jordan, and any other well established celebrities and brands will have to pay to use their own name/brand. In order to reclaim their brand, first will have to prove that the other person did it in bad faith. Explain to me how a “team” picking a name out of air and oops, it happened to be a well-established brand is a “good faith” defense.  I’m pretty sure that these trademark owners in China have access to some form of media that allows them to search names. Who hasn’t heard of Eminem, Oprah Winfrey, or Michael Jordan?

Most brands will likely seek legal action instead of paying for their name. Or they might ignore the market altogether. Last thought to consider: this might sound like a smart extortion plan for the trademark holder but doesn’t this scare U.S. retailers from entering the Chinese market?