Trademark protection and brand value in China

31 August 2021

Trademark protection and brand value in China

Trademark protection extends far beyond legal protection. In order to bring its role into full play, trademark protection should be in conformity with the company’s development by strategic combination with its brand value and business planning.

Trademark protection helps brands generate more value, and brands with more value are more worthy of protection. China’s current trademark system is being improved with the aim of helping companies upgrade their brands and better protect their trademarks, and judicial support is growing as well. This is a necessity not only for ensuring the healthy development of enterprises, but also for creating a favourable economic environment. In recent years, there has been an obvious trend of increased intensity with more methods and better effectiveness in terms of both governmental moves to provide better judicial protection and to improve the trademark environment, and right holders taking the initiative to fight against infringement.

According to a report of the China National Intellectual Property Administration (CNIPA), 150,000 cases of malicious pre-emptive registrations and trademark hoarding were rejected by the CNIPA from 2018 to 2020. This trend has gradually become the consensus of all sectors of society in 2021, which marks an unprecedented importance attached to trademark and brand protection, and establishment of a firm guarantee for business prosperity. Meanwhile, data shows that China’s economy grew by 2.3 percent in 2020; the World Bank expects the global economy to expand by 4 percent in 2021, while China is anticipated to rebound to 7.9 percent in the same year, a shot in the arm in the post-Covid-19 era. The rapid recovery and development of the Chinese market and economy have brought confidence to the world, and a recovering and booming economy will surely open up new opportunities for brands to update their images.

 

Stage 1: Right acquisition

The relationship between trademark protection and its commercial value usually goes through three main stages: right acquisition, market protection and brand strategy. As is known to all, the foundation of a brand’s value is to have full protection of rights. Stable right support is indispensable for both the horizontal expansion and vertical upgrade of brand influence, and for penetration into lower-tier markets. Only when a brand has stable trademark rights can it provide a stable back-up to its company’s behaviour in commercial activities.

The initial acquisition of rights is particularly important, and the creation of the core trademark is also completed at this stage. In a complete ecosystem, only the survival and healthy development of the core species can ensure development opportunities for other species groups. Likewise, only when the core trademark and core brand positioning are established can it provide environmental guarantee for the development of other factors in the same ecosystem, and make sure that their development always adheres to the core and enhances the cohesion of brands. Companies that have achieved great success during this stage tend to make choices and put most of their energy and investment on acquisition and maintenance of core trademark rights, rather than on multi-line operations or developing multiple brands at the same time.

Only when the rights of core trademarks are obtained in full, can the core business be developed steadily, a dedicated and professional market position be established, and market recognition and consumers’ favour be gained. This is not only because the market’s situation determines a company’s positioning, it is also an inevitable trend in business development. The market increasingly favours professional companies that focus on a certain segment, and this trade-off way of protection at the initial stage of right acquisition follows the trend and meets the needs of the times.

 

Stage 2: Market protection

Trademark protection comes to the second stage when enterprises continue to grow and their core brands have been established. The initial capture of market is like skating on thin ice or facing an uphill struggle, whereas companies enter the second stage when the most difficult period has passed. With increased brand effect and popularity, it is necessary for companies to have a clearer and realistic plan to secure current markets and break into target markets. The focus of trademark protection at this stage is no longer to help companies obtain rights, but to support them in safeguarding hard-won market results and laying the foundation for further market expansion.

Companies that succeed in the second stage tend to focus their trademark protection on maintaining brand image and preventing malicious infringement, and thus more time, energy and financial resources are spent on fighting malicious registrations and counterfeit trademarks, so that the brand effect can be protected to the greatest possible extent while preventing the popularity from being diluted. More than 60 percent of the Top 100 private enterprises in China regularly monitor their trademarks in the market and take active measures to crack down on infringing trademarks that may adversely affect them, to protect their market stability. In addition, companies in various industries have different ways and focuses in protecting trademarks and building brands. It is ideal for both companies and the society that companies draw strength from each other and explore a suitable brand protection strategy that addresses their own development needs.

Companies generally have formed a stable brand image and brand story with mature positioning and mid-to-long-term planning in the second stage. In addition to market protection routine as the focus of trademark protection, the main tasks of market strategy planning should also include upgrading brand positioning, penetrating brand effect into lower-tier markets and extending the brand effect of current core business to other possible market areas. Many Chinese science and technology enterprises have applied this method to their own development and obtained significant benefits.

Data from Forbes shows that the world’s most valuable brand is worth US$241.2 billion and the total value of the Top 5 – all internet and technology companies – exceeds US$817.3 billion. By contrast, traditional high-output industries like banking and real estate fail to stand out in the list. The Top 5 companies also list within Top 10 in terms of total input of protecting trademarks and defending rights. They not only have built complete structure, but also established internal work system and process to protect trademarks. Indeed, many factors determine brand value, yet trademark protection is the most important one.

 

Stage 3: Brand strategy

The essence of the third stage is the brand upgrade. An excellent brand drives and energizes its industry’s development. In the third stage, the focus of trademark protection for enterprises is often on how to maximize the social value of a brand and let it become the guarantee and symbol of quality in its industry. At this stage, the impact of a brand does not limit to a single product or a single field, and correspondingly the trademark protection also extends beyond. It is carried out across entire fields of the industry with strategic arrangement that requires not only effective protection and confirmation of a company’s main trademarks, sub-trademarks, and defensive trademarks, but also a close correspondence between main trademarks and others.

While supporting each other, trademarks also give more narrative to the company’s brand story. Since 2018, most companies in mainland China with an annual turnover over Rmb1 billion (US$155 million) have been able to build their corporate brands into high-quality ones in their respective industries with full brand stories and trademark development and protection strategies, which will inevitably be further improved and upgraded in companies’ future development.

The establishment of a corporate brand image is not a once-and-for-all job, but a long-term task. Trademark protection should always meet the needs of its company by aligning with the stage of the company’s development and business growth, so that it provides robust support to the brand strategy and contributes to continued success of its enterprise.



About the author

 Robert Chan

Robert Chan

Robert Chan is the co-founder of Sun & Chan Intellectual Property Co., Ltd., a prominent intellectual property agency in China. He has extensive case experience of trademark prosecution, and is especially good at handling complex cases and building brand protection strategy. Under his leadership, the success rate in the past three years has exceeded 50% in cases of trademark review, opposition and invalidation added up. At present, the main business of Chan’s team includes management of various applications, trademark review of refusal, opposition, invalidation, trademark strategy consulting, etc.

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