Successful brands from the United States, and particularly those branded by U.S. celebrities, are often received with similar enthusiasm in other parts of the world. Recently, YEEZY shoes designed by Kanye West made their much anticipated debut to sneaker-heads in China. These consumers were delighted when a physical YEEZY store opened in Wenzhou. There was one problem – all the shoes in the store appeared to be knockoffs, replicas, or complete counterfeits of the genuine YEEZY products.
Unfortunately, the Wenzhou YEEZY store may not be illegal under Chinese law, and equally unfortunate, there might not be much the U.S. trademark owner can do to shut it down. This is because trademark rights in one country do not automatically extend into other countries, and different countries have different methods for establishing who owns a trademark. The U.S. requires a company to use a mark on goods or services in commerce to establish rights in the mark, and to obtain and maintain a Federal trademark registration. Most other countries, including China, do not have this requirement. Instead, the first company to file an application to register a mark is deemed the owner, even if they have no proof that they intend to use the mark.
The “first to file” trademark system often enables trademark “pirates” to flourish. These companies file trademark applications for marks that are already popular in other countries. They then hold the mark hostage, and use their registration to prevent the legitimate trademark owner from entering the local market. Some request a large amount of money to assign the registration to the legitimate trademark owner. Some use the registration as a bartering chip to negotiate being a local distributor of genuine products. Others simply use the mark to sell their own knockoff or counterfeit products. It is easy for these pirates to identify valuable marks. They can electronically monitor the trademark offices in the U.S. or Europe, and see when companies have filed applications for new marks.
Once a pirate has filed its application, the legitimate trademark owner usually has limited options. In some cases, they may be able to use an international treaty called the Madrid Protocol and file an application which pre-dates the pirate’s application. This is possible only if the trademark owner files its foreign application within six months of the filing date in its home country, and its home application was filed prior to the filing date of the pirate application. The legitimate trademark owner may also file a cancellation action against the pirate application, if the pirate has not used the registered mark on products for several years.
Unfortunately, the quickest and most efficient way to deal with the problem may be to simply negotiate with the pirate. In the YEEZY case, for example, a non-use cancellation action is not possible, because the Chinese YEEZY store is actually selling products under the YEEZY name.
The good news is that Chinese courts are beginning to recognize the rights of foreign trademark owners, and some recent cases have been held in their favor. For example, the Chinese courts awarded the Jordan trademark to Michael Jordan, awarded $1.5 million in damages to New Balance, and awarded $300,000 in damages to Under Armour. Although these decisions were fact-specific, some of the theories of trademark infringement and unfair competition that were asserted may provide recourse to other legitimate trademark owners.
Trademark owners need to be aware of the dangers posed by trademark pirates, and take steps to mitigate them. They should consider filing applications in those countries they anticipate will be major markets for their products, those countries in which they will have their goods manufactured, and those countries notorious for harboring trademark pirates. They can discuss with their trademark counsel the best strategy for foreign filing. This strategy may include filing foreign applications within six months of the U.S. application, to retain the benefit of the U.S. filing date. These foreign applications may be pursued through the Madrid Protocol, which allows for pursuing a trademark in multiple countries through a common filing system. However, not all countries are members to the Madrid Protocol, and a Madrid application has limitations. Thus, another option is filing applications directly in the desired countries. Trademark owners also typically take advantage of the European Community Trademark system and file one application to obtain coverage in all of the EU member states. A well-considered foreign filing strategy, along with appropriate cancellation and court actions, can help keep trademark pirates at bay.
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