Why trademark due diligence matters
February 28, 2012 | BY
clpstaff &clp articles &Apple's long running dispute with Proview Technology Shenzhen highlights the importance of due diligence and getting it right first time in China.
“Do your due diligence, find out who owns the marks, do not take what the other side says as fact, verify everything separately and make sure none of the documents are fakes,” was the advice of one lawyer when talking about trademark due diligence in China
Stan Abrams, of counsel at GoldenGate Lawyers, was talking about the lessons that could be learned from Apple's iPad dispute, which has raised the question of due diligence in China when buying or transferring trademarks and highlights the importance of getting things right first time.
Acquiring a trademark in China can be complicated. Trademark squatters mean comprehensive searches of databases and agencies to verify official documentation are needed. A lawyer close to the case always advises his clients to check and spend extra time when performing due diligence.
Buyers also need to consider potential marks from unrelated categories of goods and services that are often overlooked. Another problem is that companies often have similar names, so it can be hard to locate the parent company. Ensuring all these are checked is the first step in due diligence.
The second step is to “ensure the trademark is properly assigned – this only happens once the PRC Trademark Office completes the procedure” said the lawyer. The Office has to recognise trademark ownership. Otherwise, it still belongs to the initial registering party.
The case is similar to the legal battle in 2007 between French food maker Danone and its Chinese partner Wahaha. Danone sued Wahaha chairman and stakeholders for trademark infringement after they set up companies selling competing products bearing the Wahaha mark. As with the Apple case, the PRC Trademark Office never approved the transfer of the mark to make the Danane/Wahaha joint venture the owner. Danone had no case before the courts, as the trademark was not theirs to infringe upon.
“It can be hard in China as there is less room for errors. The system is so formal, if you make a mistake, the courts are going to be very black and white,” said Abrams. Getting it right first time is the key to any purchase or transfer of a trademark. Sloppy due diligence in the beginning will end up in greater costs down the line.
By David Tring
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