Facebook Victorious in Chinese Trademark Battle

On the heels of Apple’s recent trademark loss in China, Facebook has been handed a victory. The California-based social networking company won what legal experts are calling “a rare trademark victory” against a local firm in China. In a ruling issued this week, the Beijing Municipal High People's Court held that the Zhongshan Pearl River Drinks’ trademark application, which was filed in 2011 and which aimed to register the "face book" trademark in connection with certain foods and beverages, was an obvious act of copying and amounts to unfair competition.

The case comes on the heels of Facebook initiating two unsuccessful objection proceedings in front of China's Trademark Review and Adjudication Board. As a result, the company filed suit in Beijing to prevent the native Chinese company from using its trademark on an array of food-related products. Zhongshan Pearl River Drinks is just one of a very large pool of native Chinese entities that have taken advantage of the ease with which parties can effectively squat on others’ trademarks in China. Used interchangeably with the terms “trademark hijacking” or “bad-faith filing,” trademark squatting refers to the “intentional filing a trademark application for a second party's registered trademark in a country where the second party does not currently hold a trademark registration.”

Facebook’s win may offer a glimmer of hope for brands, including fashion ones, which have struggled with China and its residents’ exceptionally widespread intellectual property infringement practices. Good news for brand owners, China may no longer be the place where all legitimate trademarks go to die (although Apple may feel differently). As you may know, for a number of years, a large variety of brands – from Apple and Goldman Sachs to Dior and Hermes – have struggled in their expansion efforts in the Far East as a result of trademark complications.

The good news for brand holders comes in the form of the Chinese government-enacted revisions to its national trademark law, which took effect roughly a year ago. The major changes include: an increase in the level of damages the court may provide for trademark holders whose marks have been infringed (the limit is now $480,000 per infringement, six times more than the prior maximum), procedures to reduce bad faith filing, a quicker turnaround time for trademark applications (the China Trademark Office will complete its examination of an application within nine months), stricter standards against the unauthorized use of "well known" marks, and good news for Christian Louboutin and co., colors may now be trademarked for the first time in China. Moreover, thanks to the newly enacted revisions, brands now have increased access to the Chinese Trademark Review and Adjudication Board, which has the power to invalidate registered trademarks, but which does not always do so, as we saw in the Facebook case.

Such revisions, especially the ones that address bad faith applications, serve as significant lifelines for designers and design houses, many of which have been subject to extensive trademark infringement schemes. It is exactly these provisions that brands are citing in their motions to fight the Chinese holders of their trademarks.

While it is still strongly recommended that brands file for trademark registration in China as early as possible in order to avoid such squatting scenarios, Chinese courts are proving to be far more sympathetic to brands as a result of the trademark law amendments.