This article is co-authored by Tianpeng Wang, CEO of Trustiics.com and Hong Zheng, IP lawyer in China.
Such tools as JD Sourcing and JD Shipping can help arrange shipping, warehousing, and customs clearance. Shopify merchants can now sell to the world’s second-largest and fastest-growing consumer market by accessing JD.com’s one-stop logistics services.
SMEs should nonetheless still keep a close eye on a few things pertaining to your products or brands. Above all, it will be your responsibility, as the owner, to protect your intellectual property rights. Here’s where to start:
1. Conduct brand clearance (trademark availability search)
Before selling in a foreign market, check whether someone has registered a trademark like your brand name or logo. Trademark registration is jurisdiction-by-jurisdiction protection, and registration in your home country does not automatically protect you in a foreign market. You don’t want your valuable brand name diluted or damaged because someone else is selling a similar product using a similar brand name. The worst-case scenario? A third party may even stop you from using your own brand name if that party has registered your mark in their local market.
Do a quick trademark search in the categories that apply to your products. This will confirm if your brand is available for registration or if someone else has applied for, or even registered, the same, or similar, marks. There are over 30 million registered trademarks in China, representing almost 50% of the world’s total registrations. You will need a local qualified and experienced trademark lawyer to go through the massive database and analyze the search results.
2. File trademark application (and protect other IPRs as well)
If your brand and logo have not been registered in the desired classes in China, you should file as soon as possible. China is a contracting party to the Madrid Protocol and adopts the same system of trademark classifications as many countries globally, such as Canada, the U.S., Australia, and EU members. There are 45 different categories or so-called “classes,” including 34 for products and 11 for services. You will need a trademark lawyer’s help to decide which classes fit your products or services and then make the class-by-class filings in China. The simple rule of thumb is to make the filings in the same classes in all the countries where your products are sold.
Please note that Hong Kong has maintained its independent legal system. Therefore, even if you have made trademark filings in Hong Kong, you still need to make separate filings in mainland China, and vice versa.
You should also normally consider registering patents (especially design patents) and domain names in China to prevent IPR infringements. The likelihood of infringements will substantially increase as your sales in the Chinese market grow.
3. Take legal action against trademark infringement
Suppose a trademark availability search identifies some similar registered trademarks, or trademark applications, in China by someone else, especially in the same classes. In that case, you will need to take legal action. Common actions include opposition and invalidation filings.
A third party may have filed an application for a trademark identical to yours, but China Trademark Office has not yet granted it. In that case, you should engage a China-qualified IP lawyer to file opposition before the application matures into registration. If the registration has already been granted, an application for invalidation should be filed.
Once the opposition or invalidation application is filed, an experienced IP lawyer in China will usually help their international clients pressure the third party to transfer their registered trademark to you at a reasonable price. To avoid “being blackmailed,” it’s best to let an experienced and trusted local lawyer negotiate on your behalf.
In sum, take care of your IP protections, even though the Shopify-JD alliance offers a convenient package of logistics services. It’s best to be proactive, rather than waiting till later when your cost of protecting IPRs becomes much higher.
The Renminbi (RMB, aka Chinese Yuan), the official Chinese currency, is not freely convertible to international currencies such as US or Canadian dollars. An e-commerce platform needs to find a solution to the foreign exchange issue one way or another. For example, all the sellers on T-Mall Global, an Alibaba subsidiary, need Alipay accounts. Sellers on other Chinese e-commerce platforms may have to set up a local subsidiary (aka WFOE, Wholly-Foreign-Owned Enterprise) and open a Chinese bank account. The Shopify-JD arrangement will likely have a convenient payment solution, but you’ll want to understand how it works for merchants.
2. Issues arising out of traditional sales arrangement
Lastly, the Shopify-JD partnership is limited to helping merchants on Shopify sell through JD.com. If your business is B2B international sales, you still need to deal with all the common legal issues. Here are some critical things to check:
(1) What is the best structure for you? Can you sell directly to the buyer in China, sell through a global distributor, or manufacture with a local OEM and sell locally?
(2) Do you know and trust your international buyer, distributor, or OEM? Does it have the qualifications and ability to perform the contract as agreed?
(3) Can your contract protect you on a wide range of things, from payment terms to each party’s respective responsibilities? Make sure the contract covers details like shipment, insurance, and customs clearance. Have you and your buyer agreed upon the same terms, especially when you are signing contracts in different language versions?
(4) What happens if things go south? Do you know your recourse if the foreign buyer defaults? What if something happens beyond the control of either party, such as so-called “Force majeure” events?
(5) Are there important local regulatory and logistical issues? If so, who will be taking care of these issues? It’s important to check things such as foreign exchange control, customs clearance, quarantine, and inspection.
We hope you can use the above tips before you start selling your products to China, no matter whether you sell through the Shopify-JD arrangement, Alibaba’s T-Mall Global, or by a traditional distributorship. Whatever your choice, you will need to protect your trademark and other IPRs in the market where you have significant sales.
If you have any questions concerning trademark and other IPRs protection in China, Canada, or the United States, or if you have legal inquiries arising out of selling to the Chinese market, feel free to book a free 20-min consultation call with us here
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About the authors
Before starting Trustiics, Tianpeng practiced with major international law firms’ China offices for over 15 years. He has advised more than 100 international companies’ investment and business activities in China and other Asian markets
Partner at Tee & Howe Intellectual Property Attorneys, Beijing, China
TRUSTIICS Recommended Lawyer
Mr. Zheng specializes in intellectual property law with 20 years of experience. He has been named as one of the “Top-10 Trademark Attorneys” in China and has extensive experience in advising international businesses to protect their IPRs in China.