What to keep in mind when manufacturing or selling products in East Asia

Swedish companies’ export to East Asia has grown rapidly during the last few years. Last year, the Swedish newspaper Dagens Näringsliv reported that Swedish companies exported a value of 46 million SEK to China alone. According to the same source, an estimated 20-25% of large Swedish companies’ revenue origins from the Asian market. This number is estimated to grow to 30-35% in the coming years as a result of China’s high market potential. The experts’ hot tip is consequently to increase your growth in East Asia in general, and China in particular.¹

However, turning the rudder on one’s export ship to face East Asia is sometimes easier said than done. There are a number of intellectual property related problems that can occur. China is not only a “hot“ market for export, it is also a highly lucrative country for manufacturing in.¹ As a result, many Swedish companies confirm the image of a large number of counterfeited products originating from China. Since counterfeits hit the market fast, it is crucial to immediately find the manufacturing source. Here are my most fundamental tips when it comes to exporting to – or manufacturing in – East Asia.

But first, the most common problems western companies face in East Asia:

• ”Trademark Squatting”
Chinese companies tend to scan the European and US market in search of new brands, which they then trademark in China. When the initial owner of the brand then wants to establish some kind of presence in China, the result is often a lawsuit from the Chinese trademark holder. Unfortunately, it is oftentimes hard to prove that a registration has been done in “bad faith”, i.e. that the trademark has been registered knowing that there are previous registered rights. Also, for companies already manufacturing in China, it is required by law to register your trademark in China. The problems that occur when not having the proper trademark rights in the country in which you are manufacturing is that the Chinese customs can seize all goods that are being transported out of the country because they are considered as contraband. In this case, to prove your innocence legally is basically impossible if you do not have the proper trademark registrations in the country in which you are manufacturing.²

• The trademark parasites
Swedish companies have raised concerns over an increase in “parasites” in Asian countries such as China, India and Japan. This means marketing one’s own products with the help of the reputation of established brands. For example, this means registering trademarks in the respective countries’ native written language so it means/sounds like another registered trademark. On paper, the trademarks can differ quite a lot, it is therefore hard to claim that they are infringements.²

The international sports brand New Balance is one the companies that have faced big problems with both trademark infringements and trademark parasites. Read more on that here.

• ”Domain Squatting”
Domain name registrations in China follow the same pattern as trademark. Despite not being actual intellectual property assets, domain names are – as you know – closely linked with the identity and exclusivity of a brand. Websites with identical or confusingly similar attributes to that of a trademark are registered, resulting in that the trademark holder is “blocked” from registering it. Usually, these domain names are then used for email fraud against the actual brand’s customers.²

What to keep in mind in order to avoid these problems:

1. Register your trademark before establishing a brand presence in the Asian country, or if you are manufacturing there.

2. Keep in mind that a trademark application in China can take up to two years before it is approved.

3. Also, register the trademark in the written native language, Chinese letters for example.

4. Register your trademark in the custom’s Enforcement Database in order to prevent potential Asian counterfeits from entering Europe.

5. Register the most important/relevant Asian domain names, for example:
.cn for China
.com.cn also for China
.in for India
.jp for Japan
.online a new top-level domain that many digital companies in Asia are using.

The extent of a domain name portfolio for Asia is of course dependent on your present – and future – presence in Asia. Therefore, the needs always differ from company to company.

If you need help with taking action on these issues, or just want to know more, do not hesitate to get in touch!

Sources
1 Dagens Näringsliv
2 Piratkopiering i världshandeln