PENFOLDS Cops Chinese Burn: Avoiding Trade Mark litigation in China

Paul Thompson - Trade marks online

For more information about protecting your intellectual property in Australia and Overseas contact Paul Thompson

There are recent reports out of China on a conflict that is a stark lesson for those who do or may trade there.

The iconic Australian Penfolds wines have been part of the upper end of the increased consumption of wine in China, with owner Treasury Wine Estates exporting as many as 100,000 cases annually.  However, a local Chinese businessman, Li Daozhi, had previously taken it on himself to file for trade mark protection, for the Penfolds’ brand in its Chinese form (Ben Fu) and for wine as the goods.

As the popularity of the Penfolds wines in China increased, the Chinese businessman alleged trade mark infringement.  This resulted in July of this year in a large hotel chain, one of the primary customers for the product, withdrawing Penfolds from its offering for fear of being caught up in the legal proceedings.

China is a jurisdiction in which the first to file for registration of a trade mark has an almost unassailable advantage.  Recent changes to Chinese legislation are hoped to improve the position but it remains to be seen if this will be the case.

Interestingly, the businessman in question has some form in this area.  He had previously registered a trade mark in relation to French wine maker, Castel.  A court action for infringement resulted in Castel facing a US$5,000,000 damages award.  It is likely Penfolds will need to come to some financial accommodation with the local owner, although it has had some initial success in legal proceedings.

The lesson to be learnt from this and numerous other examples of such activities in China is that, if you are going to trade in China, it is sensible to register your trade mark before starting marketing and sales activities.  That registration should extend to the Chinese version of your mark, as a large proportion of Chinese consumers do not read the Latin script. Selecting a Chinese version of your mark can be complex, with a variety of options available, including simply transliterating the sounds of your brand name into Chinese characters, translating the meaning of your name (if it has one), or creating a wholly new name with an appropriate meaning in Chinese. It is also worthwhile making sure no one has taken the step of registration on speculation that you may commence trading in that jurisdiction.  This risk increases with the global profile of your brand and business activities.  Finally, consider taking these steps before even talking to potential distributors as it is not unknown for your erstwhile allies to become your registered enemies.