Development And Protection Of Foreign Brands In China

Saturday, December 1, 2007 - 01:00

Most foreign companies are already alert to the opportunities which are becoming available as China grows in significance as not only a producer, but also as a consumer of commercial products. There is, however, a wide range of views amongst observers as to the likely speed and scope of the future increase in domestic consumer spending. The world has never before seen such a dramatic market change as the transition of the Chinese economy from state control to vigorous private enterprise over the course of just three decades.

As in any market, it is crucially important to strike the right tone and adopt an image which is appealing to local consumers. While it may be convenient and cost effective to build upon existing global brand equity by using a consistent style, image, logo and colour palette, serious consideration should be given to the incorporation of elements which are more familiar and appealing to local consumers who may appreciate the intimacy of the branding image of a company which has clearly made an effort to modify its marketing approach to conform to local tastes and culture. The consumer preferences, purchasing behaviour and culture in China are sufficiently different from other countries and the potential consumer base is sufficiently large as to justify the investment of significant time and resources in tailoring the brand image of a foreign company to suit the local market. For reasons which are not altogether clear, many foreign companies devote far less effort to the development of their brands in China than to the maintenance of existing brands in mature markets which may have significantly less potential. That said, the sophisticated models which have been developed internationally may not yet be suitable for use in China, where flexibility and a creative approach remain of paramount importance.

China has many different ethnic groups and more than one billion people have Chinese in one of its various forms as their native language. In addition to Mandarin (Putonghua) which is the official and most widely used dialect or language (linguists still debate whether it is appropriate to describe the different varieties of Chinese as dialects or separate languages belonging to the same family), there are very significant sections of the population who use Shanghainese, Cantonese or other dialects as their native language. These dialects are, generally speaking, diverse and mutually incomprehensible to the same extent as the Romance languages of Europe. The Beijing variant of spoken Mandarin Chinese (Putonghua) is the official standard in China and it is used throughout the country for Government or official matters. In Taiwan Mandarin is also spoken, although many examples of local slang usage have evolved. Mandarin is also one of the four official languages of Singapore, while Cantonese is one of the official languages in Hong Kong and Macau and is widely spoken throughout Southern China.

Since spoken Chinese has so many variants, the written language is the only means of conveying a message which will be understood by all literate consumers. Although the rationale for selecting a unified trademark in Chinese characters is both obvious and compelling, it is also inevitable that some compromise is made and some flexibility allowed in order to cater for marketing and regulatory issues which arise due to the existence of two parallel systems for writing Chinese characters. For example, due to the difficulty of reading and writing complicated Chinese characters and in an effort to improve literacy, a new scheme of simplified written Chinese characters was introduced in the People's Republic of China in the 1950s. Simplified characters remain the official and dominant means of writing in the People's Republic of China but Singapore is the only other jurisdiction to officially adopt simplified Chinese characters.

In Taiwan, Hong Kong and Macau, the traditional complicated characters are still in use. Those familiar with traditional Chinese characters can generally deduce the meaning of simplified characters; however, the opposite does not hold true and consumers who have learnt only simplified characters would generally struggle to read complicated traditional characters which typically include significantly more strokes.

Although some commentators have estimated that up to 20 percent of China's population has studied English, many consumers in Greater China do not readily comprehend, and may have difficulty in pronouncing, words written in the Roman letters which are used in most non-Asian countries. Virtually all advertising and marketing in Chinese-speaking countries is carried out either exclusively in Chinese or in Chinese-English bilingual form. Adopting a Chinese character trademark will remove a language barrier, improve recognition and recall of the trademark and enable the products to reach a wider market.

When a product is sold without suitable Chinese character trademarks, consumers tend to adopt their own name for the product. These names are typically highly descriptive and for this reason, incapable of monopolisation, either as trademarks or under Unfair Competition Laws (which generally require an element of exclusivity through use). If the foreign business does not select and protect its own Chinese character trademarks, the version created by Chinese-speaking consumers may have unattractive or unwanted connotations. This is a situation which numerous foreign companies have encountered and it is both costly and difficult to address.

Trademark pirates may adopt or register either the unofficial or the official Chinese character version of a foreign trademark if it is not promptly protected through registration. It can be extremely difficult to obtain recourse through legal action due to the difficulty of proving that the Roman letter and Chinese character marks are recognised by consumers as substantially equivalent. This problem is often compounded by the fact that international usage of a foreign trademark and the reputation enjoyed by a foreign company internationally obviously do not relate to the use of the Chinese characters in question. As a defensive measure, Chinese character versions of foreign trademarks should be adopted and registered before any product bearing the trademark is introduced to the local market. This will enable the proprietor to obtain the benefit of the goodwill and reputation in the Chinese character trademark as well as the foreign mark.

There are several methods of selecting a Chinese character version of a foreign trademark. Using the conceptual method, a Chinese character trademark is selected which has a meaning equivalent to the meaning possessed by the foreign mark. Obviously, the conceptual method is applicable only where the foreign trademark has an obvious dictionary meaning. The conceptual method has the clear advantage that the Chinese language mark will have a concept which would be universally recognised irrespective of language barriers and concept advertising can therefore remain consistent across different jurisdictions. The principal disadvantage of the conceptual method is that in virtually all cases the Chinese characters will sound totally different from the foreign trademark. Accordingly, even if the foreign trademark is famous in other countries, Chinese speaking consumers may not realise that the Chinese version is related to the foreign mark. Substantial advertising expenditure may be necessary to establish an association between the Chinese character mark and the foreign mark in the minds of local consumers.

Chinese trademarks may also be selected according to the phonetic method whereby Chinese characters are selected which have a sound similar to the foreign mark. This method is preferable in cases where the foreign trademark is aurally distinctive and particularly where the foreign mark already has a reputation amongst Chinese speaking consumers. The phonetic method carries the advantage that some benefit may be derived from an overseas reputation because the sound of the mark is recognisable to consumers.

In some cases, it is possible to create a Chinese character version of a foreign trademark which both sounds like the original mark and has an equivalent or otherwise desirable meaning. Use of the phonetic method can also bring strategic advantages because a registration may block trademark pirates from the common practice of registering Chinese character marks which have a similar sound to well known foreign trademarks. Great care must be taken when selecting trademarks by the phonetic method to ensure that there is no undesirable connotation which arises due to tonal differences or regional variations of dialect.

If the phonetic and conceptual methods do not produce an acceptable Chinese character trademark, an alternative method would be to simply select unrelated Chinese characters which are generally attractive from a visual, phonetic, or conceptual perspective, but otherwise have no relationship to the foreign mark. The disadvantage of this process is that no benefit can be derived from the reputation of the foreign mark and additional marketing expenditure may be required in order to build up consumer recognition of the selected mark as the equivalent of the foreign mark in question.

There are various legal restrictions on the use of certain Chinese characters in trademarks and these need to be kept in mind during the selection process in order to avoid creating a trademark which may be either unusable or incapable of monopolisation. Particular issues which need to be taken into account include the restrictions on registration of trademarks which may be laudatory or descriptive of certain features of the relevant products or which are otherwise considered undesirable on grounds of moral or political connotation or which may imply official or state endorsement of the product.

Lindsay Esler, one of Asia's most well known intellectual property lawyers, is Head of the Intellectual Property Department and Managing Partner at Deacons in Hong Kong and China. Mr. Esler is extensively published in international journals and a featured speaker at many international IP symposia and conferences. He specialises in IP management, strategy and licensing and trademark advice, filing and prosecution.

Please email the author at lindsay.esler@deacons.com.hk with questions about this article.