Brand integrity at major risk in China

24 June 2010

BEIJING: Many brand owners are struggling to protect their intellectual property in China, a trend that is proving particularly challenging for firms in the automotive industry.

In May, Japanese carmaker Toyota lost a court case against Chinese rival Geely Group after filing a lawsuit linked to an alleged abuse in this area.

Geely's Merrie model was said to carry a logo, bonnet, hubcaps, steering column and boot design which were more than coincidentally similar to Toyota's "T".

Toyota also argued it had registered its insignia with the State Trademark Association in China in 1990, while Geely only followed the same course for the Merrie in 1996.

Despite this, the multinational was ordered to pay costs by the legal authorities, raising doubts about the level of support that will be afforded to non-indigenous firms in China in the future.

"In my considered professional opinion, the Geely mark is clearly derived from Toyota's visual identity," said Harry Steiner, founder of Steiner & Co, the branding consultancy.

"By its denial of the obvious, this ruling sends a strong signal to foreign companies that similar legal suits will be decided on ethnicity and nationality, rather than merit."

Toyota is not alone in opting to take such a route, with Nissan Beijing having suggested that domestic auto manufacturer Great Wall's Sai Ying SUV closely resembled elements of its own Frontier.

Great Wall has rejected this assertion, while also outlining its intention to apply for a patent linked to the Sai Ying.

Elsewhere, General Motors is currently looking into whether certain features of the Chevrolet Spark have been appropriated by Chery Automobile Co in producing the QQ minicar.

Honda is also in the process of pursuing action against two Chinese motorcycle manufacturers that it believes have acted improperly in just such a fashion.

These obstacles are apparent in many other sectors, with large numbers of low-cost "clones" of Apple's iPhone having flooded the market in China.

Walt Disney has recently allied with Wal-Mart and Carrefour to clamp down on piracy, and Microsoft previously launched a discounted version of Office to try and stop the use of copied software.

Health and beauty manufacturers have fared equally badly when its comes to counterfeiting, according to Anina Ho, managing director of  Mario Badescu, the cosmetics specialist.

"The only way for imported brands is to educate customers to differentiate fake goods from the real product, because it is useless to go to the court," said Ho.

Joseph Simone, intellectual property partner at Baker & McKenzie, the global legal firm, said the rising confidence in judges in China was encouraging manufacturers to take the legal path.

"At the same time, foreign companies feel they have no alternative but to test the waters in Chinese courts. Failing to take action is an invitation to more infringements," he added.

"These kinds of actions push the Chinese companies to think twice about infringing, now they know there is a risk of embarrassment through court proceedings. In due course, one will see a shift in mentality among Chinese infringers."

Neal Stender, of Coudert Brothers, another legal practice, also warned that safeguarding intellectual property was an absolute must, even if attempts like Toyota's do not always prove successful.

"These companies already knew that enforcement is not easy, but IP is often one of their 'crown jewels', and infringement lawsuits are often a necessary part of IP protection strategy, despite their unpredictable results," he said.

Data sourced from Campaign; additional content by Warc staff